Sierra Wireless Reports Second Quarter 2008 Results



    TSX: SW
    Nasdaq:   SWIR

    VANCOUVER, July 23 /CNW/ - Sierra Wireless, Inc. (NASDAQ:   SWIR, TSX: SW)
is reporting second quarter 2008 results.
    Our results are reported in U.S. dollars and are prepared in accordance
with United States generally accepted accounting principles.
    "In the second quarter of 2008, we experienced strong momentum in our
business and achieved record quarterly revenue and operating earnings" said
Jason Cohenour, President and Chief Executive Officer. "Our revenue grew by
45% and earnings from operations were up 77% compared to the second quarter of
2007. Our strong year over year improvement was driven by continued momentum
in sales of our PC Adapter products, growth in our embedded modules business,
the addition of AirLink and disciplined cost management.
    Looking ahead, our short term view is cautious given the expected erosion
in sales of our embedded modules to PC OEMs combined with macro economic
uncertainty in our key markets. Longer term, we continue to be encouraged by
the growth opportunities in our market segments. Mobile broadband services
continue to expand and improve around the world, customer awareness of these
compelling services is growing, market segments and applications are expanding
and overall market penetration is still very low. Based on this outlook and
our confidence in our ability to execute, we are continuing to invest in
further strengthening and broadening our market position."

    Q2 2008 Financial Results

    Our revenue for the second quarter of 2008 amounted to a record
$155.7 million, gross margin was $43.2 million, or 27.8% of revenue, operating
expenses were $28.8 million and net earnings were $11.0 million, or diluted
earnings per share of $0.35. Our results for Q2 2008 include $0.7 million of
pre-tax transaction costs related to the termination of the CradlePoint
acquisition. Excluding these transaction costs, earnings per share would have
been $0.36. We generated $14.6 million of cash from operations during the
second quarter and our balance sheet remains strong, with $217.0 million of
cash, short and long-term investments.

    Results for the second quarter of 2008, relative to guidance provided on
April 29, 2008 are as follows:

    Second quarter revenue for 2008 of $155.7 million was better than our
    guidance of $154.0 million. Our earnings from operations were $14.4
    million, better than our guidance of $13.9 million. Our net earnings of
    $11.0 million, or diluted earnings per share of $0.35, were in line with
    our guidance of net earnings of $11.0 million, or diluted earnings per
    share of $0.35.

    Results for the second quarter of 2008, compared to the second quarter of
2007 are as follows:

    Second quarter revenue increased by 45% to $155.7 million in 2008 from
    $107.4 million for the same period in 2007. Gross margin for the second
    quarter of 2008 was 27.8% of revenue, compared to 27.0% for the same
    period in 2007. Operating expenses were $28.8 million and earnings from
    operations were $14.4 million in the second quarter of 2008, compared to
    $20.9 million and $8.1 million, respectively, in the same period of 2007.
    Net earnings for the second quarter of 2008 were $11.0 million, or
    diluted earnings per share of $0.35, compared to net earnings of $6.7
    million, or diluted earnings per share of $0.25, in the same period of
    2007.

    Our results include stock-based compensation expense and amortization
    resulting from the acquisitions of AirPrime, Inc. in 2003 and AirLink in
    May 2007. In addition, our results also include transaction costs related
    to the termination of the CradlePoint acquisition. Adjusting for these
    amounts, our non-GAAP results are as follows:

    
    (in millions of U.S. dollars)                         Q2 2008    Q2 2007
                                                         ---------  ---------

    Earnings from operations - GAAP                        $ 14.4     $  8.1
      Stock-based compensation                                1.7        1.2
      Acquisition related amortization                        0.9        0.6
      Transaction costs related to terminated acquisition     0.7          -
                                                         ---------  ---------
    Earnings from operations - Non-GAAP                    $ 17.7     $  9.9

    Net earnings - GAAP                                    $ 11.0     $  6.7
    Net earnings - Non-GAAP                                  13.3        8.0

    Diluted earnings per share - GAAP                      $ 0.35     $ 0.25
    Diluted earnings per share - Non-GAAP                    0.42       0.30
    

    Results for the second quarter of 2008, compared to the first quarter of
2008 are as follows:

    Revenue for the second quarter of 2008 increased by 10% to
    $155.7 million, compared to $141.9 million in the first quarter of 2008.
    Gross margin was 27.8% of revenue in the second quarter of 2008, compared
    to 27.7% in the first quarter of 2008. Operating expenses were
    $28.8 million and earnings from operations were $14.4 million in the
    second quarter of 2008, compared to $28.0 million and $11.4 million,
    respectively, in the first quarter of 2008. Net earnings for the second
    quarter of 2008 were $11.0 million, or diluted earnings per share of
    $0.35, compared to net earnings of $9.7 million, or diluted earnings per
    share of $0.31, in the first quarter of 2008.

