Hello, and welcome to the third quarter 2026 of QAN's Earnings Conference Call. My name is Tawanda, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please note that this conference is being recorded. I will now 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 Sequon 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 in 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 Litigational 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 environment 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 will start with a brief update on our balance sheet as we have now fully concluded our Bitcoin Treasuries spreadsheet. As announced on September 24th, we sold the remaining 314 Bitcoins held on our balance sheet as of June 30th, completing the Treasury exit that began with the full redemption of our convertible debt in May. These final sales were executed at an average price of approximately $78,500 per Bitcoin for total proceeds of $24.6 million. As a result, Sequence no longer holds any digital assets, and we have no outstanding debt other than a small amount tied to government-financed R&D projects. We ended the third quarter with $39.1 million in cash, cash equivalents and short-term deposits, compared to $21 million in cash and 314 Bitcoin at the end of the second quarter. With this exit complete, the Bitcoin Treasurer's Chapter is closed, and the full strategy and financial attention of the company is now in our semiconductor business. Our priority going forward is squarely on executing our semiconductor strategy, scaling our IoT product business, developing our new defense and drone business, and advancing our 5G ERECAP roadmap to create long-term shareholder value. We enter the fourth quarter with a strong balance sheet and the financial flexibility to support our operations and invest and grow. Now turning to our semiconductor business. Our 4G IUD products showed strong momentum in the third quarter. Third quarter revenue came in at approximately $9.1 million in line with our guidance range. That's up 22% from $7.5 million in the second quarter and up 183% from $3.2 million in the third quarter of 2025. The vast majority of our Q3 revenue was generated by product sales, which increased by more than four times year-over-year. Through the first nine months of 2026, revenue totaled $22.6 million. That already exceeds our full year 2025 We are seeing strong order momentum across our customer base, driven by design wins that have reached mass production, several of which we expect to keep This is reflected in its strong and growing backlog, extending into the second half of 2027, which gives us solid visibility and confidence in our product growth project. As in the previous two quarters, our Q3 book-to-bill ratio was well above one. Our product design wind pipeline, measured by potential three-year product revenue, keeps expanding. We update this figure once a year. So for now, we are maintaining the $300 million reported at the end of 2025. However, in the third quarter alone, we added nine design win projects and eight advanced engagements. As reported at the end of the second quarter, $165 million of this pipeline is in mass production and generating gravity. Two additional projects move to mass production in Q3, and we expect several more to follow in Q4, bringing the mass production portion of the pipeline to more than $180 million by year end. Smart metering, telematic, and asset tracking remain our strongest verticals. and the volume and visibility we are building in these markets reflect the strength of our product positioning and customer relationships. Looking at our product families, our Monarch CAT-M products remain a core growth driver, accounting for more than 80% of Q3 product revenue, with asset tracking and smart metering applications leading the way. We expect this business to keep growing in the future. Revenue from our Calliope Cat1 BIS product is driven by our design wins in telematics and security, where several projects have now reached mass production. We expect this momentum to carry into Q4 and beyond, with significant revenue growth materializing in 2027. Overall, our cellular IUT pipeline for both CATM and CAT1biz keeps growing, with many new opportunities every quarter. Beyond the design wind pipeline, we are currently working on more than a dozen new projects, that we hope to win in the near future. In addition, we have begun substantive discussions on several 5G eRETCAP projects with customers preparing for the network transition from 4G to 5G, a market we are targeting with a highly competitive chip now in development. As we previously said, our 5G eRETCAP test chip is in-house. We expect to complete end-to-end lab testing late this year with a plan to engage customers in the second half of 2027 and generate revenue in 2020. As the IoT market transitions from 4G to 5G, eRETCAP remains a key pillar of our long-term strategy. It positions SQLs to capture a significant product design win opportunity and expand our market share in cellular IoT while enhancing our IP leadership and supporting future licensing agreements. Beyond IoT, our IRIS RF transceiver is attracting strong interns across defense, drone and space applications. Since we began shipping our development kit platform in Q2, We have generated more than 20 leads in these markets, including many Tier 1 customers. The first drone customer we announced last quarter is now ready for production and we expect shipments to begin in Q4. While most of the RF pipeline is still in the engagement phase, it already represents more than $30 million in 3 years revenue potential, with very high margins. We are fully committed to scaling this defense and drone business by building out our go-to-market strategy and strategic partnerships, several of which are currently under discussion. Turning to services and licensing, this business remains an important source of high-margin revenue, although the timing of individual engagements can vary from port to port. Our goal is to leverage our RF and 5G IP portfolio to address new markets and regions beyond our own addressable mark. We have already concluded several licensing deals in the past, some of which are now generating royalty revenue that we expect to grow in 2027. We also have several active licensing and strategic engagements under discussion. with global customers and partners across a range of end markets and geographies. Individually, these opportunities range from several hundred thousand dollars to well over 10 million dollars and their total revenue potential exceeds 75 million dollars. We are making progress on most of them and aim to close some in Q4. These opportunities provide potential upside to our revenue will advance our path to breakeven and expand our strategic reach into new markets and applications. Now a few words on supply chain and product cost. We continue to navigate a challenging supply and cost environment. While memory remains the primary constraint, we are increasingly seeing pressure across the broader semiconductor supply chain. To mitigate these challenges, We have implemented multiple sourcing options for key components and manufacturing materials, including substrates, flash memory, and assembly and packaging, which puts us in a stronger position heading into 2027. However, we still need to address silicon supply as TSMC will be operating under capacity allocation for all mature nodes in 2027. The significant growth is expected next year. Our main challenge is to meet all government needs. At the same time, we are mitigating cost pressures by passing through increases to customers where appropriate. limiting the impact on gross margin. This is particularly important for memory components where pricing remains volatile and changes from month by month. We managed all of these challenges well in 2026 and focus on our ability to manage these challenges again in the coming year. Third quarter cash burn came in line with our plan We remain focused on displaying cost management and on reducing cash burn over time as revenue grows with the objective of reaching breakeven as quickly as possible. Overall, our third quarter reflected real progress in strengthening our core IUT business, completing the simplification of our capital structure, and positioning the company for sustained growth. For the fourth quarter, we expect revenue in the range of $9.5 million to $11 million. This guidance assumes the limited contribution from licensing and services. Should we close the major licensing deal during the quarter, revenue could exceed this. from a position of strength. We have a simplified balance sheet with approximately $40 million in cash and short-term deposits, no debt, other than government-financed R&D funding and significant financial flexibility. We have an IoT business with strong underlying momentum, supported by a growing backlog and a maturing design wind pipeline that's increasingly converting into production revenue. We have an exciting new market opportunity in defense, drone and space, which adds And we have a differentiated strategic IP portfolio in 5G and RF, which we believe remains one of the most important long-term value drivers for SICO. We remain focused on scaling our product revenue across both our IoT and defense and drone markets, advancing our 5G E-RedCap roadmap, and executing against the key drivers we believe will unlock the full value of sequence over time. With that, I will now turn the call over to Norman to review our quarter financial results in greater detail.

