Sierra Wireless Reports Second Quarter 2010 Results

- Exceeded earnings guidance for the quarter on record revenue and lower non-GAAP operating expenses

- Record quarterly revenue of $159.1 million, up 18% compared to the second quarter of 2009

- GAAP loss from operations of $3.5 million and loss per share of $0.28

- Non-GAAP earnings from operations of $4.7 million and non-GAAP diluted earnings per share of $0.14

TSX: SW

NASDAQ: SWIR

VANCOUVER, July 29 /CNW/ - Sierra Wireless, Inc. (NASDAQ: SWIR, TSX: SW) today reported second quarter 2010 results. All results are reported in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles ("GAAP"), except as otherwise indicated below.

Revenue for the second quarter of 2010 was $159.1 million, an increase of 18% compared to $135.3 million in the second quarter of 2009 and an increase of 5% compared to $151.3 million in the first quarter of 2010. Our record revenue was driven by strong demand for both Machine-to-Machine ("M2M") and Mobile Computing products in the quarter. M2M revenue increased to $83.6 million, up 53% compared to $54.6 million in second quarter of 2009. Mobile Computing revenue was $75.5 million, down 6% compared to $80.7 million in the second quarter of 2009, but up 21% sequentially from the first quarter of 2010.

"Strong, broad based demand, combined with lower operating expenses, enabled us to deliver record quarterly revenue and better than expected earnings, despite industry wide component supply constraints," said Jason Cohenour, President and Chief Executive Officer. "Our sequential revenue growth was driven by the launch of new AirCard products with key customers, while our M2M business experienced exceptional year over year growth across a number of key market segments."

On a GAAP basis, gross margin was 29.0% in the second quarter of 2010, compared to 35.8% in the same period of 2009. Operating expenses were $49.7 million and loss from operations was $3.5 million in the second quarter of 2010, compared to $64.7 million and $16.2 million, respectively, in the same period of 2009. Our net loss was $8.6 million, or loss per share of $0.28, compared to a net loss of $5.9 million, or loss per share of $0.19, in the second quarter of 2009.

On a non-GAAP basis, gross margin in the second quarter of 2010 was 29.1%, compared to 35.9% in the second quarter of 2009. Operating expenses and earnings from operations were $41.7 million and $4.7 million, respectively, compared to $45.8 million and $2.8 million, respectively, in the second quarter of 2009. Net earnings were $4.4 million, or $0.14 per diluted share, compared to net earnings of $1.5 million, or $0.05 per diluted share, in the second quarter of 2009.

Non-GAAP results exclude transaction costs related the Wavecom acquisition, restructuring costs, acquisition related integration costs, stock based compensation expense, acquisition related amortization, foreign exchange gains or losses, tax adjustments and non-controlling interest related to non-GAAP adjustments. The reconciliation between GAAP and non-GAAP results of operations is provided in the accompanying schedules.

Financial Guidance

The following guidance for the third quarter of 2010 reflects current business indicators and expectations. Relative to Q2, we expect further revenue growth driven by higher demand, particularly for our AirCard(R) products. Our guidance also reflects the uncertain macroeconomic environment and expected component supply constraints. Inherent in this guidance are risk factors that are described in greater detail in 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.

    
                                                 Consolidated
       Q3 2010 Guidance                            Non-GAAP
       ----------------                          ------------

       Revenue                             $168.0 - $173.0 million
       Earnings from operations               $5.4 - $6.4 million
       Net earnings                           $4.5 - $5.4 million
       Diluted earnings per share             $0.15 - $0.17/share
    

Conference Call, Webcast and Instant Replay

Sierra Wireless will host a conference call and webcast today, Thursday, July 29 2010 at 2:30 pm PDT/5:30 pm EDT to review its second quarter 2010 results. You can participate in the conference call either via telephone or webcast. To participate in this conference call, please dial the following number approximately ten minutes prior to the commencement of the call. A live slide presentation will be available for viewing during the call from the link provided below.

