Sierra Wireless Reports Third Quarter 2010 Results
- Record quarterly revenue and lower non-GAAP operating expenses drove
higher than expected earnings
- Revenue of $172.7 million, up 27% compared to the third quarter of
2009 and up 9% compared to the second quarter of 2010
- GAAP net earnings of $0.7 million and diluted earnings per share of
$0.02
- Non-GAAP net earnings of $6.5 million and non-GAAP diluted earnings
per share of $0.21
TSX: SWNASDAQ: SWIR
VANCOUVER, BRITISH COLUMBIA, Nov. 3 /PRNewswire-FirstCall/ - Sierra Wireless, Inc. (NASDAQ: SWIR, TSX: SW) today reported third quarter 2010 results. All results are reported in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles ("GAAP"), except as otherwise indicated below.
Revenue for the third quarter of 2010 was a record $172.7 million, an increase of 27% compared to $135.7 million in the third quarter of 2009 and an increase of 9% compared to $159.1 million in the second quarter of 2010. Machine-to-Machine ("M2M") revenue was $76.1 million, up 42% compared to $53.8 million in the third quarter of 2009. Mobile Computing revenue was $96.6 million, up 18% compared to $81.9 million in the third quarter of 2009.
"In the third quarter, our M2M and Mobile Computing lines of business delivered strong year-over-year revenue growth, driven by new product introductions and broad-based demand across our diversified customer base," said Jason Cohenour, President and Chief Executive Officer. "This revenue growth, combined with a continued focus on cost management, resulted in better than expected earnings in the quarter."
"Looking forward, new AirCard product launches at AT&T and Telstra and the introduction of the first of our LTE product lineup demonstrate the strength of our channel position and product pipeline in Mobile Computing. In M2M, new design wins in a number of our key segments and strategic wins with our AirVantage services platform demonstrate that we are well positioned to build on our market leadership and drive growth over the long term."
On a GAAP basis, gross margin was 28.3% in the third quarter of 2010, compared to 35.8% in the third quarter of 2009. Operating expenses were $51.2 million and loss from operations were $2.2 million in the third quarter of 2010, compared to operating expenses of $58.7 million and a loss from operations of $10.2 million in the third quarter of 2009. Net earnings were $0.7 million, or $0.02 per diluted share, compared to a net loss of $7.6 million, or $0.25 per diluted share, in the third quarter of 2009.
On a non-GAAP basis, gross margin was 28.4% in the third quarter of 2010, compared to 35.9% in the third quarter of 2009. Operating expenses were $41.3 million and earnings from operations were $7.8 million in the third quarter of 2010, compared to operating expenses of $43.6 million and earnings from operations of $5.1 million in the third quarter of 2009. Net earnings were $6.5 million, or $0.21 per diluted share, compared to net earnings of $5.5 million, or $0.18 per diluted share, in the third quarter of 2009.
Non-GAAP results exclude transaction costs related to the Wavecom acquisition, restructuring costs, acquisition related integration costs, stock based compensation expense, acquisition related amortization, foreign exchange gains or losses, tax adjustments and non-controlling interest related to non-GAAP adjustments. The reconciliation between GAAP and non-GAAP results of operations is provided in the accompanying schedules.
Financial Guidance
The following guidance for the fourth quarter of 2010 reflects current business indicators and expectations. Relative to the third quarter, the company expects sequential growth in M2M revenue as the result of broad-based demand and expects a sequential decline in Mobile Computing revenue as the result of lower AirCard sales. The company also expects a modest increase in gross margin percentage in the quarter, partially offset by slightly higher operating expenses driven by new product certification and launch costs. The net result of which is an expected modest increase in net earnings compared to the third quarter of 2010. This guidance also reflects the uncertain macroeconomic environment and expected component supply constraints. Inherent in this guidance are risk factors that are described in greater detail in the company's regulatory filings. Actual results could differ materially from those presented below. All figures are approximations based on management's current beliefs and assumptions.
Consolidated
Q4 2010 Guidance Non-GAAP
---------------- ------------
Revenue $170 - $175 million
Earnings from operations $8.0 - $9.0 million
Net earnings $6.8 - $7.6 million
Diluted earnings per share $0.22 - $0.24/share
Conference Call, Webcast and Instant Replay
Sierra Wireless will host a conference call and webcast today, Wednesday, November 3, 2010 at 2:30 pm PDT/5:30 pm EDT to review its third quarter 2010 results. You can participate in the conference call either via telephone or webcast. To participate in this conference call, please dial the following number approximately ten minutes prior to the commencement of the call. A live slide presentation will be available for viewing during the call from the link provided below.
Telephone participation:
Toll free (Canada and US): +1-888-231-8191 (passcode not required)
Outside Canada and the US: +1-647-427-7450 (passcode not required)
For those unable to participate in the live call, an instant replay will be available for seven business days following the call. Dial +1-800-642-1687 or +1-416-849-0833 and enter passcode 92787423 followed by the pound (#) key to access the replay.