Thank you, George, and good morning, everyone. I will now turn to the third quarter financial results. Total revenue for the third quarter was $9.1 million, an increase of 21.9% compared and many more. In the first nine months of 2020, Revenue was $22.6 million compared to the $19.4 million in the same period of 2025. When you exclude the $8 million of non-return cost from the latest license and services revenue from the prior year period, revenue for the first nine months nearly covered the revenue. Cross-margin was 33%. Compared to 32.9% in the second quarter, Operating expenses consisting of R&D and SG&A expenses were approximately $10.3 million down from $11.9 million in the second quarter and $13.7 million in the first quarter of 2011. This is a reduction of about 14% sequentially and 25% year-over-year. We expect operating expenses in the second quarter of 2026 to be lower than in the first quarter, while we continue to invest. During the quarter, we completed the sale of our remaining 315 Bitcoin and reported a realized net gain of $6.2 million. There was no impairment of digital assets in the first quarter, compared to the $3 million in the second quarter. There's no Bitcoin left on our balance sheet. Financial results will no longer be affected by Bitcoin pricing changes, whether through impairments or through reverse Operating loss was $1 million, compared to a loss of $7.2 million in the second quarter of 2026 and a loss of $24 million in the third quarter. The $1 million operating loss includes a $6.2 million gain from the fifth quarter and also reflects the high revenue of reduced operating costs. Net loss of the quarter was $1.5 million, or $0.10 for diluted ADS, compared to $9.8 million loss for $0.65 for diluted ADS in the second quarter and $16.6 million loss Net Interest Exempts was the third of four new models, one of two of four new models, and the second of four models, which reflected the total dimensions of R2.0. On a non-HIRS-S basis, including non-cache impairments, stock fake computations, and non-cache arguments associated with the vertical Non-IFRS net worth was $6,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000, Cash, Cash Equivalent, and Short-Term Properties, and Contagious Searches, focused on search analysis and trading powers. Consisting of $6.2 million in Cash and Cash Equivalent, and a total of $5 million in Short-Term Properties. This is up $8.7 million from $21 million in 2013, reflecting $24.6 million of proceeds from the remaining Bitcoin, partially offset by the and Courtney Cashburn. In addition, in October, we received a $205 million dollar R&D print certificate of Qiuting's cap development, which is not completed in our December survey presentation. The cash burn in the third quarter was approximately $5.9 million dollars, in line with this development. As of September 30, we have new Bitcoin, which has been streaming on Bitcoin since the 30th of 2000, and has been searching on Bitcoin since the 21st of October. The work of the VAT is still in the deep, and our Bitcoin is currently at an exit of 50, but the VAT is not almost at 50. Our only remaining financing is government research funding. It is carried by a cost of $2 million, and we have a very good balance sheet for the amount we actually expect to reimburse the person who is streaming the VAT. Coming back to George's comment on righteousness, we have several discussions that are well-appointed, and we believe a number of these have a potential to contribute meaningfully to readiness. The time of righteousness and readiness execution can be difficult to predict, and that variability is reflected in the achievement of our science. Before I have the call back to George, I want to summarize the key points of our research. We are reducing our operating costs. We are working on product cross-structure to improve cross-network. We no longer hold any complaints. We have a strong balance sheet, a homing spectrum, and an overall cash position of approximately $20 million. With this foundation, we believe that Qiuting is well positioned to support its operating and strategic priorities. With that, I turn the floor back to you.