Telephone participation:

    
    Toll free (Canada and US):     1-888-231-8191 (passcode not required)
    Outside Canada and the US:     1-647-427-7450 (passcode not required)

    Webcast:

    We will also broadcast our conference call over the Internet. To access
the web broadcast, please follow the link below and choose one of the
following options:

    -   If you are following the conference call on the phone, please choose
        the "Non-Streaming" version
    -   If you would prefer to follow online only, with streaming audio,
        select any of the other options according to your preferred format

   
http://event.on24.com/r.htm?e=218669&s=1&k=CA8CF12C48755ABFF6F27C77C947A4FC
    

The webcast will be available at the above link for 90 days following the call.

Should you be unable to participate, Instant Replay (audio) will be available following the conference call for 7 business days.

Audio only dial: 1-800-642-1687 (Canada and U.S.) or 1-416-849-0833

Passcode: 79283474 followed by the pound key (the number sign)

We look forward to having you participate in our call.

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this press release that are not based on historical facts constitute forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws ("forward-looking statements"). These forward-looking statements are not promises or guarantees of future performance but are only predictions that relate to future events, conditions or circumstances or our future results, performance, achievements or developments and are subject to substantial known and unknown risks, assumptions, uncertainties and other factors that could cause our actual results, performance, achievements or developments in our business or in our industry to differ materially from those expressed, anticipated or implied by such forward-looking statements. Forward-looking statements in this press release include all financial guidance for the third quarter of 2010, and all other disclosure regarding possible events, conditions, circumstances or results of operations that are based on assumptions about future economic conditions, courses of action and other future events. We caution you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. These forward-looking statements appear in a number of different places in this press release and can be identified by words such as "may", "estimates", "projects", "expects", "intends", "believes", "plans", "anticipates", "continue", "growing", "expanding", or their negatives or other comparable words. Forward-looking statements include statements regarding the outlook for our future operations, plans and timing for the introduction or enhancement of our services and products, statements concerning strategies or developments, statements about future market conditions, supply conditions, end customer demand conditions, channel inventory and sell through, revenue, gross margin, operating expenses, profits, forecasts of future costs and expenditures, the outcome of legal proceedings, and other expectations, intentions and plans that are not historical fact. The risk factors and uncertainties that may affect our actual results, performance, achievements or developments are many and include, amongst others, our ability to develop, manufacture, supply and market new products that we do not produce today that meet the needs of customers and gain commercial acceptance, our reliance on the deployment of next generation networks by major wireless operators, the continuous commitment of our customers, and increased competition. These risk factors and others are discussed in our Annual Information Form and Management's Discussion and Analysis of Financial Condition and Results of Operations, which may be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov and in our other regulatory filings with the Securities and Exchange Commission in the United States and the Provincial Securities Commissions in Canada. Many of these factors and uncertainties are beyond our control. Consequently, all forward-looking statements in this press release are qualified by this cautionary statement and we cannot assure you that actual results, performance, achievements or developments that we anticipate will be realized. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions and we do not undertake any obligation to update forward-looking statements should the assumptions related to these plans, estimates, projections, beliefs and opinions change, except as required by law.

About Sierra Wireless

Sierra Wireless (NASDAQ: SWIR - TSX: SW) is expanding the wireless world with a comprehensive offering of hardware, software, and connected services for mobile lifestyles and machine-to-machine communications. Our customers count on us to help them succeed with early access to new wireless technologies and innovative, reliable, high-performing solutions for a broad range of applications. For more information about Sierra Wireless, visit www.sierrawireless.com.

AirCard is a registered trademark, and AirPrime, AirLink, and AirVantage are trademarks belonging to Sierra Wireless. Other product or service names mentioned herein may be the trademarks of their respective owners.

    
                            SIERRA WIRELESS, INC.

