Sequans Communications S.A. (SQNS) Earnings Call Transcript & Summary

Welcome to Sequans First Quarter 2020 Business Update Conference call. [Operator Instructions] As a reminder, this conference is being recorded. Before I turn the call over to our host, Mr. Georges Karam, I would like to remind you of the following important information on behalf of Sequans. This call contains projections and other forward-looking statements regarding future events, our future financial performance and potential financing sources. All statements other than present and historical facts and conditions discussed in this call, including any statements regarding our expected results for the first quarter of 2020, future results of operations and financial positions, business strategy and plans, expectations of Massive IoT and Broadband and Critical IoT sales, the ability to operate remotely at high levels of productivity, increasing backlog of orders, the potential impact of the coronavirus on our manufacturing operations and on customer demand, and our objectives for future operations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. These statements are only predictions and reflect our current beliefs and expectations with respect to future events and are based on assumptions and subject to risks, 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. We have not filed our Form 6-K for the quarter ended March 31, 2020. As a result, all the projected financial results described in this call should be considered preliminary and are subject to change to reflect the completion of our quarterly close procedures and any unnecessary adjustments or changes in accounting estimates that are identified prior to the time we issue our first quarter 2020 results. Please go ahead, sir.

Thank you, operator. Good morning, ladies and gentlemen. This is Georges speaking. I'm with Deborah Choate, our Chief Financial Officer. Welcome to our first quarter business update call. As you have seen in our press release, we are expecting very good results for the first quarter considering the negative impact from the coronavirus, which affected us much less than many other semiconductor companies. The situation in Q1 was very unusual for us and for the entire ecosystem. The coronavirus had some impact on our ability to produce and ship modules in the first quarter, but our chip production was much less affected. Employees at our contract manufacturers in China returned from the Lunar New Year vacation as quickly as they were allowed to by the restriction imposed due to the coronavirus. But they were not at full capacity until very recently. By now, operations are nearly back to normal in China, including our own Chinese team who's back in the office. Meanwhile, we have instituted a work from home policy in all of our other offices. As the coronavirus spreads throughout the world, we are doing our best to ensure the safety and well-being of our employees and their families as well as those of our customers and partners. Thankfully, all our people remain healthy and productive. We are accustomed to being in a widely dispersed locations and being agile and adaptable is part of our corporate culture. So we are managing dynamically as the situation evolves and supporting our customers to the best of our ability as in regular days. Last week, we even held our regular all-hands meeting according to schedule, connecting everyone, around 250 people, most of them working from home, on a video conference to discuss what's going on and to give everyone an interesting update from our 5G development team. Turning now to some details on the business front. We are happy to report that demand remains in line with our expectations in all areas, with the Broadband IoT business actually stronger than we expected. With such a large proportion of the population working from home in the U.S., demand for devices like mobile routers is surging, and we are seeing a big increase in orders for our modules that power Verizon Jetpack Ellipsis (sic) [ Verizon Ellipsis Jetpack ] portable router. Largely due to this extra demand, we are entering the second quarter with a backlog of orders much higher than we would have expected at this point, giving us much better visibility than we have had in recent quarters. The current unique circumstances obviously create some degree of execution risk, but we believe we are in good shape in terms of demand. In the emerging market portion of the Broadband IoT business, things seem to be tracking according to our previous comments regarding a return to growth in 2020 as business from new customers continues to ramp. We are excited about our strong position in CBRS, and as we mentioned in our Q4 call, we have multiple customers going through testing and trials, plus a growing pipeline of opportunities. Last week, the FCC announced a 1-month delay in the auction of CBRS priority access licenses, which was supposed to start June 25. In order to give the party more time to prepare in light of the coronavirus situations, bidding will now begin on July 23. The Massive IoT business is also tracking in line with our expectations. We have completely resolved the Cat 1 channel inventory issue, and we expect our shipments to be at normal levels in the second quarter according to the updated forecast we are getting from our primary module partners. The trajectory of the ramp in Cat M/NB remains the biggest variable, as you know, for 2020. But so far, all indications remain positive. The ramp of the projects that have been launched by our customers is in line with our expectations, and we feel good about the projects that are in the development