Sierra Wireless Reports Fourth Quarter and Fiscal Year 2006 Results



    TSX: SW
    Nasdaq:   SWIR

    VANCOUVER, Jan. 31 /CNW/ - Sierra Wireless, Inc. (NASDAQ:   SWIR, TSX: SW)
is reporting fourth quarter and fiscal year 2006 results.
    Our results are reported in US dollars and are prepared in accordance
with United States generally accepted accounting principles.
    "In the fourth quarter of 2006, we achieved record quarterly revenues of
$68.3 million, driven by recent new product introductions, continued global
channel expansion and strong OEM design win activity," said Jason Cohenour,
President and Chief Executive Officer. "We commenced shipments of our new
EV-DO Rev A AirCard(R) 595 to Verizon and continued shipments of our 3.6 Mbps
HSDPA AirCard 875 to Cingular and our AirCard 595 to Sprint. We also had
record revenue in Europe and strong shipments of our AirCard 875 to Telstra in
Australia. As expected, our continued business development execution in Europe
resulted in our HSDPA AirCard products being commercially available on two
networks in each of France, Spain, Switzerland and the UK by the end of the
fourth quarter.
    Overall, 2006 was a year of growth and recovery for the company. We grew
our revenue by 107% and took the company from a deep loss position in 2005, to
solid and improving profitability by the end of 2006. Our intense focus on
wide area wireless for mobile computing, combined with strong new product and
business development execution, is driving our improving results and we
believe we are well positioned as we start 2007. Looking forward, we believe
we have strong momentum with our recently launched products and expanded base
of global channels. We also expect to launch a number of new products early in
2007. We expect that our current momentum, combined with continued new product
releases, will drive considerable revenue growth and improving profitability
in 2007."
    Our revenue for the three months ended December 31, 2006 amounted to a
record $68.3 million, gross margin was $17.8 million, or 26.0% of revenue,
operating expenses were $16.4 million and net earnings were $2.4 million, or
diluted earnings per share of $0.09. Our balance sheet remains strong, with
$87.0 million of cash and short-term investments.
    Results for the fourth quarter of 2006, relative to Company guidance
provided on October 26, 2006 are as follows:

    Fourth quarter revenue for 2006 of $68.3 million was better than our
    guidance of $66.0 million. Our net earnings of $2.4 million, or diluted
    earnings per share of $0.09, was also better than our guidance of net
    earnings of $1.7 million or diluted earnings per share of $0.07.

    Results for the fourth quarter of 2006, compared to the fourth quarter of
2005 are as follows:

    Fourth quarter revenue increased by 82% to $68.3 million in 2006, from
    $37.6 million for the same period in 2005. Gross margin for the fourth
    quarter of 2006 was 26.0% of revenue, compared to 38.6% for the same
    period in 2005. Operating expenses were $16.4 million in the fourth
    quarter of 2006, compared to $14.6 million in the same period of 2005.
    Net earnings were $2.4 million, or diluted earnings per share of $0.09 in
    the fourth quarter of 2006, compared to net earnings of $0.9 million, or
    diluted earnings per share of $0.04, in the same period of 2005. Fourth
    quarter 2006 cost of goods sold and operating expenses included $0.1
    million and $0.9 million, respectively, of stock-based compensation
    expense, compared to nil in the fourth quarter of 2005. Our results for
    the fourth quarter of 2005 included an adjustment that increased gross
    margin by $1.2 million related to the finalization of an intellectual
    property royalty agreement, the cost of which had been previously accrued
    for at higher rates. Excluding the adjustments above, fourth quarter 2006
    adjusted net earnings were $3.3 million, or $0.13 per diluted share,
    compared to fourth quarter 2005 adjusted net loss of $0.3 million, or
    loss per share of $0.01.

    Results for the fourth quarter of 2006, compared to the third quarter of
2006 were as follows:

    Revenue for the fourth quarter of 2006 increased by 30% to $68.3 million,
    compared to $52.5 million in the third quarter of 2006. Gross margin was
    26.0% of revenue in the fourth quarter of 2006, compared to 30.2% in the
    third quarter of 2006. Operating expenses were $16.4 million in the
    fourth quarter of 2006, compared to $15.8 million in the third quarter of
    2006. Net earnings for the fourth quarter of 2006 were $2.4 million, or
    diluted earnings per share of $0.09, compared to net earnings of $1.1
    million, or diluted earnings per share of $0.04, in the third quarter of
    2006. Excluding the favorable net effect of adjustments in the third
    quarter of 2006 amounting to $0.7 million related to royalty obligations
    and inventory writedowns, gross margin was 28.9% and net earnings were
    $0.4 million, or diluted earnings per share of $0.01.