    
    Second Quarter and Recent Highlights Included:

    -  We launched our new Compass 597 USB modem with Sprint and commenced
       commercial volume shipments. The Compass 597 is the smallest USB modem
       on the market and supports many innovative features, including
       integrated GPS, on board memory for file storage, our TRU-Install
       software for rapid, easy installation without a CD and TRU-Flow, which
       substantially accelerates data throughput for end users.

    -  We commenced our first shipments of the Compass 885, our new USB modem
       for HSPA networks, to O2 in the UK. The Compass 885 is the smallest
       HSPA USB modem on the market and supports the same, robust feature set
       as the Compass 597.

    -  We introduced the MC8790 and MC8790V embedded modules for HSPA
       networks which we expect will provide our OEM customers with two new
       highly functional, yet cost effective embedded solutions.

    -  CalAmp Corp. selected our embedded modules to provide mobile broadband
       connectivity for CalAmp's recently launched Dataradio CiPHR IP
       Router/Radio Modem, a rugged wireless data communications and
       networking platform for public safety applications.

    -  Alcatel-Lucent selected Sierra Wireless to supply embedded modules for
       its wireless laptop security, management, and tracking system, the
       OmniAccess 3500 Nonstop Laptop Guardian (NLG). The NLG is currently
       available to enterprises through Sprint as the SprintSecure Laptop
       Guardian.

    -  ERCO & GENER, a provider of communication systems for the French and
       export markets, selected our embedded modules to provide HSPA network
       connectivity for the GenPro 30e modem. The GenPro 30e modem is
       designed for M2M applications and is currently available in several
       European markets.

    -  We announced a significant enhancement to our line of AirLink(TM) MP
       rugged intelligent gateways. The new MP 595W, MP 880W and MP 881W
       intelligent gateways support Wi-Fi hotspot and full routing
       capabilities to simplify installation and communication between the
       gateways and mobile computers.

    -  We announced the addition of IPsec virtual private network security
       enhancements to ALEOS(TM), the robust embedded intelligence available
       exclusively in our line of AirLink intelligent wireless gateways. This
       enhancement will improve data security on ALEOS-powered Sierra
       Wireless AirLink platforms.

    -  We added the PinPoint XT, an intelligent gateway ideally suited for
       vehicle tracking, fleet management and telematics solutions, to our
       AirLink product line. The PinPoint XT is expected to be available for
       GSM and CDMA networks worldwide in the second half of 2008.

    -  The AirLink HSUPA product line was certified for use on the AT&T
       BroadbandConnect high-speed wireless network in the United States. The
       AirLink Raven X, Pinpoint X and MP 881W are the first HSUPA-enabled
       standalone rugged mobile and M2M devices available that take full
       advantage of the faster data speeds provided by AT&T's HSUPA network.

    -  On April 7, 2008, we signed a definitive agreement to acquire
       CradlePoint, Inc. Under the terms of the definitive agreement, we had
       expected to pay cash consideration of $21.8 million and would have
       issued 462,963 shares to the shareholders of CradlePoint. On July 7,
       2008, we announced that we had terminated the agreement to acquire
       CradlePoint as a result of one of the conditions of closing not being
       met.

    -  During the second quarter, we received regulatory approval to purchase
       up to 1,567,378 of our common shares (representing approximately 5% of
       our common shares outstanding as of May 21, 2008) by way of a normal
       course issuer bid ("the Bid") on the Toronto Stock Exchange and the
       NASDAQ Global Market. As of June 30, 2008, no common shares have been
       purchased under the Bid.
    

    Financial Guidance

    The following guidance for the third quarter of 2008 reflects our current
business indicators and expectations.
    Our guidance for the third quarter reflects the expected erosion in sales
of our embedded modules to PC OEMs combined with macro economic uncertainty in
our key markets.
    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.