phase. We always have the potential for one of our customers to take longer getting ready to launch. But so far, we don't see any general slowdown or reassessment going on. Things are moving well with our new go-to-market initiatives as well. Over 100 people from our 2 large distributors, Avnet and RFPD, have been trained and are ready to go full speed. We are also having excellent traction with our new MCU partners, Microchip and NXP. Perhaps you managed to see the online demo from one of them last week that showcased the benefit of our collaboration. One reason we believe that -- one reason we believe we have not seen any significant change in the level of interest or timing on new projects is that most of our opportunities are related to business applications rather than being dependent on consumer demand. We also feel comfortable with the level of growth we are assuming for 2020 from the vertical and strategic portion of our business. We are continuing to meet the relevant milestones and we have good visibility on the revenue from the large strategic partnership we signed in the fourth quarter last year. We are continuing our discussions regarding several new strategic deals that have the potential to provide license and/or service revenue on top of what we are forecasting from our ongoing projects for 2020. We realize that in the current environment of macroeconomic uncertainty, we need to be even more focused on risk management, and we know this is important to our customers as well. Therefore, we have taken several steps to manage both business and financial risk. We have an excellent relationship with Nokomis Capital, the holder of all our convertible debt, who is also a large shareholder. As you know, in February, we amended our agreement for the $6 million principal amount of notes due in April to extend the maturity by 1 year to April 2021. Since then, we worked with Nokomis to amend the agreements for each separate convertible note to give us additional flexibility beyond 2021. We succeeded in obtaining options to extend the term of each note if not fully converted, or the remaining portion if partially converted, by an extra year, and this is up to 3x, pushing the maturity, if we like, to April 2024. Deborah can elaborate on the details, but the point I want to emphasize is the provision of these amendments give us options that we do not necessarily intend to exercise. Both Sequans and Nokomis want to see these notes converted, but these options provide us full flexibility for a relatively long period of time if some portion of the notes don't convert and we prefer not to pay it back at its term. This also enables us to demonstrate to our strategic partners and important customers our ability to manage our capital structure regardless of the prevailing macroeconomic conditions. This is why we are characterizing giving ourselves such options as a risk management initiative. Switching to the near-term situation for a moment. I'm pleased to say we are finding the French government very helpful and supportive, providing various types of assistance in coping with the ramification of the global pandemic. Deborah will go through the details of the various measures we expect to benefit from. And I will just note that these measures come in addition to the 5G-related innovation financing project that we currently have in process and discussed on our Q4 results call. Even with a strong Q2 business outlook and the support we expect to receive from the French government, the optics of our balance sheet continue to be important in this environment, even if we have no immediate issue. So we have taken another action to increase our range of financing options by putting in place an at-the-market, ATM, offering capability under our existing shelf registration. Again, it's important to emphasize that this represents an opportunity, not a commitment, to issue new shares at prevailing market prices over an extended period of time. It does not obligate us to issue any shares, and it does not preclude us from opening new capital via other means. With the economic uncertainties brought about by the coronavirus, we want to have access to all the tools available and to be in a position to demonstrate that we have a variety of options in managing through the breakeven point. So to summarize the main messages of our call today: We had good results in Q1 even though the main effect of the coronavirus was that it kept us from shipping all the modules we otherwise could have in the quarter. Our Massive IoT, meaning our Cat 1 and Cat M business, is moving according to plan and so is the vertical and strategic business. We have stronger-than-expected demand in our Broadband IoT business, and we have a significantly larger backlog of orders entering Q2 than we had expected. Although we've had no bad news on the demand side, in fact, to the contrary, the increased level of general economic uncertainty arising from global pandemic causes us to place even more focus on carefully managing business and financial risk. This is why we have taken steps to position the company to have as much flexibility as possible to implement various options in various circumstances if and when it makes sense. Taking a bit longer-term view, we believe the ways we are now being forced to live and work may have a lasting effect. From telemedicine to remote education and from teleworking to operating factories remotely, 5G is going to be crucial to our future. It's going to enable different and more automated processes regardless of whether we are in the middle of a health crisis or not. Now I would like to turn the call over to Deborah. Deborah?