    Results for the fiscal year 2006, compared to the fiscal year 2005 were
as follows:

    Revenue for the year ended December 31, 2006 increased 107% to a record
    $221.3 million, compared to $107.1 million in 2005. Gross margin was
    31.3% of revenue in 2006, compared to 23.6% in 2005. Operating expenses
    were $63.6 million in 2006, compared to $65.0 million in 2005. Net
    earnings in 2006 were $9.8 million, or diluted earnings per share of
    $0.38, compared to a net loss of $36.5 million, or loss per share of
    $1.44, in 2005. Excluding the impact of restructuring, other charges and
    legal provisions of $19.5 million in 2005, gross margin was 35.4%,
    operating expenses were $58.7 million, net loss was $17.0 million and
    loss per share was $0.67. Our results for 2006 include stock compensation
    expense of $3.8 million, compared to nil in 2005.

    
    Fourth Quarter Highlights Included:

    -  We signed an agreement with Tomen Electronics Corp., a leading
       distributor of semiconductor, storage and communications components in
       Japan, which designates Tomen as the primary distributor for all
       Sierra Wireless products in Japan. This agreement marks our formal
       entry into the Japanese 3G wireless market.

    -  We announced the commercial availability of the AirCard 860 wireless
       wide area network card for HSDPA networks from Rogers Wireless and its
       resellers in Canada.

    -  Digi International introduced the industry's first commercial-grade
       EV-DO Rev A wireless wide area network router, the ConnectPort WAN
       VPN, that integrates our MC5725 EV-DO Rev A embedded module.

    -  We announced the availability of the AirCard 850 wireless wide area PC
       Card with Orange UK, O2 in the UK and Bouygues Telecom of France. In
       addition to these announcements, we commenced shipments of the AirCard
       850 and AirCard 875 to operators in Spain, including Telefonica. Our
       UMTS/HSDPA AirCards are now commercially available on two networks in
       each of France, Spain, Switzerland and the UK.

    -  We signed an agreement with M2M Connectivity, a specialist wireless
       module distributor for machine-to-machine products and applications,
       for the distribution of our 3G embedded modules in Australia and New
       Zealand.

    -  Together with Telecom New Zealand, we announced the launch of the
       AirCard 595 wireless wide area PC card in New Zealand, the first PC
       card available on Telecom's upgraded Mobile Broadband Rev A network.
       This is the first launch of the AirCard 595 outside of the United
       States.

    -  ASUSTeK Computer Inc. (ASUS) selected our 3.6 HSDPA MC8775 embedded
       module to be integrated into the new ASUS V2 notebook computer. The
       MC8775 provides V2 notebook users with an integrated connection to 3G
       and HSDPA networks worldwide.

    -  We secured design wins with three new PC OEM customers, including
       Dialogue for their FlyBook line of ultra portable notebook computers.
       Two of our new design wins are targeted specifically for the Japanese
       market. In addition to these three new customer wins, we have been
       awarded next generation design wins with three of our existing PC OEM
       customers.

    -  Together with Verizon Wireless, we announced that our AirCard 595 PC
       card for EV-DO Revision A networks is commercially available for use
       with Verizon Wireless' BroadbandAccess service. This is the first EV-
       DO Revision A-compatible PC card to launch on the Verizon Wireless
       network, and is available on-line and through Verizon Wireless
       business customer sales channels. Our AirCard 595 PC card is expected
       to be available in Verizon Wireless retail stores in January.

    Financial Guidance

    The following guidance for the first quarter of 2007 reflects our current
business indicators and expectations. Inherent in this guidance are risk
factors that are described in 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.

                                                     Q1 2007 Guidance
                                                     ----------------

    Revenue                                          $82.0 million
    Earnings from operations                         $ 2.5 million
    Net earnings                                     $ 3.0 million
    Diluted earnings per share                       $0.12 / share
      This guidance includes stock-based compensation expense of
      approximately $1.0 million
    

    Based on strong bookings, we have solid visibility on Q1 2007 revenue. 
This guidance also includes a sizeable increase in operating expenses related
to new product launches and major trade show activity expected to occur in the
quarter.

    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 applicable 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 include all
financial guidance for the first quarter of 2007, 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", 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, which may be found on SEDAR at
www.sedar.com 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 the
control of the Company. Consequently, all forward-looking statements in this
press release are qualified by this cautionary statement and there can be no
assurance that actual results, performance, achievements or developments
anticipated by the Company will be realized. Forward-looking statements are
based on management's current plans, estimates, projections, beliefs and
opinions and the Company does not undertake any obligation to update
forward-looking statements should the assumptions related to these plans,
estimates, projections, beliefs and opinions change.