Webcast:
The conference call will also be broadcast over the Internet. To access the web broadcast, please follow the link below and choose one of the following options:
- If you are following the conference call on the phone, please choose
the "Non-Streaming" version
- If you would prefer to follow online only, with streaming audio,
select any of the other options according to your preferred format
http://event.on24.com/r.htm?e=239495&s=1&k=169ABC381D43379E9238724AFC132D20
The webcast will be available at the above link for 90 days following the call.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this press release that are not based on historical facts constitute forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws ("forward-looking statements"). These forward-looking statements are not promises or guarantees of future performance but are only predictions that relate to future events, conditions or circumstances or our future results, performance, achievements or developments and are subject to substantial known and unknown risks, assumptions, uncertainties and other factors that could cause our actual results, performance, achievements or developments in our business or in our industry to differ materially from those expressed, anticipated or implied by such forward-looking statements. Forward-looking statements in this press release include all financial guidance for the fourth quarter of 2010, and all other disclosure regarding possible events, conditions, circumstances or results of operations that are based on assumptions about future economic conditions, courses of action and other future events. We caution you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. These forward-looking statements appear in a number of different places in this press release and can be identified by words such as "may", "estimates", "projects", "expects", "intends", "believes", "plans", "anticipates", "continue", "growing", "expanding", or their negatives or other comparable words. Forward-looking statements include statements regarding the outlook for our future operations, plans and timing for the introduction or enhancement of our services and products, statements concerning strategies or developments, statements about future market conditions, supply conditions, end customer demand conditions, channel inventory and sell through, revenue, gross margin, operating expenses, profits, forecasts of future costs and expenditures, the outcome of legal proceedings, and other expectations, intentions and plans that are not historical fact. The risk factors and uncertainties that may affect our actual results, performance, achievements or developments are many and include, amongst others, our ability to develop, manufacture, supply and market new products that we do not produce today that meet the needs of customers and gain commercial acceptance, our reliance on the deployment of next generation networks by major wireless operators, the continuous commitment of our customers, and increased competition. These risk factors and others are discussed in our Annual Information Form and Management's Discussion and Analysis of Financial Condition and Results of Operations, which may be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov and in our other regulatory filings with the Securities and Exchange Commission in the United States and the Provincial Securities Commissions in Canada. Many of these factors and uncertainties are beyond our control. Consequently, all forward-looking statements in this press release are qualified by this cautionary statement and we cannot assure you that actual results, performance, achievements or developments that we anticipate will be realized. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions and we do not undertake any obligation to update forward-looking statements should the assumptions related to these plans, estimates, projections, beliefs and opinions change, except as required by law.
About Sierra Wireless
Sierra Wireless (NASDAQ: SWIR - TSX: SW) offers industry-leading mobile computing and machine-to-machine (M2M) communications products and solutions that connect people, devices, and applications over cellular networks. Wireless service providers, equipment manufacturers, enterprises and government organizations around the world depend on us for reliable wireless technology. We offer 2G, 3G and 4G wireless modems, routers and gateways as well as a comprehensive suite of software, tools, and services that ensure our customers can successfully bring wireless applications to market. For more information about Sierra Wireless, visit www.sierrawireless.com.
AirCard is a registered trademark, and AirPrime, AirLink, and AirVantage are trademarks belonging to Sierra Wireless. Other product or service names mentioned herein may be the trademarks of their respective owners.
SIERRA WIRELESS, INC.