    
                                         Non-GAAP Adjustments
                                    -----------------------------

     Q3 2008                                      Acquisition        Non-
     Guidance           GAAP        Stock Comp   Amortization(1)     GAAP
    ----------    --------------  --------------  ------------- -------------

    Revenue       $140.0 million                               $140.0 million
    Earnings from
     operations    $11.0 million    $1.7 million  $0.7 million  $13.4 million
    Net earnings    $8.5 million    $1.1 million  $0.5 million  $10.1 million
    Diluted
     earnings per
     share          $ 0.27/share                                  $0.32/share

    (1) Represents purchase price amortization associated with the
        acquisition of AirLink Communications, Inc. in May 2007 and the
        acquisition of AirPrime, Inc. in 2003.
    

    Conference Call, Webcast and Instant Replay

    We will host a conference call to review our results on Wednesday, July
23, 2008 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:

    1-800-733-7560   Passcode: Not required
    or
    1-416-644-3414   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 or enter:

    www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2284040

    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) will be
available following the conference call for 7 business days.

    Audio only dial: 1-877-289-8525 or 1-416-640-1917
    Passcode: 21271682 followed by the number sign.

    The webcast will be available at the above link for 90 days following the
call.
    We look forward to having you participate in our call.

    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 third quarter of 2008, 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 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 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) modems and software connect
people and systems to mobile broadband networks around the world. The Company
offers a diverse product portfolio addressing enterprise, consumer, original
equipment manufacturer, specialized vertical industry, and machine-to-machine
markets, and provides professional services to customers requiring expertise
in wireless design, integration and carrier certification. For more
information about Sierra Wireless, visit www.sierrawireless.com.
    "AirCard" is a registered trademark 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 and Deficit
              (Expressed in thousands of United States dollars,
                          except per share amounts)
        (Prepared in accordance with United States generally accepted
                        accounting principles (GAAP))
                                 (Unaudited)

                                   Three months ended     Six months ended
                                  --------------------- ---------------------
                                          June 30,              June 30,
                                         ----------            ----------
                                     2008       2007       2008       2007
                                  ---------  ---------  ---------  ----------

    Revenue...................... $ 155,698  $ 107,379  $ 297,647  $ 192,807
    Cost of goods sold...........   112,490     78,383    215,104    140,494
                                  ---------  ---------  ---------  ----------
    Gross margin.................    43,208     28,996     82,543     52,313
                                  ---------  ---------  ---------  ----------

    Expenses
      Sales and marketing........     7,928      4,923     15,763      9,020
      Research and development...    14,063     11,606     27,832     21,491
      Administration.............     5,601      3,448     10,685      6,589
      Amortization...............     1,212        889      2,493      1,557
                                  ---------  ---------  ---------  ----------
                                     28,804     20,866     56,773     38,657
                                  ---------  ---------  ---------  ----------
    Earnings from operations.....    14,404      8,130     25,770     13,656

    Other income.................     1,269        758      3,728      2,007
                                  ---------  ---------  ---------  ----------
    Earnings before
     income taxes................    15,673      8,888     29,498     15,663
    Income tax expense...........     4,702      2,218      8,850      3,736
                                  ---------  ---------  ---------  ----------
    Net earnings.................    10,971      6,670     20,648     11,927
    Deficit, beginning
     of period...................   (30,925)   (67,804)   (40,602)   (73,061)
                                  ---------  ---------  ---------  ----------
    Deficit, end of period....... $ (19,954) $ (61,134) $ (19,954) $ (61,134)
                                  ---------  ---------  ---------  ----------
                                  ---------  ---------  ---------  ----------

    Earnings per share for
     the period:
      Basic...................... $    0.35  $    0.25  $    0.66  $    0.46
      Diluted.................... $    0.35  $    0.25  $    0.66  $    0.45
                                  ---------  ---------  ---------  ----------
                                  ---------  ---------  ---------  ----------

    Weighted average number of
     shares (in thousands)
      Basic......................    31,371     26,405     31,356     26,065
      Diluted....................    31,512     26,722     31,469     26,340
                                  ---------  ---------  ---------  ----------
                                  ---------  ---------  ---------  ----------



                            SIERRA WIRELESS, INC.