    About Sierra Wireless

    Sierra Wireless (NASDAQ:   SWIR - TSX: SW) develops and markets wide area
wireless solutions for mobile computing. The Sierra Wireless product portfolio
includes the award-winning AirCard(R) line of wireless modems, embedded
modules for original equipment manufacturers (OEMs), and the MP line of
rugged, vehicle-mounted wireless modems. Sierra Wireless also offers
professional services to OEM customers during product development, leveraging
the company's expertise in wireless design and integration to provide built-in
wireless connectivity for notebook computers and other portable computing
devices. Sierra Wireless is headquartered in Richmond, British Columbia,
Canada, with additional offices in Carlsbad, California, London, and Hong
Kong. For more information about Sierra Wireless, please visit
www.sierrawireless.com.

    "AirCard" is a registered trademark and "AirCard Enabled" is a trademark
of Sierra Wireless. Other product or service names mentioned herein may be the
trademarks of their respective owners.

    Conference Call, Webcast and Instant Replay

    We will host a conference call to review our results on Wednesday,
January 31, 2007 at 2:30 pm PST, 5:30 PM EST. You can participate in the
conference call either via telephone or webcast. To participate in this
conference call, please connect approximately ten minutes prior to the
commencement of the call.

    
    Telephone participation:

        Please dial the following number:

        1-800-796-7558   Passcode: Not required
        or
        1-416-644-3423   Passcode: Not required

    Webcast (to listen):

        The Company will also broadcast its conference call over the
        Internet. To access the web broadcast, click on this URL enter
        www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1664080

        This webcast event will be optimized for Microsoft Windows Media
        Player version 9. To download go to:
        http://www.microsoft.com/windows/windowsmedia/download.

    Should you be unable to participate, Instant Replay (audio and webcast)
will be available following the conference call.

    -  Audio only dial (available for 7 business days): 1-877-289-8525 or
       1-416-640-1917 Passcode: 21209010 followed by the number sign.

    -  Webcast (available for 90 days)
       www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1664080
       No Passcode is required.

    We look forward to having you participate in our call.



                            SIERRA WIRELESS, INC.

              Consolidated Statements of Operations and Deficit
              (Expressed in thousands of United States dollars,
                          except per share amounts)
        (Prepared in accordance with United States generally accepted
                        accounting principles (GAAP))


                                    Three months ended       Year ended
                                    ------------------       ----------
                                       December 31,          December 31,
                                       ------------          ------------
                                     2006       2005       2006       2005
                                     ----       ----       ----       ----

    Revenue ...................... $ 68,303   $ 37,560   $221,285   $107,144
    Cost of goods sold ...........   50,524     23,058    152,108     81,848
                                   ---------  ---------  ---------  ---------
    Gross margin .................   17,779     14,502     69,177     25,296
                                   ---------  ---------  ---------  ---------

    Expenses
      Sales and marketing ........    3,418      3,968     13,714     15,551
      Research and development,
       net .......................    8,824      7,841     34,087     30,365
      Administration .............    3,404      1,556     12,879     10,818
      Restructuring and other
       charges ...................        -        329          -      5,255
      Amortization ...............      705        899      2,909      2,997
                                   ---------  ---------  ---------  ---------
                                     16,351     14,593     63,589     64,986
                                   ---------  ---------  ---------  ---------
    Earnings (loss) from
     operations ..................    1,428        (91)     5,588    (39,690)

    Other income .................    1,627        863      5,254      2,277
                                   ---------  ---------  ---------  ---------
    Earnings (loss) before
     income taxes ................    3,055        772     10,842    (37,413)
    Income tax expense (recovery)       684       (139)     1,046       (945)
                                   ---------  ---------  ---------  ---------
    Net earnings (loss) ..........    2,371        911      9,796    (36,468)
    Deficit, beginning of period .  (75,432)   (83,768)   (82,857)   (46,389)
                                   ---------  ---------  ---------  ---------
    Deficit, end of period ....... $(73,061)  $(82,857)  $(73,061)  $(82,857)
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------

    Earnings (loss) per share
     for the period:
      Basic ...................... $   0.09   $   0.04   $   0.38   $  (1.44)
      Diluted .................... $   0.09   $   0.04   $   0.38   $  (1.44)
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------

    Weighted average number of
     shares (in thousands)
      Basic ......................   25,681     25,439     25,609     25,385
      Diluted ....................   25,856     26,111     25,857     25,385
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------



                            SIERRA WIRELESS, INC.

