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Press release from Business Wire

Sierra Wireless Reports Third Quarter 2011 Results

<ul class='bwmarginl1'> <li class='bwlistitemmargb'> Revenue in the third quarter 2011 of $146.8 million </li> <li class='bwlistitemmargb'> Non-GAAP net earnings per diluted share of $0.15 </li> <li class='bwlistitemmargb'> Core M2M revenue up 15% year-over-year </li> <li class='bwlistitemmargb'> Gross margin increased to 29.5%, up from 28.0% in the second quarter </li> </ul>

Wednesday, November 02, 2011

Sierra Wireless Reports Third Quarter 2011 Results16:51 EDT Wednesday, November 02, 2011 VANCOUVER, British Columbia (Business Wire) -- Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported third quarter 2011 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 2011 was $146.8 million, a decrease of 15% compared to $172.7 million in the third quarter of 2010, and an increase of 5% compared to $139.9 million in the second quarter of 2011. The year-over-year revenue decrease was primarily driven by the loss of revenue from Barnes & Noble and Clearwire, which combined accounted for approximately $30 million in revenue in the third quarter of 2010. Machine-to-Machine (“M2M”) revenue was $75.3 million, down 1% compared to $76.1 million in the third quarter of 2010. Excluding sales to Barnes & Noble, the company's core M2M business increased 15% in the third quarter of 2011 on a year-over-year basis. Mobile Computing revenue was $71.5 million, down 26% compared to $96.6 million in the third quarter of 2010. “Solid execution led to significant profitability improvements in the quarter, despite a slower than expected ramp in AirCard® revenue,” said Jason Cohenour, President and Chief Executive Officer. “Looking forward, steady growth in core segments such as Automotive, Energy, and Networking continues to drive our market leadership in Machine-to-Machine. In addition, our PCOEM business continues to show substantial year-over-year growth and our market position with key operators has strengthened considerably with the launch of new 4G LTE AirCard products.” On a GAAP basis, gross margin was $43.3 million, or 29.5%, in the third quarter of 2011 compared to $49.0 million, or 28.3%, in the third quarter of 2010. Operating expenses were $45.1 million and loss from operations was $1.8 million in the third quarter of 2011, compared to operating expenses of $51.2 million and a loss from operations of $2.2 million in the third quarter of 2010. Net loss was $1.0 million, or $0.03 per diluted share, in the third quarter of 2011, compared to net earnings of $0.7 million, or $0.02 per diluted share, in the third quarter of 2010. On a non-GAAP basis, gross margin was 29.6% in the third quarter of 2011, compared to 28.4% in the third quarter of 2010. Operating expenses were $39.4 million and earnings from operations were $4.0 million in the third quarter of 2011, compared to operating expenses of $41.3 million and earnings from operations of $7.8 million in the third quarter of 2010. Net earnings were $4.6 million, or $0.15 per diluted share, in the third quarter of 2011 compared to net earnings of $6.5 million, or $0.21 per diluted share, in the third quarter of 2010. Non-GAAP results exclude the impact of stock-based compensation expense, acquisition amortization, integration costs, restructuring costs, foreign exchange gains or losses on translation of balance sheet accounts, and certain tax adjustments. We disclose non-GAAP amounts as we believe that these measures provide our shareholders with better information on actual operating results and assist in comparisons from one period to another. The reconciliation between our GAAP and non-GAAP results of operations is provided in the accompanying schedules. Financial Guidance The following guidance for the fourth quarter of 2011 reflects current business indicators and expectations. In the fourth quarter of 2011, we expect total revenue to be relatively unchanged from third quarter levels, we expect the majority of the gross margin improvements we achieved in the third quarter to be sustained and we expect operating expenses to be slightly above the seasonally low level experienced in the third quarter. Inherent in this guidance are risk factors that are described in greater detail in our regulatory filings. Our actual results could differ materially from those presented below. All figures are approximations based on management's current beliefs and assumptions. Q4 2011 Guidance       ConsolidatedNon-GAAP     Revenue $145 to 150 million Earnings from operations $1.5 to $3.0 million Net earnings $1.5 to $3.0 million Earnings per share $0.05 to $0.10 per share Conference Call, Webcast and Instant Replay Details We will host a conference call to review our results on Wednesday, November 2, 2011 at 2:30 p.m. PDT, 5:30 p.m. EDT. 