Thank you, Norman. As we close, our priorities are clear. We are focused on scaling our IUD semiconductor business, expanding into software-defined radio applications across drones, defense, and space, and advancing our 5G electrical equipment. The third quarter showed solid momentum across the list. Revenue grew 22% sequentially and 183% year-over-year. Product revenue more than quadrupled, and our book-to-bill ratio was again well above one, supported by a backlog that now extends into the second half of 2027. More design wins are moving into mass production, and we expect the mass production portion of our pipeline to exceed $180 million by year end. Our IRIS RF transceiver is building traction in the defense and drone industries and our licensing pipeline gives us additional upside on top of our product. We have also completed an important transformation of our balance sheet with our convertible debt fully redeemed and our Bitcoin treasury exit complete. We have now approximately $40 million in cash and short-term deposits and a simple capital structure, giving us the flexibility to support operations and invest in growth as we move toward the big human running. Overall, we believe Sequence is well positioned with a clean balance sheet, improving visibility into product revenue, a differentiated technology portfolio across 4G, 5G and RF, and multiple avenues for growth. We remain focused on execution and on creating long-term value for our shareholders. With that, operator, we are ready to open the call for the questions. Thank you.

Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 11 on your telephone, then wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Scott Searle with Roth. Your line is open.

Hey, good morning, good afternoon. Thanks for taking the questions. Hey, George, just quickly to clarify on the cash front, I believe there was still an outstanding incoming payment from the French government of $3 million. So I want to clarify whether or not that came into the third quarter. That's expected in the fourth quarter. and just to clarify, 180 million of those design wins now going into production over a three-year estimated time period. So in 27, we're looking at some point ramping up to a $60 million a year product run rate. Is that the correct way to interpret it?

Hi, Scott. The first question, in fact, we received $2.5 billion from the French government in October. It's not recorded in the balance sheet end of September, obviously. It came almost the first week of October and on the pro forma basis, yes. And on the design wind pipeline, you know the target is to be above 180 by year end and you're abstracted this represents three years revenue so this will give you the average run rate over the coming three years I will not say 60 million is the number for the first year but in average for the three years you have 60 so will be somewhere you know between 50 plus I would say because it's growing over the three years you still have product ramping every year over those three years period

And on the Aura front with the Iris product line, it seems like you're starting to get a lot of traction there. I wanted to clarify the comments that you made on the call. I thought you said $30 million. Is that from the initial drone win by itself, that it could ramp up to $10 million a year over time? And it seems like not only the timeline to win, but the timeline to production has actually been pretty fast on this front. So engaging with 20-plus customers now, How do you expect that to, I guess, roll and progress over the course of 27?

