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Press release from Business Wire

Sierra Wireless Reports Second Quarter 2012 Results

<ul> <li class='bwlistitemmargb'> Revenue in the second quarter 2012 of $167.4 million, 19.7 percent year-over-year growth </li> <li class='bwlistitemmargb'> Non-GAAP earnings from operations of $12.7 million, up from loss of $0.8 million in the second quarter of 2011 </li> <li class='bwlistitemmargb'> Non-GAAP net earnings of $9.3 million, or $0.30 per diluted share, up from a net loss of $1.0 million, or $0.03 per diluted share in the second quarter of 2011 </li> <li class='bwlistitemmargb'> Cash, cash equivalents and short-term investments balance of $125.3 million, up $18.5 million from the end of the first quarter 2012 </li> </ul>

Thursday, August 02, 2012

Sierra Wireless Reports Second Quarter 2012 Results16:39 EDT Thursday, August 02, 2012 VANCOUVER, British Columbia (Business Wire) -- Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported second quarter 2012 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 second quarter of 2012 was $167.4 million, compared to $139.9 million in the second quarter of 2011, and $150.3 million in the first quarter of 2012. The year-over-year revenue increase of 19.7 percent was driven by strong sales in our 4G Mobile Computing products and steady growth in our Machine-to-Machine (“M2M”) business. Mobile Computing revenue was $89.9 million, compared to $66.0 million in the second quarter of 2011. M2M revenue was $77.5 million, compared to $73.9 million in the second quarter of 2011. “Exceptionally strong sales of our 4G Mobile Computing products, combined with steady growth in our Machine-to-Machine business, led to higher than expected revenue and profitability in the second quarter of 2012,” said Jason Cohenour, President and Chief Executive Officer. “In addition, our successful acquisition of Sagemcom's M2M business expands our leading market share position and further accelerates our growth in the exciting Machine-to-Machine market.” On a GAAP basis, gross margin was $51.3 million, or 30.7 percent of revenue, in the second quarter of 2012, compared to $39.1 million, or 28.0 percent of revenue, in the second quarter of 2011. Operating expenses were $45.1 million and earnings from operations were $6.2 million in the second quarter of 2012, compared to operating expenses of $45.4 million and a loss from operations of $6.3 million in the second quarter of 2011. Net earnings were $3.6 million, or $0.11 per diluted share, in the second quarter of 2012, compared to a net loss of $6.8 million, or $0.22 per diluted share, in the second quarter of 2011. The second quarter of 2012 results included $2.1 million in acquisition and restructuring costs, compared to $0.4 million in restructuring and integration costs in the second quarter of 2011. On a non-GAAP basis, gross margin was 30.7 percent of revenue in the second quarter of 2012, compared to 28.0 percent of revenue in the second quarter of 2011. Operating expenses were $38.8 million and earnings from operations were $12.7 million in the second quarter of 2012, compared to operating expenses of $40.0 million and a loss from operations of $0.8 million in the second quarter of 2011. Net earnings were $9.3 million, or $0.30 per diluted share, in the second quarter of 2012 compared to a net loss of $1.0 million, or $0.03 per diluted share, in the second quarter of 2011. The cash, cash equivalents and short-term investments balance at the end of the second quarter of 2012 was $125.3 million, up $18.5 million from the end of the first quarter of 2012. During the second quarter of 2012, we purchased and cancelled 400,000 common shares in the open market for $3.3 million in connection with our normal course issuer bid. Non-GAAP results exclude the impact of stock-based compensation expense, acquisition costs, restructuring costs, integration costs, acquisition amortization, foreign exchange gains or losses on foreign currency contracts as well as 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 about actual operating results and assist in comparisons from one period to another. The reconciliation between