Thank you, Georges. Most of you have seen our press release from this morning but may not have had an opportunity to review the filings we made with the SEC. So I'll try to add some details that will provide additional context to all of our disclosures over the past couple of days. Yesterday, we filed our Form 20-F containing our audited financial statements for 2019. A PDF version can be downloaded from the Investors section of our website. And today is the last business day of the first quarter and when we complete the closing process and report our results 4 or 5 weeks from now, we expect our revenues to be in the range of $8.7 million to $8.8 million. We are anticipating a first quarter non-IFRS net loss per diluted ADS to be in the range of $0.40 to $0.43. This reflects an estimated $800,000 in onetime noncash operating expenses related to bringing on the new 5G development team in Israel. This level of revenues reflects typical seasonality for the first quarter of the year as well as the impact of the COVID-19 on our ability to produce and ship modules during the quarter. None of our chips are produced in China. They are manufactured in other Asian countries that experienced much less direct impact on the manufacturing from the virus to date. Our modules are made primarily by 2 contract manufacturers in the Shanghai area that are now operating close to normally after gradually coming back after the restrictions were lifted. We are fortunate to be able to take advantage of a variety of supportive measures by the French government to help French companies cope with the economic ramifications of the pandemic and to support growth during the second half of the year. By the time we have our first quarter results call, we expect to have received the nearly $3 million R&D tax credit payment that we usually receive in September because the government is allowing companies to apply for accelerated payment. In that same time frame, we also expect to receive a government loan for about EUR 2 million that, at our option, could either be repaid or converted to shares in the event of a follow-on offering. So when you add this more than $5 million from these sources to the over $5 million we expect to report as of March 31, we expect to have over $10 million in cash at the beginning of the second quarter. Furthermore, we are applying for an additional government loan under the COVID-19 relief package. It will probably be in the mid-single digits. In addition, as part of the overall relief package, the French government is deferring payment of social taxes until Q3, which we expect to help our cash flow by about $1 million in Q2. As Georges mentioned, these measures have no effect on the government-backed innovation financing we are applying for related to 5G, which could represent a combination of 0 interest loans and grants. We expect the amount can be in the high single digits, and we hope it will be finalized by midyear. As you know, we are also in active discussions on several strategic deals, which could be in the range of $5 million to $10 million each. Any of these would represent upside to our current revenue target and could also help our cash by providing a substantial upfront payment. We believe that if we are able to complete most of what I just discussed, we will be able to fund operations to reach breakeven. In the meantime, in order to ensure that we meet all the goals, we need to demonstrate our long-term staying power to partners and customers while also engaging in prudent risk management ourselves. So we have taken steps to create options that provide us with the certainty that we can manage our capital structure and demonstrate the necessary balance sheet flexibility for the next several years. Specifically, as Georges mentioned, we worked with Nokomis to amend each of our convertible debt agreements for the notes issued in 2015, 2016, 2018 and 2 in 2019. The amendments give us the option to implement up to 3 consecutive 1-year extensions of the term of each convertible note or a portion thereof, creating the ability but not the obligation to extend the maturity of any or all notes to 2024. Each of the 3 options available for each note grants additional consideration to Nokomis and the amendments also provide an incentive for early conversion. The full details of each of the options are available in the exhibits to our Form 20-F filed yesterday and are summarized in that document as well. As Georges noted, it's important to have the certainty that we are able to obtain additional financial flexibility anytime during the next 3 years and also be able to share that fact with customers and partners. Finally, given the current economic uncertainty and market volatility, we have chosen to add another type of funding capability to our financing options. It's called an ATM or at-the-market offering capability under our existing shelf registration statement. Today, we filed a prospective supplement and entered into a sales agreement with B. Riley as the placement agent. This capability will enable us to raise capital quickly and opportunistically at prevailing market prices for the duration of our shelf, which expires in December 2020, at which time we expect to renew it. If you are not familiar with the ATM process, the company has the ability to control the timing and amount of sales as well as the minimum acceptable price and the shares are sold in the open market at prevailing market prices. Since this ATM capability can remain active for several years, we put a high maximum amount of capital to be raised to avoid repeating the documentation process unnecessarily. We will report any sales retroactively when we report our quarterly results. As a final point, today is the day we typically put out the advisory to let everyone know the date and time of our next results call. We expect to hold the call in the same general time frame as we typically do, at the end of April. We will announce a specific day after we assure ourselves that we will be able to work effectively with our auditors on a remote basis and that the closing process will go smoothly. So watch for our advisory giving the exact date and time. As always, the written version of our remarks today will be available on the webcast page in the Investor Relations section of our website. I'll now turn the call back to Georges. Georges?

Thank you, Deborah. I'll close by saying that there are so many valuable use cases enabled by 5G technology: the higher throughput of enhanced Mobile Broadband; the opportunity to bring more efficiency to various businesses and processes via Massive IoT; and to enable improved safety, more security and better health through Ultra Reliable Low Latency Communications. We are at the forefront of developing these solutions for non-handset applications. And we believe we are all witnessing some of the catalysts that will accelerate the demand for 4G and 5G use cases and clearly demonstrate the value of Sequans as a scarce and important resource going forward. Now we would be happy to take your questions. Operator?