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: Toll-free (Canada and US): 1-877-201-0168 Alternate number: 1-647-788-4901 Conference ID: 17659973 For those unable to participate in the live call, a replay will be available for 10 days following. Dial 1-855-859-2056 or 1-800-585-8367 and enter the Conference ID number above to access the replay. To access the webcast, please follow the link below: http://www.snwebcastcenter.com/custom_events/sierrawireless-20111102/site/ The webcast will remain available at the above link for one year following the call. We look forward to having you participate in our call. Cautionary Note Regarding Forward-Looking Statements Certain statements and information in this press release are not based on historical facts and constitute forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities laws (“forward-looking statements”) including statements and information relating to our financial guidance for the fourth quarter of 2011 and our fiscal year 2011, our business outlook for the short and longer term and our strategy, plans and future operating performance. Forward-looking statements are provided to help you understand our views of our short and longer term prospects. We caution you that forward-looking statements may not be appropriate for other purposes. We will not update or revise our forward-looking statements unless we are required to do so by securities laws. Forward-looking statements: Typically include words and phrases about the future such as “outlook”, “may”, “estimates”, “intends”, “believes”, “plans”, “anticipates” and “expects”. Are not promises or guarantees of future performance. They represent our current views and may change significantly. Are based on a number of material assumptions, including those listed below, which could prove to be significantly incorrect: Our ability to develop, manufacture and sell new products and services that meet the needs of our customers and gain commercial acceptance; Our ability to continue to sell our products and services in the expected quantities at the expected prices and expected times; Expected transition period to our 4G products; Expected cost of goods sold; Expected component supply constraints; Our ability to “win” new business; That wireless network operators will deploy next generation networks when expected; Our operations are not adversely disrupted by component shortages or other development, operating or regulatory risks; and Expected tax rates and foreign exchange rates. Are subject to substantial known and unknown material risks and uncertainties. Many factors could cause our actual results, achievements and developments in our business to differ significantly from those expressed or implied by our forward-looking statements, including without limitation, the following factors, most of which are discussed in greater detail. 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. Actual sales volumes or prices for our products and services may be lower than we expect for any reason including, without limitation, the continuing uncertain economic conditions, price and product competition, different product mix, the loss of any of our significant customers, competition from new or established wireless communication companies; The cost of products sold may be higher than planned or necessary component supplies may not be available, are delayed or are not available on commercially reasonable terms; We may be unable to enforce our intellectual property rights or may be subject to litigation that has an adverse outcome; The development and timing of the introduction of our new products may be later than we expect or may be indefinitely delayed. Transition periods associated with the migration to new technologies may be longer than we expect. 