Yeah, I mean, honestly, the traction is really, I should say, overwhelming. We have a lot, a lot of demand on this platform. We're out of all the EVK we built in the first batch to sell them to customers. Now we're fighting to catch up, you know, to get more and feed more customers. We built, like, we shipped more than 30 and many more units so far, and we have 20 leads customer there. So this is developing. I mean, the $30 million I gave, this is really the potential of the leads we have in hand or an estimate of what we have in hand that we are working on today. It's not the design when we have alone. We have one design when it's smaller than this, but this design when moved to production, as I said, because we have an initial order to ship into port for production and we're expecting for 2027 more orders to come from this customer. And on the last remark, the time to turn risk to production, we need to keep in mind that this radio, we don't have a lot of software there, so it's really a piece of hardware that you add to a baseband technology and so on. So depending on the situation, if the They have their own existing product and are changing radio to the benefit of the radio sequence, which has a feature allowing, you know, anti-jamming. We can move very quickly. and this is what happened with the first customer. He has an existing product, he moved to change the radio and obviously almost in six months he got this product up and running and now we are seeing revenue. If you are in a situation where the customer is building from scratch on his platform, obviously it will be much longer, not limited by sequence technology, it will be limited by the overall system the customer is building.

Very helpful. And lastly, if I could, on the licensing front, it sounds like there's an active pipeline. I want to clarify a couple of things. It's not really built into the fourth quarter guidance at the current time. It sounded like the total opportunity pipeline, I think the number you said was 75 million, but you're also expecting to see potentially some of these opportunities convert in the fourth quarter. Just want to clarify that. Thanks.

Indeed. I mean, we have, as we said, the you know these are number of deals that we are engaged with and to sum them all will exceed 75 million dollar opportunity honestly all of them are likely so I give them we don't have a deal which is you know maybe 10% chance to get it I'm really happy the deals we are counting in are I should say 2% chance to close it and some of them are quite advanced and hopefully we can send something into for Now obviously from the time you sign to take the revenue all depends as you know you have the revenue recognition comes into play and sometimes we are not able to factor in the revenue in Q4 because it depends we are able to make delivery in order that can allow us to to make some of the revenue even if we sign in Q4 so we could sign in Q4 and take zero revenue That's why we are not factoring big deal inside. We're taking normal business that we have in hand, mainly products with a little bit of small licensing deals that they are already secured by the company.

Great. Thanks so much. I'll get back to the queue.

Thank you. Our next question comes from the line of Josh Nichols with B-Rally Securities. Your line is open.

Thanks for taking my question and good to see the company fully transition to IoT semiconductor business with the feeling of the Bitcoin treasury part. So two questions I want to ask. Sorry, it was a little bit garbled on my end. But one is you gave a revenue level of like nine and a half to 11 million for 4Q, but that excludes significant license revenue. Looking at that, you talked about some of the pricing headwinds on memory. Should we assume that 4Q gross margin is comparable to 3Q x any large licensing deals generally?

Hi, Josh. I mean, first of all, I mean, you're right. I mean, within the facts of major licensing deals, there's a little bit of licensing inside. more or less small one or some of them already signed and we take some revenue as we move forward. But to go back on the question of the gross margin, to be honest is really, I don't know how to, what prediction I can give there, but we have a big, big problem with those memory that the price change every month, really every month, literally. And this is really creating a lot of challenge for us to predict if you want exactly even the price increase we reflect on our customer so it's really like a catch you know we adjust the price and later on on some basis very hard to anticipate a lot of cost increase I mean we take whatever logically we can justify it to customers and sometimes catch up in the middle of the quarter when we have So I believe I remain cautious on the margin in Q4. I don't believe we're settled for now. Hopefully this will change in 2027 because we have a lot of actions with double sourcing that will enter into play. For example, we put some double sourcing specifically for the flash memory, but this is not factored in yet in our shipment to customer because it takes some time to to transition to a new model as you need to adjust the software and so on with the customers. And this is coming more in 2027 than Q4. So in Q4, I remain a little bit, you know, cautious on my gross margin, similar to what we have seen in Q4.

Appreciate the context. Thanks. I'll hop back in the queue.

Thanks, George.

Thank you. Please stand by for our next question. Our next question comes from the line of Jake and Stefan with Lake Street Capital Markets. Jacob, your line is open.