[Operator Instructions] Our first question comes from Scott Searle with Roth Capital.

Thanks for hosting the call and providing a lot of the detail that you've done so far this morning, Georges. Quick question on the broadband front as it relates to modules. You're starting to get capacity coming back online. I'm wondering how quickly can you ramp capacity given the demand profile right now. What could you expect to deliver in the second quarter? And could you calibrate us in terms of what that number looked like approximately in the first quarter?

In fact, obviously, let's say, we manage very quickly to -- because you have 2 issues. You have obviously the -- for the sheer fact we provide modules. So there is dependency on the chipset of Sequans as well as the manufacturing of the module and as well supply of all the components needed there. So we manage on our site so far to secure the TSMC. At least this -- as you know, we have some level of security there that we got from TSMC by putting some hot run. So we are, to some extent, comfortable on this. And I tend to say we secured at least the capacity of April, we plan to ship for the remaining component as we are speaking. For the May -- and for the May month, we still have some shortage in component that our team is working on to accelerate for a couple of components. So the answer is a little bit complicated, if you want, as I'm speaking now. Obviously, we're at the beginning of the quarter, so we -- the demand is there. The backlog is there. Obviously, we could have some issue not to be able to deliver it all, but we believe we will have an upside no matter what already, so versus normal operation, I tend to say. It's just a question about how big is this upside we'll be able to achieve. And this depends on some of the shortage that we are trying to close for May, not for April, which is, by the way, good news. Like giving us May capability at full speed today is a good news for me, for my team. And obviously, all this to keep it into the circumstance of the coronavirus is not developing in different ways where no one control it. So I'm assuming that things are converging in Asia, and it will continue to be going in the right direction without any other issue.

Great. And if you could, also on the Cat M front, it seems like Cat 1 has bounced back. Cat M, the pipeline is filling in line with expectations. But certainly, the MCU guys in terms of hosting some of their design activity and dev key calls in the past week or so has been very encouraging. So could you give us an idea about how some of these new revenue streams filter into the P&L this year? Will you see contribution from some of your MCU partners in 2020? How quickly does Monarch Go ramp up? And CBRS, do we start to see some revenue from this in the second half? And then I have one last question.

I mean obviously, all those MCU activity -- by the way, we have some of what we did so far with STMicro already in design win, and we have customers happy with what we did there. And we won those deals because of this, I would say, integration that we achieved. With what we are doing with Microchip and NXP today, we're seeing more accelerated, I would say, event with more deals converging to design win. To turn those to revenue, honestly, I see them more towards the end of the year. I'm talking about massive numbers, big numbers, not talking about samples for stocking or initial shipment. But we expect the results of this activity really to give us more -- some results in Q4, not before, to be significant, I would say, in terms of number, dollar amount and the revenue.

And lastly, if you could, just to reclarify some of the commentary around the French government loans. There's a potential for an additional, it sounds like mid-single-digit loan related technology innovation in 5G. And if you could as well, it sounds like there's been a lot of strategic interest around 5G. Could you just provide a little bit more color on that front in terms of maybe the number of parties that are interested and the time lines of when you would expect some conclusion on that front?

Yes. I mean obviously, into -- I mean, let's say, the normal one -- and this is very important, not to mix with all what's happening with -- from the French government because of the coronavirus, which is obviously supporting the 5G program of Sequans. And this, as I spoke about in Q4, we have done this in the past, by the way, when we launched the Cat M. So it's not something which is completely new. It's very established, and we know how to handle this. They tend to be kind of consortium. You don't do it alone, so you need to bring a little bit of partners because you need to put it in the scope of the application. And -- but during this project, you cover some of the costs that you are incurring to develop the 5G chip. And this is somehow we expect to see something, by experience, to what we managed to get into in the past, something close to high single-digit, I would say, amount. And we expect to -- it's not -- I mean we expect in any case to get it closed in Q2. Maybe the money will not be coming in Q2 or not, depending on the signature, but in principle, this is an activity for us to close it by June. On the other front, which is, as usual, the French government is really very, very supportive to all the company. I mean even for a company not able to operate from home and so on, they are putting -- paying even all the salary of the people to avoid any issue for all those companies. So it's really -- there is strong measures there. But one of the measure -- we're benefiting from a couple of them because obviously in our case, our team is fully working. And we are happy to manage that they are -- all of them working efficiently. But we have -- they put into place some loans, and we find that we are eligible for this one. And we are already in the process of finalizing obviously all what you need to do to get this loan. Having BPI in our -- as a shareholder is also helpful for the company because we get all the right people supporting us inside the government organization. In terms of getting outcome of this, I hope that on our earnings call, we'll get clearance on this. We'll get at least good feedback about the amount. But it should be implemented quickly. It's not something to come -- it should happen this quarter, I will say. And hopefully, on our earnings call, details will be -- in 4, 5 weeks, we'll give you -- we'll be giving you all the detail about it, where we are.