Consolidated Statements of Operations and Retained Earnings (Deficit)
(Expressed in thousands of United States ("U.S.") dollars, except per
share amounts)
(Prepared in accordance with United States generally accepted
accounting principles ("U.S. GAAP"))
(Unaudited)
Three months ended Nine months ended
------------------ -----------------
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Revenue...................... $ 172,732 $ 135,677 $ 483,165 $ 382,432
Cost of goods sold........... 123,778 87,088 341,667 253,869
---------- ---------- ---------- ----------
Gross margin................. 48,954 48,589 141,498 128,563
---------- ---------- ---------- ----------
Expenses:
Sales and marketing........ 12,137 14,692 39,476 39,644
Research and development... 22,178 22,546 64,253 60,182
Administration............. 8,865 9,589 27,284 26,928
Acquisition costs.......... - 364 - 7,690
Restructuring.............. 4,316 5,332 7,508 15,927
Integration................ 727 1,332 4,204 2,522
Amortization............... 2,939 4,889 8,964 12,310
---------- ---------- ---------- ----------
51,162 58,744 151,689 165,203
---------- ---------- ---------- ----------
Loss from operations......... (2,208) (10,155) (10,191) (36,640)
Foreign exchange gain (loss) 2,359 1,981 (6,759) 3,015
Other income (expense)....... 12 (88) (221) (4,120)
---------- ---------- ---------- ----------
Net earnings (loss) before
income taxes................ 163 (8,262) (17,171) (37,745)
Income tax expense (recovery) (499) (634) (1,587) 328
---------- ---------- ---------- ----------
Net earnings (loss).......... 662 (7,628) (15,584) (38,073)
Net loss attributable to the
non-controlling interest.... (48) - (218) (909)
---------- ---------- ---------- ----------
Net earnings (loss)
attributable to Sierra
Wireless, Inc............... 710 (7,628) (15,366) (37,164)
Retained earnings (deficit),
beginning of period......... (34,702) (8,263) (18,626) 21,273
---------- ---------- ---------- ----------
Deficit, end of period....... $ (33,992) $ (15,891) $ (33,992) $ (15,891)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings (loss) per share
attributable to Sierra
Wireless, Inc.:
Basic...................... $ 0.02 $ (0.25) $ (0.49) $ (1.20)
Diluted.................... $ 0.02 $ (0.25) $ (0.49) $ (1.20)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
shares (in thousands):
Basic...................... 31,077 31,032 31,061 31,032
Diluted.................... 31,208 31,032 31,061 31,032
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SIERRA WIRELESS, INC.
Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars)
(Prepared in accordance with U.S. GAAP)
September 30, December 31,
------------- ------------
2010 2009
---- ----
(Unaudited)
Assets
Current assets:
Cash and cash equivalents.................. $ 102,573 $ 107,491
Short-term investments..................... 2,413 26,898
Accounts receivable, net of allowance for
doubtful accounts of $4,588
(2009 - $6,504)........................... 132,249 86,466
Inventories................................ 36,576 24,708
Deferred income taxes...................... 6,803 6,168
Prepaid expenses and other................. 13,291 14,039
------------- -------------
293,905 265,770
Fixed assets................................. 22,002 27,956
Intangible assets............................ 73,200 86,674
Goodwill..................................... 91,350 95,064
Deferred income taxes........................ 1,533 1,794
Other........................................ - 7,261
------------- -------------
$ 481,990 $ 484,519
------------- -------------
------------- -------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable........................... $ 67,557 $ 71,035
Accrued liabilities........................ 81,457 54,419
Deferred revenue and credits............... 636 750
Current portion of long-term obligations... 1,392 3,371
Current portion of obligations under
capital leases............................ 364 293
------------- -------------
151,406 129,868
Long-term obligations........................ 1,915 3,197
Obligations under capital leases............. 290 245
Other long-term liabilities.................. 25,661 32,663
Deferred income taxes........................ 1,345 1,950
Shareholders' equity:
Share capital.............................. 326,463 326,043
Shares held for restricted share unit
("RSU") distribution, at cost............. (3,915) (6,442)
Additional paid-in capital................. 15,787 13,133
Deficit.................................... (33,992) (18,626)
Accumulated other comprehensive loss....... (4,166) (37)
------------- -------------
300,177 314,071
Non-controlling interest in Wavecom S.A...... 1,196 2,525
------------- -------------
Total shareholders' equity................... 301,373 316,596
------------- -------------
$ 481,990 $ 484,519
------------- -------------
------------- -------------
SIERRA WIRELESS, INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
(Prepared in accordance with U.S. GAAP)
(Unaudited)
Three months ended Nine months ended
------------------ -----------------
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Cash flows from operating
activities:
Net earnings (loss)........ $ 662 $ (7,628) $ (15,584) $ (38,073)
Adjustments to reconcile
net earnings (loss) to net
cash provided by (used in)
operating activities
Amortization............. 8,693 12,179 26,177 30,545
Stock-based compensation 2,107 1,693 5,551 6,427
Non-cash restructuring
and other............... 13 4,163 (884) 4,163
Deferred income taxes.... (395) - (1,093) -
Loss (gain) on disposal.. (61) 42 (72) (7)
Unrealized foreign
exchange loss on
restricted cash......... - - - 15,653
Unrealized foreign
exchange loss on term loan - - - 1,215
Changes in operating assets
and liabilities
Accounts receivable...... (33,015) (12,314) (50,358) 21,861
Inventories.............. (5,705) 4,344 (12,216) 17,148
Prepaid expenses and
other assets............ 1,128 1,027 7,248 1,010
Accounts payable......... (900) 10,281 13,901 (7,236)
Accrued liabilities...... 16,765 1,896 9,845 (8,206)
Deferred revenue and
credits................. - (548) 127 (457)
---------- ---------- ---------- ----------
Net cash provided by
(used in) operating
activities................ (10,708) 15,135 (17,358) 44,043
Cash flows from investing
activities:
Business acquisition, net
of cash acquired of
$139,785.................. - - - (26,493)
Acquisition of OCEANE
convertible bonds......... - - - (104,767)
Decrease in restricted cash - - - 175,820
Purchase of Wavecom S.A.