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

                                                          June      December
                                                       ----------  ----------
                                                        30, 2008    31, 2007
                                                       ----------  ----------
                                                       (Unaudited)

    Assets
    Current assets:
      Cash and cash equivalents.......................  $ 143,641  $  83,624
      Short-term investments..........................     53,598     92,980
      Accounts receivable.............................     98,358     83,015
      Inventories.....................................     26,912     24,989
      Deferred income taxes...........................      3,224      3,556
      Prepaid expenses................................      7,744      9,229
                                                       ----------  ----------
                                                          333,477    297,393

    Long-term investments.............................     19,764     19,757
    Fixed assets......................................     20,011     15,274
    Intangible assets.................................     16,298     17,418
    Goodwill..........................................     31,996     32,541
    Deferred income taxes.............................      1,359      1,156
    Other.............................................          -      1,482
                                                       ----------  ----------
                                                        $ 422,905  $ 385,021
                                                       ----------  ----------
                                                       ----------  ----------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable................................  $  36,698  $  31,163
      Accrued liabilities.............................     63,044     53,691
      Deferred revenue and credits....................        363        534
      Current portion of long-term liabilities........        252        277
                                                       ----------  ----------
                                                          100,357     85,665

    Long-term liabilities.............................        466        581
    Deferred income taxes.............................      3,151      3,451

    Shareholders' equity:
      Share capital...................................    329,205    328,323
      Additional paid-in capital......................      8,461      6,374
      Warrants........................................      1,538      1,538
      Deficit.........................................    (19,954)   (40,602)
      Accumulated other comprehensive loss............       (319)      (309)
                                                       ----------  ----------
                                                          318,931    295,324
                                                       ----------  ----------
                                                        $ 422,905  $ 385,021
                                                       ----------  ----------
                                                       ----------  ----------



                            SIERRA WIRELESS, INC.

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

                                    Three months ended    Six months ended
                                  --------------------- ---------------------
                                          June 30,              June 30,
                                         ----------            ----------
                                     2008       2007       2008       2007
                                  ---------- ---------- ---------- ----------

    Cash flows from operating
     activities:
      Net earnings for the
       period.................... $  10,971  $   6,670  $  20,648  $  11,927
      Adjustments to reconcile
       net earnings to net
       cash provided by operating
       activities
      Amortization...............     4,028      4,116      7,799      6,925
    Stock-based compensation.....     1,657      1,219      3,295      2,104
      Loss (gain) on disposal....        (2)       (20)        73        (20)
      Utilization of
       pre-acquisition
       tax losses................         -        602          -        802
      Deferred income taxes......       (54)        41       (170)        41
    Changes in operating assets
     and liabilities
      Accounts receivable........     2,434    (16,220)   (16,311)    (8,715)
      Inventories................     3,215     (4,492)    (1,924)   (13,548)
      Prepaid expenses and
       other assets..............     2,115      1,075      2,967      2,349
      Accounts payable...........   (11,867)     7,193      5,535     18,353
      Accrued liabilities........     2,124      6,783      9,354     (3,495)
      Deferred revenue
       and credits...............       (15)        (9)      (171)       217
                                  ---------- ---------- ---------- ----------
    Net cash provided by
     operating activities........    14,606      6,958     31,095     16,940

    Cash flows from investing
     activities:
      Business acquisitions......       (35)   (11,512)       (35)   (11,893)
      Proceeds on disposal.......         2         21          2         21
      Purchase of fixed assets...    (5,110)    (1,893)   (10,019)    (4,719)
      Increase in intangible
       assets....................      (595)      (205)      (884)      (382)
      Purchase of short-term
       investments...............   (38,024)    (9,602)   (75,596)   (64,104)
      Proceeds on maturity of
       short-term investments....    69,723     49,664    115,920     86,874
                                  ---------- ---------- ---------- ----------
    Net cash provided by
     investing activities........    25,961     26,473     29,388      5,797

    Cash flows from financing
     activities:
      Issue of common shares, net
       of share issue costs......       607      2,420        684      2,549
      Purchase of shares for
       restricted share
       unit plan.................    (1,011)         -     (1,011)         -
      Increase (decrease) in
       long-term liabilities.....       (46)        12       (139)      (497)
                                  ---------- ---------- ---------- ----------
      Net cash provided by (used
       in) financing activities..      (450)     2,432       (466)     2,052

                                  ---------- ---------- ---------- ----------
    Net increase in cash and
     cash equivalents............    40,117     35,863     60,017     24,789
    Cash and cash equivalents,
     beginning of period.........   103,524     35,364     83,624     46,438
                                  ---------- ---------- ---------- ----------
    Cash and cash equivalents,
     end of period............... $ 143,641  $  71,227  $ 143,641  $  71,227
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------
    

    %SEDAR: 00011917E




For further information:

For further information: Sierra Wireless, Inc., David G. McLennan, Chief
Financial Officer, (604) 231-1181, Website: www.sierrawireless.com, Email:
investor@sierrawireless.com

Organization Profile

SIERRA WIRELESS, INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890