Our next question comes from Mike Walkley with Canaccord Genuity.

Just on the broadband demand, can you give us some color that is it just Verizon in the U.S.? Are you seeing it in other regions also with people working from home across the globe? And then can you remind us just as this business ramp, how would it impact the gross margins relative to the corporate average?

I mean obviously -- honestly, we're seeing some demand in the broadband in general. I saw, for example, because it's becoming -- all the government, by the way, they are getting -- working from home, it's an issue for many, many people. I was watching yesterday the TV. Even in France, it seems that we have places where the people are not able to work from home just because they don't have the right Internet in their house and so on. So obviously, I'm expecting the demand of broadband to accelerate in general and this is independent of the business of Sequans, I would say. In all the country, all of them, now we are moving to a mode where we work more and more from home. And obviously, you need to have maybe even some enterprise broadband connection. You could have even the enterprise giving you all what you need to get the VPN, to get the secure link and so on. And this can stimulate more demand in general for Sequans, which is good news to our business because we are there to support it with the 4G product that we have, but also in the future, 5G, as I mentioned, going forward. And in terms of gross margin, we -- even if we sell module for this Jetpack, the gross margin there is more on the high side. It's not like other modules. So this is a gross margin more close to the 35%, if I tend to say, this kind of product. So obviously, depending on the mix, we could have an impact. But I'm expecting to -- at least to stay in the 4% to 5% globally. We'll be giving more color overall, if you allow me, on the earnings call because we need really to evaluate exactly how much upside we are able to take into the quarter. And obviously, depending on this upside, we'll see the rest of the business where it will be. Very likely, by the way, to address the demand, we may -- we will put priority for this product line versus other module because it's the same fab and it uses more or less 90% same component. So the priority is today put for this broadband business, obviously, serving the codes because those routers are going to kids leaving their school and they cannot work from -- they will need to work from home. So we are really trying to put all the priority of the business on this business, on this demand. So in other words, if for capacity reason we are not able to do some of the Cat 1 module that we push it for Q3, the gross margin will be less impacted because it will be a module replacing another module. Only the upside can impact the gross margin.

Great. No, we're definitely seeing stockout across the United States all types of mobile hotspots. That seems like a good area of demand that should continue. And just my follow-up question. In the short term or the quarter, the preliminary results, any way you guys can maybe give us a breakdown between product and other revenue and maybe impact to gross margins just from the supply issues re-ramping out of China?

Deborah, can you comment on the gross margin?

Well, I think we're expecting still to have a good contribution from services revenues, which is helping us bring up the gross margin. So I think we are looking at the gross margin to be in a healthy region, at least 45%, and -- but we're still a fairly large contribution from services in the quarter.

Our next question comes from Ari Shusterman with Needham & Company.

So I wanted to start off with talking about your Monarch SiP chip. Can you kind of talk about traction you're seeing in it and perhaps provide a bit of color on the revenue contribution you expect in Q1 from it?

Yes. I mean obviously, the SiP -- first of all, we're -- this is part of our Monarch family. So all the software, the SiP. Our customer can decide what the first generation of Monarch to use. Monarch chip use the module with our Monarch or using the SiP. And very honestly, the SiP is -- we saw a lot more traction on the SiP versus the other option because it's kind of unique in the market, first of all, in the size but also in all the metering application, where you have water and gas because it has a special packaging and no equivalent solution exists in the market. So many people like it. And then obviously, they can benefit from all the software that we have on Monarch family. This is today moving well. We have already order coming for our second quarter. So it's accelerating. And we're seeing more design win in favor of the SiP. And also, we have customers already moving to production with the SiP. And we're seeing Tier 1 customers there. Obviously, we're benefiting from many things there. Obviously, the quality of the product, but we could talk as well about the go-to-market strategy there because the SiP is, as you know, a product co-owned by Skyworks and Sequans. So this gives it more powerful, I would say, brand in the market. But also, it's distributed by RFPD, the Arrow company, as a distributor. And we are leveraging, I would say, the sales channel of RFPD as well to bring new customers with this. So all in all, it's very positive. Too early to give you color in dollar amount and so on, but all is moving really as expected on the high end of our sales Cat M.