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 of Sierra Wireless. “AirPrime,” “AirLink,” and “AirVantage” are also trademarks of Sierra Wireless. Other product or service names mentioned herein may be the trademarks of their respective owners. SIERRA WIRELESS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands of U.S. dollars, except where otherwise stated)(unaudited)   Three months endedSeptember 30     Nine months endedSeptember 30       2011       2010     2011       2010   Revenue$146,827   $ 172,732 $430,990   $ 483,165 Cost of goods sold     103,493       123,778     309,092       341,667   Gross margin     43,334       48,954     121,898       141,498   Expenses Sales and marketing 11,158 12,137 34,752 39,476 Research and development 21,942 22,178 67,479 64,253 Administration 8,548 8,865 26,743 27,284 Restructuring 881 4,316 856 7,508 Integration 121 727 1,426 4,204 Amortization     2,447       2,939     8,089       8,964         45,097       51,162     139,345       151,689   Loss from operations(1,763) (2,208 ) (17,447) (10,191 ) Foreign exchange gain (loss) (154) 2,359 47 (6,759 ) Other income (expense)     68       12     15       (221 ) Income (loss) before income taxes(1,849) 163 (17,385) (17,171 ) Income tax recovery     (851)     (499 )   (1,775)     (1,587 ) Net earnings (loss)(998) 662 (15,610) (15,584 ) Net loss attributable to non-controlling interest   –     (48 )   (57)   (218 ) Net earnings (loss) attributable to the Company   $(998)   $ 710   $(15,553)   $ (15,366 ) Net income (loss) per share attributable to the Company's common shareholders (in dollars) Basic $(0.03) $ 0.02 $(0.50) $ (0.49 ) Diluted $(0.03) $ 0.02 $(0.50) $ (0.49 ) Weighted average number of shares outstanding (in thousands) Basic 31,297 31,077 31,267 31,061 Diluted     31,297       31,208     31,267       31,061   SIERRA WIRELESS, INC.CONSOLIDATED BALANCE SHEETS(in thousands of U.S. dollars)(unaudited)     September 30,December 31,     20112010Assets Current assets Cash and cash equivalents $100,662 $ 85,443 Short-term investments – 26,405 Accounts receivable, net of allowance for doubtful accounts of $4,210 (2010 - $4,606) 106,076 117,397 Inventories 37,071 22,134 Deferred income taxes 11,843 9,577 Prepaid expenses and other     15,870     24,542   271,522 285,498 Property, plant and equipment 23,108 22,635 Intangible assets 59,588 69,024 Goodwill 91,152 90,953 Deferred income taxes 1,172 836 Other assets     629     622       $447,171   $ 469,568   Liabilities Current liabilities Accounts payable and accrued liabilities $128,019 $ 138,940 Deferred revenue and credits 838 987 Current portion of obligations under capital leases     257     324   129,114 140,251 Long-term obligations 27,926 24,724 Obligations under capital leases 354 263 Deferred income taxes     538     1,143         157,932     166,381   Equity Shareholders' equity Common stock: no par value; unlimited shares authorized; issued and outstanding: 31,297,053 shares (December 31, 2010 - 31,222,786 shares) 328,383 327,668 Preferred stock: no par value; unlimited shares authorized; issued and outstanding: nil shares - - Treasury stock: at cost 622,008 shares (December 31, 2010 – 643,042 shares) (4,336) (3,908 ) Additional paid-in capital 18,742 16,926 Deficit (48,720) (33,167 ) Accumulated other comprehensive loss     (4,830)   (5,471 ) 289,239 302,048 Non-controlling interest     –     1,139         289,239     303,187       $447,171   $ 469,568   SIERRA WIRELESS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands of U.S. dollars)(unaudited)               Three months endedSeptember 30   Nine months endedSeptember 30     2011   20102011   2010Cash flows provided (used) by:       Operating activities Net earnings (loss) $(998) $ 662 $(15,610) $ (15,584 ) Items not requiring (providing) cash Amortization 7,456 8,692 24,524 26,176 Stock-based compensation 1,587 2,108 4,916 5,552 Non-cash restructuring and other – 13 – (884 ) Deferred income taxes (988) (395 ) (3,207) (1,093 ) Loss (gain) on disposal of property, plant and equipment (6) (61 ) 27 (72 ) Changes in non-cash working capital Accounts receivable (10,616) (33,015 ) 11,051 (50,358 ) Inventories (5,075) (5,705 ) (3,076) (12,216 ) Prepaid expenses and other 6,903 1,128 9,406 7,248 Accounts payable and accrued liabilities (8,236) 15,865 (19,252) 23,746 Deferred revenue and credits     (69)     –     (161)     127   Cash flows provided (used) by operating activities     (10,042)     (10,708 )   8,618       (17,358 ) Investing activities Purchase of Wavecom S.A. shares (282)–(1,787) (1,553 ) Additions to property, plant and equipment (3,357) (1,817 ) (11,920) (7,535 ) Proceeds from sale of property, plant and equipment 14 67 29 73 Increase in intangible assets (1,265) (966 ) (3,222) (2,965 ) Net change in short-term investments     17,470       11,009     26,405       24,479   Cash flows provided by investing activities     12,580       8,293     9,505       12,499   Financing activities Issuance of common shares, net of share issue costs 22 251 480 279 Purchase of treasury shares for RSU distribution (2,497)–(2,497)– Repayment