shares.................... - - (1,553) -
Proceeds on disposal....... 67 23 73 119
Purchase of fixed assets... (1,817) (1,449) (7,535) (8,268)
Increase in intangible
assets.................... (966) (3,595) (2,965) (5,075)
Purchase of short-term
investments............... (2,411) (22,998) (16,910) (47,445)
Proceeds on maturity of
short-term investments.... 13,420 16,200 41,389 40,260
---------- ---------- ---------- ----------
Net cash provided by (used in)
investing activities........ 8,293 (11,819) 12,499 24,151
Cash flows from financing
activities:
Proceeds on issuance of
term loan................. - - - 102,716
Repayment of term loan..... - - - (103,931)
Financing costs............ - - - (3,914)
Issuance of common shares,
net of share issue costs.. 251 5 279 5
Purchase of treasury shares
for RSU distribution...... - (3,899) - (6,417)
Proceeds on exercise of
Wavecom options........... - - - 4,148
Repayment of long-term
liabilities............... (242) (334) (2,339) (900)
---------- ---------- ---------- ----------
Net cash provided by (used in)
financing activities........ 9 (4,228) (2,060) (8,293)
Effect of foreign exchange
changes on cash and cash
equivalents................. 2,970 (1,486) 2,001 (12,574)
---------- ---------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents... 564 (2,398) (4,918) 47,327
Cash and cash equivalents,
beginning of period......... 102,009 112,983 107,491 63,258
---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period............... $ 102,573 $ 110,585 $ 102,573 $ 110,585
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SIERRA WIRELESS, INC.
Reconciliation of GAAP and Non-GAAP Results
(Unaudited)
Three months ended Nine months ended
------------------ -----------------
September 30, September 30,
------------- -------------
2010 2009 2010 2009
(in millions of U.S. dollars) ---- ---- ---- ----
Revenue - GAAP and Non-GAAP $ 172.7 $ 135.7 $ 483.2 $ 382.4
Gross margin - GAAP $ 49.0 $ 48.6 $ 141.5 $ 128.6
Stock-based compensation 0.1 0.1 0.4 0.4
---------- ---------- ---------- ----------
Gross margin - Non-GAAP $ 49.1 $ 48.7 $ 141.9 $ 129.0
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Loss from operations - GAAP $ (2.2) $ (10.2) $ (10.2) $ (36.6)
Stock-based compensation 2.1 1.7 5.5 6.4
Transaction costs - 0.4 - 7.7
Restructuring and other costs 3.8 5.5 7.0 15.2
Integration costs 0.7 1.3 4.2 2.5
Acquisition related
amortization 3.4 6.4 10.1 14.9
---------- ---------- ---------- ----------
Earnings from operations
- Non-GAAP $ 7.8 $ 5.1 $ 16.6 $ 10.1
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings (loss) - GAAP $ 0.7 $ (7.6) $ (15.4) $ (37.2)
Stock-based compensation,
transaction, restructuring,
integration and acquisition
amortization costs, net
of tax 9.6 15.1 25.2 46.1
Foreign exchange (gain) loss (2.4) (2.0) 6.8 (3.0)
Interest expense - - - 4.3
Non-controlling interest - - (0.1) (0.7)
Tax impact related to net
change in tax assets and
tax provision adjustment
for actual taxes filed (1.4) - (1.4) -
---------- ---------- ---------- ----------
Net earnings - Non-GAAP $ 6.5 $ 5.5 $ 15.1 $ 9.5
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted earnings (loss) per
share - GAAP $ 0.02 $ (0.25) $ (0.49) $ (1.20)
Diluted earnings per share
- Non-GAAP $ 0.21 $ 0.18 $ 0.48 $ 0.30
SIERRA WIRELESS, INC.
REVENUE BY BUSINESS LINE
(Expressed as a percentage of revenue)
Three months ended Nine months ended
------------------ -----------------
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
M2M.......................... 44% 40% 51% 36%
Mobile Computing............. 56 60 49 64
---------- ---------- ---------- ----------
100% 100% 100% 100%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SIERRA WIRELESS, INC.
REVENUE BY PRODUCT LINE
(Expressed as a percentage of revenue)
Three months ended Nine months ended
------------------ -----------------
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
AirPrime Intelligent
Embedded Modules............ 39% 33% 46% 30%
AirCard Mobile Broadband
Devices..................... 52 58 45 61
AirLink Intelligent Gateways
and Routers................. 7 8 7 8
AirVantage Solutions and Other 2 1 2 1
---------- ---------- ---------- ----------
100% 100% 100% 100%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SOURCE Sierra Wireless, Inc.
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