our GAAP and non-GAAP results is provided in the accompanying schedules. Financial guidance Financial guidance for the third quarter of 2012 excludes any impact from the acquisition of the Sagemcom M2M business. In the third quarter of 2012, we expect revenue and gross margin to decrease on a sequential basis driven primarily by normalizing sales patterns in our Mobile Computing business, following an exceptional Q2. Q3 2012 Guidance           Consolidated Non-GAAP   Revenue $157.0 to $162.0 million   Earnings from operations $6.0 to $8.0 million   Net earnings $4.3 to $5.7 million   Earnings per share $0.14 to $0.19 per share This Non-GAAP guidance for the third quarter of 2012 reflects current business indicators and expectations. 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. Conference call, webcast and instant replay details Sierra Wireless President and CEO, Jason Cohenour, and CFO, David McLennan, will host a conference call and webcast with analysts and investors to review the results on Thursday, August 2, 2012, at 5:30 PM Eastern Time (2:30 PM PT). A live slide presentation will be available for viewing during the call from the link provided below. 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: 88885531 For those unable to participate in the live call, a replay will be available until August 10, 2012. 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-20120802/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 third quarter of 2012 and our fiscal year 2012, 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; Expected deployment of next generation networks by wireless network operators; 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. 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” and “AirLink” are registered trademarks of Sierra Wireless. “AirPrime” 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 BALANCE SHEETS(in thousands of U.S. dollars)(unaudited)   June 30,   December 31,   20122011Assets Current assets Cash and cash equivalents $ 123,159 $ 101,375 Short-term investments 2,153 9,347 Accounts receivable, net of allowance for doubtful accounts of $2,477 (2011 - $3,642) 111,223 107,367 Inventories 15,157 16,168 Deferred income taxes 8,075 6,540 Prepaids and other 23,579 20,674 283,346 261,471 Property, plant and equipment 24,394 22,087 Intangible assets 35,517 42,557 Goodwill 89,345 89,961 Deferred income taxes 6,205 6,205 Other assets 592 606   $ 439,399 $ 422,887 Liabilities Current liabilities Accounts payable and accrued liabilities $ 144,518 $ 123,547 Deferred income taxes – 336 Deferred revenue and credits 1,059 1,721 145,577 125,604 Long-term obligations 24,314 25,143 Deferred income taxes 236 236   170,127 150,983 Equity Shareholders' equity Common stock: no par value; unlimited shares authorized; issued and outstanding: 30,562,076 shares (December 31, 2011 - 31,306,692 shares) 322,521 328,440 Preferred stock: no par value; unlimited shares authorized; issued and outstanding: nil shares – – Treasury stock: at cost 725,555 shares (December 31, 2011 – 877,559 shares) (5,238) (6,141) Additional paid-in capital 19,886 20,087 Deficit (58,556) (62,482) Accumulated other comprehensive loss (9,341) (8,000)   269,272 271,904   $ 439,399 $ 422,887 SIERRA WIRELESS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands of U.S. dollars, except where otherwise stated)(unaudited)   Three months endedJune 30     Six months endedJune 30   2012   20112012   2011Revenue$ 167,441 $ 139,888 $ 317,707 $ 284,163 Cost of goods sold 116,106 100,788 221,606 205,599 Gross margin51,335 39,100 96,101 78,564 Expenses Sales and marketing 11,190 11,326 23,051 23,594 Research and development 20,773 22,025 42,169 45,537 Administration 8,746 8,810 17,346 18,195 Acquisition costs 599 – 599 – Restructuring 1,531 (350) 1,711 (25) Integration – 765 – 1,305 Amortization 2,275 2,794 4,662 5,642   45,114 45,370 89,538 94,248 Earnings (loss) from operations6,221 (6,270) 6,563 (15,684) Foreign exchange gain (loss) 336 (221) 542 201 Other income (expense) 10 (13) (161) (53) Earnings (loss) before income taxes6,567 (6,504) 6,944 (15,536) Income tax expense (recovery) 2,986 275 3,018 (924) Net earnings (loss)3,581 (6,779) 3,926 (14,612) Net loss attributable to non-controlling interest – (13) – (57) Net earnings (loss) attributable to the Company$ 3,581 $ (6,766) $ 3,926 $ (14,555) Net earnings (loss) per share attributable to the Company's common shareholders (in dollars)   Basic $0.12 $(0.22) $0.13 $(0.47) Diluted $ 0.11 $ (0.22) $ 0.13 $ (0.47) Weighted average number of shares outstanding (in thousands) Basic 31,082 31,267 30,996 31,252 Diluted 31,252 31,267 31,133 31,252 SIERRA WIRELESS, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)(in thousands of U.S. dollars)(unaudited)   Three months endedJune 30     Six months endedJune 30     2012     2011   2012     2011 Net earnings (loss) $3,581 $ (6,779) $3,926 $ (14,612) Other comprehensive income (loss), net of taxes: Purchase of Wavecom S.A. shares, net of taxes of $nil – 42 – 42 Foreign currency translation adjustments, net of taxes of $nil   (3,343)   1,587   (1,341)   6,519 Total comprehensive earnings (loss)238 (5,150) 2,585 (8,051) Comprehensive income (loss) attributable to non-controlling interest: Net earnings (loss) – (13) – (57) Foreign currency translation adjustments, net of taxes of $nil   –   105   –   106 Comprehensive earnings (loss) attributable to the Company$238 $ (5,242) $2,585 $ (8,100) SIERRA WIRELESS, INC.CONSOLIDATED STATEMENTS OF EQUITY(in thousands of U.S. dollars)(unaudited)   Equity attributable to the Company   Common stock   Treasury Shares       # ofshares         $   # ofshares         $Additional paid-incapital       Deficit   Accumulatedothercomprehensive income (loss)Non-controlling interest(deficit)       Total Balance as at December 31, 2010 31,222,786 $ 327,668 643,042 $ (3,908) $ 16,926 $ (33,167) $ (5,471) $ 1,139 $ 303,187 Purchase of Wavecom S.A. shares – – – – (796) – 42 (1,033) (1,787) Stock option exercises 83,906 772 – – (253) – – – 519 Stock-based compensation – – – – 6,449 – – – 6,449 Purchase of treasury shares for RSU distribution – – 613,638 (4,472) – – – – (4,472) Distribution of vested RSUs – – (379,121) 2,239 (2,239) – – – – Net loss – – – – – (29,315) – (57) (29,372) Foreign currency translation adjustments, net of tax –   – –   –   –   –   (2,571)   (49)   (2,620) Balance as at December 31, 2011 31,306,692 $ 328,440 877,559 $ (6,141) $ 20,087 $ (62,482) $ (8,000) $ – $ 271,904   Common share cancellation(800,000)(6,312)––––––(6,312)Stock option exercises55,384393––(124)–––269Stock-based compensation––––3,315–––3,315Purchase of treasury shares for RSU distribution––336,638(2,489)––––(2,489)Distribution of vested RSUs––(488,642)3,392(3,392)––––Net earnings–––––3,926––3,926Foreign currency translation adjustments, net of tax–   ––   –   –   –   (1,341)   –   (1,341)Balance as at June 30, 201230,562,076$322,521725,555$(5,238)$19,886$(58,556)$(9,341)$–$269,272SIERRA WIRELESS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands of U.S. dollars)(unaudited)     Three months endedJune 30         Six months endedJune 30       2012     2011   2012     2011Cash flows provided (used) by:Operating activities Net earnings (loss) $3,581 $ (6,779) $3,926 $ (14,612) Items not requiring (providing) cash Amortization 6,731 8,456 13,713 17,068 Stock-based compensation 1,636 1,697 3,315 3,329 Deferred income taxes (843) (2,219) (1,873) (2,219) Loss (gain) on disposal of property, plant and equipment (33) 41 126 33 Changes in non-cash working capital Accounts receivable (5,027) 9,447 (4,414) 21,667 Inventories (2,307) 665 917 1,999 Prepaid expenses and other (3,677) 3,624 (2,961) 2,503 Accounts payable and accrued liabilities 28,557 2,302 21,472 (11,016) Deferred revenue and credits   (178)   (50)   (658)   (92) Cash flows provided by operating activities   28,440   17,184   33,563   18,660 Investing activities Purchase of Wavecom S.A. shares – (1,505) – (1,505) Additions to property, plant and equipment (4,957) (6,600) (8,560) (8,562) Proceeds from sale of property, plant and equipment 3 2 64 15 Increase in intangible assets (567) (1,216) (1,338) (1,957) Net change in short-term investments   (2,151)   7,089   7,194   8,935 Cash flows used by investing activities   (7,672)   (2,230)   (2,640)   (3,074) Financing activities Issuance of common