SEQUANS COMMUNICATIONS | CIK:0001383395 | 3

  • Filed: 4/12/2018
  • Entity registrant name: SEQUANS COMMUNICATIONS (CIK: 0001383395)
  • Generator: Workiva (WebFilings)
  • SEC filing page: http://www.sec.gov/Archives/edgar/data/1383395/000138339518000015/0001383395-18-000015-index.htm
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    • ifrs-full:DisclosureOfOtherOperatingIncomeExpenseExplanatory

    Other revenues and expenses
    Financial income and expenses
    Financial income:
     
    Year ended December 31,
     
    2015
     
    2016
     
    2017
     
    (in thousands)
    Income from short-term investments and term deposits and other finance revenue
    $
    26

     
    $
    48

     
    $
    60

    Foreign exchange gain
    1,769

     
    2,069

     
    2,027

    Total financial income
    $
    1,795

     
    $
    2,117

     
    $
    2,087

    Financial expenses:
     
    Year ended December 31,
     
    2015
     
    2016
     
    2017
     
    (in thousands)
    Interests on loans and finance leases
    $
    1,401

     
    $
    3,212

     
    $
    4,153

    Interests on supplier payable with extended payment terms
    —

     
    411

     
    213

    Other bank fees and financial charges
    141

     
    111

     
    306

    Other financial expenses
    145

     
    83

     
    —

    Convertible debt amendments
    —

     
    —

     
    322

    Change in the fair value of convertible debt embedded derivative
    2,036

     
    1,583

     
    —

    Foreign exchange loss
    1,520

     
    1,476

     
    3,428

    Total financial expenses
    $
    5,243

     
    $
    6,876

     
    $
    8,422


    For the year ended December 31, 2017, interest on loans and finance leases included $4,094,000 related to convertible debts issued in 2016 and 2015 and government loans granted in 2015 ($3,039,000 and $1,350,000 for the year ended December 31, 2016 and 2015, respectively). (See Note 14.1 to the Consolidated Financial Statements).
    The net foreign exchange loss of $1,401,000 for the year ended December 31, 2017 (2016: net foreign exchange gain of $593,000; 2015: net foreign exchange gain $249,000) arises primarily from euro-based monetary liabilities.
    For the year ended December 31, 2017, net expense of $322,000 was recognized related to the convertible debt amendments (see Note 14.1 to the Consolidated Financial Statements). For the years ended December 31, 2016 and 2015, expenses of $1,583,000 and $2,036,000, respectively, were recognized, related to the change in fair value of the convertible debt embedded derivative. (See Note 14.1 to the Consolidated Financial Statements). Other financial expenses of $83,000 and $145,000 for the years ended December 31, 2016 and 2015, respectively, correspond to costs related to the embedded derivative.
    Cost of revenue and operating expenses
    The tables below present the cost of revenue and operating expenses by nature of expense :
     
     
     
     
    Year ended December 31,
     
     
    Note
     
    2015
     
    2016
     
    2017
     
     
     
     
    (in thousands)
    Included in cost of revenue:
     
     
     
     
     
     
     
     
    Cost of components
     
     
     
    $
    15,343

     
    $
    20,277

     
    $
    22,137

    Depreciation and impairment
     
    7
     
    905

     
    1,270

     
    1,037

    Amortization of intangible assets
     
    8
     
    —

     
    157

     
    157

    Wages and benefits
     
     
     
    1,571

     
    2,374

     
    2,233

    Share-based payment expense
     
    13
     
    17

     
    11

     
    7

    Assembly services, royalties and other
     
     
     
    1,615

     
    1,507

     
    1,551

     
     
     
     
    $
    19,451

     
    $
    25,596

     
    $
    27,122

     
     
     
     
    Year ended December 31,
     
     
    Note
     
    2015
     
    2016
     
    2017
     
     
     
     
    (in thousands)
    Included in operating expenses (between gross profit and operating result):
     
     
     
     
     
     
     
     
    Depreciation and impairment
     
    7
     
    $
    2,472

     
    $
    1,811

     
    $
    1,723

    Amortization of intangible assets
     
    8
     
    1,897

     
    2,057

     
    2,658

    Wages and benefits
     
     
     
    20,436

     
    22,615

     
    26,044

    Share-based payment expense
     
    13
     
    850

     
    1,111

     
    1,631

    Foreign exchange gains and losses related to hedges of euro
     
     
     
    296

     
    12

     
    99

    Other, net
     
     
     
    10,767

     
    12,121

     
    8,511

     
     
     
     
    $
    36,718

     
    $
    39,727

     
    $
    40,666

    Employee benefits expense
     
     
     
     
    Year ended December 31,
     
     
    Note
     
    2015
     
    2016
     
    2017
     
     
     
     
    (in thousands)
    Wages and salaries
     
     
     
    $
    16,555

     
    $
    18,996

     
    $
    21,535

    Social security costs and other payroll taxes
     
     
     
    5,219

     
    5,805

     
    6,584

    Other benefits
     
     
     
    93

     
    100

     
    58

    Pension costs
     
     
     
    140

     
    88

     
    100

    Share-based payment expenses
     
    13
     
    867

     
    1,122

     
    1,638

    Total employee benefits expense
     
     
     
    $
    22,874

     
    $
    26,111

     
    $
    29,915


    The amount recognized as an expense for defined contributions plans amounts to $1,230,000 for the year ended December 31, 2017 ($957,000 and $1,077,000 for the years ended December 31, 2015 and 2016, respectively).
    Research and development expense and tax credit receivable
    The research tax credit in France is deducted from corporate income taxes due; if taxes due are not sufficient to cover the full amount of the credit, the balance is received in cash three years later (one year later if the Company is below certain size criteria). Total research tax credit receivable as of December 31, 2017 is $3,056,000, relating to tax credits receivables for 2017, which are expected to be recovered in 2018 in cash.
    The Company also has research tax credits available in the United Kingdom. In May 2015, the United Kingdom tax authorities made inquiries regarding the calculation method used in 2014 and discussions with the authorities were ongoing at December 31, 2015. As described in Note 16 to the Consolidated Financial Statements, the Company had decided to record a provision for risk related to the 2014 tax credit and had opted to calculate the 2015 tax credit using a less favorable regime pending outcome of the inquiry. In 2016, the audit was concluded and the final assessment was not significantly different from the provision.
    In the years ended December 31, 2015 and 2016 the costs capitalized related mainly to operator certification. In the year ended December 31, 2017, the Company capitalized costs related to the development of the chipsets for LTE Category M, the Monarch and Monarch 2.
    The reduction of research and development expense from government grants, research tax credit and development costs capitalized was as follows:
     
     
    Year ended December 31,
     
     
    2015
     
    2016
     
    2017
     
     
    (in thousands)
    Research and development costs
     
    $
    29,528

     
    $
    30,022

     
    $
    33,318

    Research tax credit
     
    (2,658
    )
     
    (1,962
    )
     
    (3,345
    )
    Government and other grants
     
    (1,179
    )
     
    (1,704
    )
     
    (3,072
    )
    Development costs capitalized (*)
     
    (386
    )
     
    (22
    )
     
    (1,931
    )
    Amortization of capitalized development costs
     
    —

     
    —

     
    232

    Total research and development expense
     
    $
    25,305

     
    $
    26,334

     
    $
    25,202


    (*) Net of Research tax credit for $259,000 for the year ended December 31, 2017.