of long-term obligations     (261)     (242 )   (888)     (2,339 ) Cash flows provided (used) by financing activities     (2,736)     9     (2,905)     (2,060 ) Effect of foreign exchange rate changes on cash and cash equivalents     (825)     2,970     1       2,001   Cash and cash equivalents, increase (decrease) in the period (1,023) 564 15,219 (4,918 ) Cash and cash equivalents, beginning of period     101,685       102,009     85,443       107,491   Cash and cash equivalents, end of period   $100,662     $ 102,573   $100,662     $ 102,573   Supplemental disclosures: Net Income taxes paid (received) $322 $ 99 $(1,589) $ 600 Net interest paid (received) 35 (41 ) 88 197 Non-cash purchase of property, plant and equipment (funded by obligation under capital lease)     –       261     –       412   SIERRA WIRELESS, INC.RECONCILLIATION OF GAAP AND NON-GAAP RESULTS(Unaudited)   (in thousands of U.S. dollars, except where otherwise stated)       2011     2010     YTD   Q3   Q2   Q1YTD   Q3   Q2   Q1   Revenue - GAAP and Non-GAAP $ 430,990   $ 146,827   $ 139,888   $ 144,275   $ 483,165   $ 172,732   $ 159,116   $ 151,317     Gross Margin - GAAP $ 121,898 $ 43,334 $ 39,100 $ 39,464 $ 141,498 $ 48,954 $ 46,210 $ 46,334 Stock-based compensation   299     89     97     113     370     111     124     135   Gross Margin - Non-GAAP $ 122,197   $ 43,423   $ 39,197   $ 39,577   $ 141,868   $ 49,065   $ 46,334   $ 46,469     Loss from operations - GAAP $ (17,447 ) $ (1,763 ) $ (6,270 ) $ (9,414 ) $ (10,191 ) $ (2,208 ) $ (3,473 ) $ (4,510 ) Stock-based compensation 4,916 1,587 1,697 1,632 5,554 2,108 1,751 1,695 Restructuring and other 856 881 (350 ) 325 6,968 3,776 1,581 1,611 Integration 1,426 121 765 540 4,204 727 1,631 1,846 Acquisition related amortization   9,798     3,198     3,312     3,288     10,082     3,403     3,194     3,485   Earnings (loss) from operations - Non-GAAP $ (451 ) $ 4,024   $ (846 ) $ (3,629 ) $ 16,617   $ 7,806   $ 4,684   $ 4,127     Net loss - GAAP $ (15,553 ) $ (998 ) $ (6,766 ) $ (7,789 ) $ (15,366 ) $ 710 $ (8,555 ) $ (7,521 ) Stock -based compensation, restructuring and other, integration, and acquisition related amortization, net of tax 16,798 5,570 5,503 5,725 25,210 9,616 7,518 8,076 Unrealized foreign exchange loss (gain) (63 ) 34 238 (335 ) 6,759 (2,359 ) 5,460 3,658 Non-controlling interest (32 ) - - (32 ) (159 ) (34 ) (40 ) (85 ) Tax adjustments   -     -     -     -     (1,388 )   (1,388 )   -     -   Net earnings (loss) - Non-GAAP $ 1,150   $ 4,606   $ (1,025 ) $ (2,431 ) $ 15,056   $ 6,545   $ 4,383   $ 4,128     Loss per share - GAAP (in dollars) $ (0.50 ) $ (0.03 ) $ (0.22 ) $ (0.25 ) $ (0.49 ) $ 0.02 $ (0.28 ) $ (0.24 ) Diluted earnings (loss) per share - Non-GAAP (in dollars) $ 0.04 $ 0.15 $ (0.03 ) $ (0.08 ) $ 0.48 $ 0.21 $ 0.14 $ 0.13 SIERRA WIRELESS, INC.REVENUE BY SEGMENT AND PRODUCT(Unaudited)         (in thousands of U.S. dollars)         Three months ended September 30   Nine months ended September 30   2011   20102011   2010M2M AirPrime Embedded Wireless Modules (excludes PC OEMs) (1) $ 63,635 $ 60,889 $ 186,089 $ 206,095 AirLink Intelligent Gateways and Routers 9,928 12,482 28,910 35,210 AirVantage M2M Cloud Platform and Other   1,752   2,770   6,952   7,114 $ 75,315 $ 76,141 $ 221,951 $ 248,419   Mobile Computing AirCard Mobile Broadband Devices $ 60,453 $ 90,368 $ 177,442 $ 216,333 AirPrime Embedded Wireless Modules for PC OEMs 9,771 6,054 28,375 16,154 Other   1,288   169   3,222   2,259 $ 71,512 $ 96,591 $ 209,039 $ 234,746   1) Barnes & Noble contributed nil in M2M revenue in the three months ended September 30, 2011 compared to $10.5 million in the three months ended September 30, 2010.  In the nine months ended September 30, 2011, Barnes & Noble contributed $0.7 million in M2M revenue compared to $55.8 million in the nine months ended September 30, 2010.SIERRA WIRELESS, INC.SEGMENTED RESULTS(Unaudited)                     (in thousands of U.S. dollars)     Three months ended September 30     Nine months ended September 30   2011   20102011   2010M2M   Revenue $ 75,315 $ 76,141 $ 221,951 $ 248,419 Cost of goods sold   49,667   N/A   149,732   N/A Gross margin $ 25,648   N/A $ 72,219   N/A Gross margin % 34.1% N/A 32.5% N/A   Mobile Computing Revenue $ 71,512 $ 96,591 $ 209,039 $ 234,746 Cost of goods sold   53,826   N/A   159,360   N/A Gross margin $ 17,686   N/A $ 49,679   N/A Gross margin % 24.7% N/A 23.8% N/A   Sierra Wireless, Inc.David G. McLennan, 604-231-1181Chief Financial OfficerWebsite: www.sierrawireless.comEmail: investor@sierrawireless.comINDUSTRY : CMTSUBJECT : ERN