shares, net of share issue costs 255 259 269 465 Repurchase of common shares (3,275) – (6,312) – Purchase of treasury shares for RSU distribution (1,502) – (2,489) – Repayment of long-term obligations   (13)   11   (655)   (627) Cash flows provided (used) by financing activities   (4,535)   270   (9,187)   (162) Effect of foreign exchange rate changes on cash and cash equivalents   153   264   48   818 Cash and cash equivalents, increase in the period 16,386 15,488 21,784 16,242 Cash and cash equivalents, beginning of period   106,773   86,197   101,375   85,443 Cash and cash equivalents, end of period$123,159 $ 101,685 $123,159 $ 101,685 Supplemental disclosures: Net Income taxes paid (received) $518 $ (1,943) $940 $ (1,759) Net interest paid (received)   (87)   54   (44)   (53) SIERRA WIRELESS, INC.RECONCILIATION OF GAAP AND NON-GAAP RESULTS(in thousands of U.S. dollars, except where otherwise stated)(unaudited)     2012     2011   YTD   Q2   Q1YTD   Q2   Q1   Revenue - GAAP and Non-GAAP$317,707$167,441 $ 150,266 $ 284,163 $ 139,888 $ 144,275   Gross Margin - GAAP$96,101$51,335 $ 44,766 $ 78,564 $ 39,100 $ 39,464 Stock-based compensation   161   78   83   210   97   113 Gross Margin - Non-GAAP$96,262$51,413 $ 44,849 $ 78,774 $ 39,197 $ 39,577   Earnings (loss) from operations - GAAP$6,563$6,221 $ 342 $ (15,684) $ (6,270) $ (9,414) Stock-based compensation 3,3151,636 1,679 3,329 1,697 1,632 Acquisition 599599 - - - - Restructuring 1,7111,531 180 (25) (350) 325 Integration -- - 1,305 765 540 Acquisition related amortization   5,646   2,665   2,981   6,600   3,312   3,288 Earnings (loss) from operations - Non-GAAP$17,834$12,652 $ 5,182 $ (4,475) $ (846) $ (3,629) Amortization (excluding acquisition related amortization)   8,067   4,066   4,001   10,468   5,144   5,324 EBITDA$25,901$16,718 $ 9,183 $ 5,993 $ 4,298 $ 1,695   Net Earnings (loss) - GAAP$3,926$3,581 $ 345 $ (14,555) $ (6,766) $ (7,789) Stock-based compensation, restructuring and other, integration, and acquisition related amortization, net of tax 10,6605,891 4,769 11,228 5,503 5,725 Unrealized foreign exchange loss (gain) (266)(165) (101) (97) 238 (335) Non-controlling interest   -   -   -   (32)   -   (32) Net earnings (loss) - Non-GAAP$14,320$9,307 $ 5,013 $ (3,456) $ (1,025) $ (2,431)   Diluted earnings (loss) per share - GAAP (in dollars) GAAP $0.13$0.11 $ 0.01 $ (0.47) $ (0.22) $ (0.25) Non-GAAP $0.46$0.30 $ 0.16 $ (0.11) $ (0.03) $ (0.08) SIERRA WIRELESS, INC.SEGMENTED RESULTS(in thousands of U.S. dollars)(unaudited)(in thousands of U.S. dollars)                 Three months ended June 30   Six months ended June 30   2012   2011   2012   2011M2M Revenue $ 77,545 $ 73,908 $ 154,488 $ 146,636 Cost of goods sold   51,426   50,017   103,645   100,065 Gross margin $ 26,119   23,891 $ 50,843   46,571 Gross margin % 33.7%32.3%32.9%31.8%   Mobile Computing Revenue $ 89,896 $ 65,980 $ 163,219 $ 137,527 Cost of goods sold   64,680   50,771   117,961   105,534 Gross margin $ 25,216 $ 15,209 $ 45,258 $ 31,993 Gross margin % 28.1%23.1%27.7%23.3%SIERRA WIRELESS, INC.REVENUE BY SEGMENT AND PRODUCT(in thousands of U.S. dollars)(unaudited)(in thousands of U.S. dollars)                     Three months ended June 30   Six months ended June 302012   2011   2012   2011M2M AirPrime Embedded Wireless Modules (excludes PC OEMs) $ 63,768 $ 62,759 $ 126,712 $ 122,454 AirLink Intelligent Gateways and Routers 11,407 8,886 22,029 18,982 AirVantage M2M Cloud Platform and Other   2,370   2,263   5,747   5,200 $ 77,545 $ 73,908 $ 154,488 $ 146,636   Mobile Computing AirCard Mobile Broadband Devices (1) $ 69,955 $ 53,135 $ 126,893 $ 116,989 AirPrime Embedded Wireless Modules for PC OEMs 17,828 11,857 33,101 18,604 Other   2,113   988   3,225   1,934 $ 89,896 $ 65,980 $ 163,219 $ 137,527 (1)Clearwire contributed $nil million in mobile computing revenue in the three and six months ended June 30, 2012 compared to $0.1 million and $8.3 million in the three and six months ended June 30, 2011, respectively.Media Contact:Sharlene MyersManager, Global Public Relations+1 (604) 232-1445smyers@sierrawireless.comorInvestor Contact:David G. McLennanChief Financial Officer+1 (604) 231-1181investor@sierrawireless.com