Yeah. Hey, guys. Appreciate you taking the questions. Nice quarter. Just first, I want to touch on the advanced discussions that you're having on the 5G REDCap opportunities. Maybe, you know, could you help us kind of think through the sizing of some of those newer deals in the pipeline versus what you have currently?

Yeah, hi Jacob. I mean, first of all, you know, in terms of design win, in other words, the pipeline when we talk about the 165 that has been publicly announced and drawn and the target I'm getting for year-end above 180, this doesn't have really that cap design win, right? I mean, because what we factor design win is really customers They have the chip, they integrated, they have hardware and they are working on their design. And obviously the eREDCAP are still in the prototype phase on our side and we have not yet something just to touch on. So all the portion of eREDCAP comes into the pipeline above this, if you want, like in the above even the design wind and production and literally above the $300 million design wind that we have. It's really an advanced opportunity that we are working on to close and we have many of them. It's really a lot. And you have a few elements happening there. I mean, just understand the market. First of all, the carriers are transitioning from 4G to 5G, refarming more spectrum. And as you know, all the IoT products today, they run on 4G. So definitely the path to prepare the future, to be future-proof on a meter, it's not about you need it today you need it for you know to predict you know to be ready to have your product operating in in 2035 and so on so that's why there is an urgency to start taking a 5G product as soon as possible you know to market obviously the carrier are not ready yet they are deploying their network or preparing to deploy their networks Ericsson and and all the you know the vendor they didn't get finish their release to those carriers. This will happen really an activity in 2027 and from there on we'll start seeing more and more design. All new design will be switching to 5G. You will have the old design maintaining on 4G but the new one definitely I predict end of 2027 it will be I need 5G, I don't need any more 4G on any new SKU. It doesn't mean we stop shipping 4G. We keep shipping this for maybe 10 years if you want some of them but at least all new design will be you need to win them with the with the retro and and the opportunity for sequence there is like first of all there is higher ASP on the 5G Second, the potential of market share could be much bigger because the competitive landscape will be much limited, will be less Chinese or zero Chinese competition, if you want, which was not the case in the 4G war. And this should give the chance for Siquan to have much more potential, I would say, in terms of design win. We are leading with our product. We believe we are ahead of competition. to go there. And all this should allow us to increase the pipeline of IoT products and get more 5G skew and continue the growth of the company beyond what we have won in the 4G today.

Okay, great. Maybe if I could just ask on some of the cost assumptions. I know you said in the last kind of answer that, you know, The gross margin front would be a little bit difficult to predict, but maybe just looking at R&D, you guys have kind of, you know, been able to taper that down over the last couple quarters. From a total operating expense kind of level, how should we think about the business going forward? Is, you know, this kind of, you know, $11 million kind of rate sustainable, or do you expect to take a little bit more out?

I mean the the definitely our target to be honest to be below 11 million per quarter and I believe it's sustained because you know as we said 4G we're investing less and less I mean to some extent even this year we're doing very little on 4G but although we introduced new flavors and new maintenance releases and so on next year it will be even at at lower scale and We'll keep investing only into the 5G. Our RF is also mature and ready for the drone and the defense. So there is no big surprise in terms of investment with the current plan we have. And we're really trying to keep controlling our OPEX to keep it as close as possible to 10 million in the average, I would say, for 2027. This should be the math. And on the gross margin, not to be confused, you know, obviously, you know, we have a chip. We have a chip and modules in the IoT. And obviously, we have the radio chip that's adding up. So the mix between chip and module, depending on the mix of the product, This is where we are targeting to be. Obviously, with a little bit of services on top, at least the way we are heading there, will take us well above 50 on a global basis for the company. for this year the things are a little bit biased obviously because we are cost structure we have we're losing few points on our cost coming from this discrepancy between the price and cost I would say or variability of the cost unfortunately and obviously because we have very low level of licensing plus still the RF is lower I would say the chip business is not half-half the chip business is more below one-third and two-thirds It's shifted a little bit towards lower margin this year. But hopefully this will be an exception and we'll improve it in 2027 going forward.

Got it. I appreciate all the color. Thanks, George.

Thank you. Ladies and gentlemen, I'm sure no further questions in the queue. I would now like to turn the call back over to George for closing remarks.

So many thanks operator. Thanks for all of you for the questions and being on the call and looking forward to have chance to talk with you on different opportunities. Thanks very much.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.