                         Consolidated Balance Sheets
              (Expressed in thousands of United States dollars)
               (Prepared in accordance with United States GAAP)


    December 31,                                         2006         2005
    ------------                                         ----         ----

    Assets
    Current assets:
      Cash and cash equivalents ..................... $  46,438    $  64,611
      Short-term investments ........................    40,554       24,907
      Accounts receivable, net of allowance for
       doubtful accounts ............................    57,441       20,252
      Inventories ...................................    18,889        3,316
      Deferred income taxes .........................       118            -
      Prepaid expenses ..............................     6,032        3,974
                                                      ----------   ----------
                                                        169,472      117,060

    Long-term investments ...........................         -       14,867
    Fixed assets ....................................    13,400       11,647
    Intangible assets ...............................     9,892       10,693
    Goodwill ........................................    18,409       19,227
    Other assets ....................................       435          486
                                                      ----------   ----------
                                                      $ 211,608    $ 173,980
                                                      ----------   ----------
                                                      ----------   ----------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable .............................. $  16,608    $   3,971
      Accrued liabilities ...........................    39,543       28,644
      Deferred revenue and credits ..................       633          422
      Current portion of long-term liabilities ......       841          894
      Current portion of obligations under
       capital lease ................................         6          304
                                                      ----------   ----------
                                                         57,631       34,235

    Long-term liabilities ...........................     1,145        1,926
    Obligations under capital lease .................         -            4

    Shareholders' equity:
      Share capital .................................   221,861      219,398
      Additional paid-in capital ....................     3,240          556
      Warrants ......................................     1,538        1,538
      Deficit .......................................   (73,061)     (82,857)
      Accumulated other comprehensive loss ..........      (746)        (820)
                                                      ----------   ----------
                                                        152,832      137,815
                                                      ----------   ----------
                                                      $ 211,608    $ 173,980
                                                      ----------   ----------
                                                      ----------   ----------



                            SIERRA WIRELESS, INC.

                    Consolidated Statements of Cash Flows
              (Expressed in thousands of United States dollars)
               (Prepared in accordance with United States GAAP)


                                    Three months ended       Year ended
                                    ------------------       ----------
                                       December 31,          December 31,
                                       ------------          ------------
                                     2006       2005       2006       2005
                                     ----       ----       ----       ----

    Cash flows from operating
     activities:
      Net earnings (loss) for
       the period ................ $  2,371   $    911   $  9,796   $(36,468)
      Adjustments to reconcile net
       earnings (loss) to net cash
       provided by operating
       activities
        Amortization .............    2,658      2,715      9,665      9,012
        Stock-based compensation
         expense .................      952          -      3,796          -
        Tax related to utilization
         of pre-acquisition losses      818          -        818          -
        Deferred income taxes ....     (118)         -       (118)         -
        Non-cash restructuring
         and other charges .......        -       (711)         -     12,329
        Loss (gain) on disposal ..      (49)         1        (35)       (41)
      Changes in operating assets
       and liabilities
        Accounts receivable ......  (18,980)      (499)   (38,196)     1,967
        Inventories ..............    9,119        900    (15,573)       219
        Prepaid expenses .........   (4,684)      (493)    (2,007)       891
        Accounts payable .........   (5,180)    (2,839)    12,637       (151)
        Accrued liabilities ......    7,249      3,241     10,899     (5,149)
        Deferred revenue and
         credits .................       41         75        211         75
                                   ---------  ---------  ---------  ---------
      Net cash provided by (used
       in) operating activities ..   (5,803)     3,301     (8,107)   (17,316)

    Cash flows from investing
     activities:
        Proceeds on disposal .....       64          -         92         48
        Purchase of fixed assets .   (1,520)    (1,965)    (9,102)    (8,292)
        Increase in intangible
         assets ..................     (343)      (377)    (1,646)    (2,138)
        Purchase of long-term
         investments .............        -        (18)         -    (14,851)
        Purchase of short-term
         investments .............  (17,898)   (18,198)   (71,943)   (88,320)
        Proceeds on maturity of
         short-term investments ..   22,749     37,731     72,318     63,593
                                   ---------  ---------  ---------  ---------
      Net cash provided by (used
       in) investing activities ..    3,052     17,173    (10,281)   (49,960)

    Cash flows from financing
     activities:
        Issue of common shares ...      179        430      1,351        592
        Tax benefit related to
         stock options exercised .     (114)       116          -        116
        Increase (decrease) in
         long-term liabilities ...     (319)       375     (1,136)      (667)
                                   ---------  ---------  ---------  ---------
      Net cash provided by (used
       in) financing activities ..     (254)       921        215         41

                                   ---------  ---------  ---------  ---------
    Net increase (decrease) in
     cash and cash equivalents ...   (3,005)    21,395    (18,173)   (67,235)
    Cash and cash equivalents,
     beginning of period .........   49,443     43,216     64,611    131,846
                                   ---------  ---------  ---------  ---------
    Cash and cash equivalents,
     end of period ............... $ 46,438   $ 64,611   $ 46,438   $ 64,611
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------
    

    %SEDAR: 00011917E




For further information:

For further information: Sierra Wireless, Inc., David G. McLennan, Chief
Financial Officer, (604) 231-1185, Website: www.sierrawireless.com, Email:
dmclennan@sierrawireless.com

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SIERRA WIRELESS, INC.

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