That's very helpful. And can you provide a bit of color on the trends you're seeing in 5G deployments? Is there -- has there been some delays? Or is there continued acceleration?

Yes. I mean the 5G -- I mean the feeling I have today is that even if you could imagine this crisis, no one know how we'll come out of it and companies could have some issues and so on. So if I put this into bracket, I tend to say this will be -- the telecommunication in general is one of the sector where people, they are going -- they are realizing that we need it more than ever, and we need autonomy on it and all the country. And so it's all -- this is positive. Despite, I would say, the bad news from the coronavirus, I would say, it's clearly creating alert to the people. So this is very good news for us. We see the carriers keep moving on. It's too early to see if we'll see an impact in deployment. But very honestly, this doesn't impact Sequans because the way we see our 5G business, if you want, for the high-end 5G, we see the business that will happen in 2022 and beyond because we are not in the smartphone. And if we are not in the smartphone, we need to plan for our business to start ramping really when the network coverage is reaching high level of coverage. On this basis, I don't believe we'll see any negative impact on this if you put the time horizon we are talking about between now and 2022.

Got you. And just a quick clarification. With regards to the loans, you plan to get tax credit from the French government. When did you say you'll get it? Is it Q2?

So we're hoping to get it by the end of April.

[Operator Instructions] Our next question comes from Bob Evans with Pennington Capital.

Thanks for providing the update. Can you comment on why the need for the ATM, given all of the other financing options that you outlined earlier from the French government, from your strategic partnership, your balance sheet seems to be in decent shape? Why do an ATM and have that overhang?

Well, I mean the way we're looking at this is really managing the risk of the unknown, if you want. I mean we are -- when you look to the situation today, obviously, everyone could question what's going to happen in a month or 2. And very honestly, no one knows. There is -- no one has the crystal ball to look to it and see how things will go. I'm personally very optimistic and maybe too much optimistic for this crisis. And I believe the market will come back like normal. But who knows? And based on this, when you have to run your company, you need to really plan for the worst and hope that this will not happen, at least you will not get surprises. So this is really the logic that drive all this in our mind. Obviously, we are betting on some strategic money to come in because, obviously, we have the money from the government and so on. This is less risky in the short term. But as you know, one of the major component for the company is to get the strategic money that we are working, as I said, on a couple of advanced deals, and they can help be more than enough to fund the company this year. But if you factor in the risk of the coronavirus and say maybe something will happen there, that you will not be able to close it on time, what do you do? So from this point of view, we wanted to have access to a tool that can allow us, I would say, to get the minimum amount needed, I would say, and avoid putting the company in a bad spot. I understand that this will be -- maybe people can understand this as an overhang. But the way to see it is more ability of the company to execute. You need to know as well that all this has 2 elements, all the thinking about how we manage our -- I would say, all those options. And we mentioned this on the call. Obviously, you think about having enough cash to execute, which is one issue. But you have as well the optics for our customer and partner and strategic partner. And we are dealing really with the Tier 1 customers that all those guys will look to us. And we don't have the luxury, I would say, of a very strong balance sheet that no one can question it. And we want to be sure that we have all the tools that can allow us to address any concern of a partner or customer when they talk about anything. This is also, by the way, true for the option we negotiated to have in hand for the convertible note. So again, it's not -- I don't believe that we are going to use those options. When I think -- when I look to the exercise price and what we expect to do this year, the conversion price and what we expect to do this year. But if you are an outsider and you look to this, you say, what will happen, Georges, if -- and for those reasons, we want to have all those options implemented to put us in very strong position that will allow us to execute our business plan as we thought we are able to do.

Okay. So this is mainly for financial flexibility in the future but not something you are looking to do in the near term?

Yes.

At this time, I would like to turn the call back over to Mr. Karam for closing comments.

Okay. No question? Thank you. Thank you very much for all of you and obviously looking to have you all on the -- on our final call, I would say, to discuss the detail of Q1 and projection -- give you a better projection of Q2 when we will have all the clarity in the coming couple of weeks. Thank you very much. Thanks, operator.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time and have a great day.