     Consolidated Statements of Operations and Retained Earnings (Deficit)
     (Expressed in thousands of United States ("U.S.") dollars, except per
                               share amounts)
        (Prepared in accordance with United States generally accepted
                     accounting principles ("U.S. GAAP"))
                                 (Unaudited)

                                    Three months ended      Six months ended
                                    ------------------      ----------------
                                           June 30,              June 30,
                                           --------              --------
                                       2010       2009       2010       2009
                                       ----       ----       ----       ----

    Revenue...................... $ 159,116  $ 135,348  $ 310,433  $ 246,755
    Cost of goods sold...........   112,906     86,895    217,889    166,781
                                  ---------  ---------  ---------  ---------
    Gross margin.................    46,210     48,453     92,544     79,974
                                  ---------  ---------  ---------  ---------

    Expenses:
      Sales and marketing........    13,183     15,590     27,339     24,952
      Research and development...    21,534     22,672     42,075     37,636
      Administration.............     8,835     10,792     18,419     17,339
      Acquisition costs..........         -        804          -      7,326
      Restructuring..............     1,581      8,869      3,192     10,595
      Integration................     1,631        936      3,477      1,190
      Amortization...............     2,919      5,001      6,025      7,421
                                  ---------  ---------  ---------  ---------
                                     49,683     64,664    100,527    106,459
                                  ---------  ---------  ---------  ---------
    Loss from operations.........    (3,473)   (16,211)    (7,983)   (26,485)

    Foreign exchange gain (loss).    (5,460)    10,957     (9,118)     1,034
    Other expense................      (103)       (10)      (233)    (4,032)
                                  ---------  ---------  ---------  ---------
    Net loss before income taxes.    (9,036)    (5,264)   (17,334)   (29,483)
    Income tax expense (recovery)      (399)     1,229     (1,088)       962
                                  ---------  ---------  ---------  ---------
    Net loss.....................    (8,637)    (6,493)   (16,246)   (30,445)
    Net loss attributable to the
     non-controlling interest....       (82)      (622)      (170)      (909)
                                  ---------  ---------  ---------  ---------
    Net loss attributable to
     Sierra Wireless, Inc........    (8,555)    (5,871)   (16,076)   (29,536)
    Retained earnings (deficit),
     beginning of period.........   (26,147)    (2,392)   (18,626)    21,273
                                  ---------  ---------  ---------  ---------
    Deficit, end of period....... $ (34,702) $  (8,263) $ (34,702) $  (8,263)
                                  ---------  ---------  ---------  ---------
                                  ---------  ---------  ---------  ---------

    Loss per share attributable to Sierra Wireless, Inc.:
      Basic...................... $   (0.28) $   (0.19) $   (0.52) $   (0.95)
      Diluted.................... $   (0.28) $   (0.19) $   (0.52) $   (0.95)
                                  ---------  ---------  ---------  ---------
                                  ---------  ---------  ---------  ---------

    Weighted average number of shares (in thousands):
      Basic......................    31,054     31,032     31,053     31,032
      Diluted....................    31,054     31,032     31,053     31,032
                                  ---------  ---------  ---------  ---------
                                  ---------  ---------  ---------  ---------



                            SIERRA WIRELESS, INC.

                         Consolidated Balance Sheets
                  (Expressed in thousands of U.S. dollars)
                   (Prepared in accordance with U.S. GAAP)

                                                        June 30, December 31,
                                                        -------- ------------
                                                           2010         2009
                                                           ----         ----
                                                     (Unaudited)

    Assets
    Current assets:
      Cash and cash equivalents...................... $ 102,009    $ 107,491
      Short-term investments.........................    13,428       26,898
      Accounts receivable, net of allowance for
       doubtful accounts of $4,208 (2009 - $6,504)...   102,620       86,466
      Inventories....................................    29,308       24,708
      Deferred income taxes..........................     6,485        6,168
      Prepaid expenses...............................    10,780       14,039
                                                      ---------    ---------
                                                        264,630      265,770

    Fixed assets.....................................    23,653       27,956
    Intangible assets................................    70,820       86,674
    Goodwill.........................................    88,504       95,064
    Deferred income taxes............................     1,642        1,794
    Other............................................     2,971        7,261
                                                      ---------    ---------
                                                      $ 452,220    $ 484,519
                                                      ---------    ---------
                                                      ---------    ---------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable............................... $ 81,195     $  71,035
      Accrued liabilities............................   52,190        54,419
      Deferred revenue and credits...................      615           750
      Current portion of long-term obligations.......    1,437         3,371
      Current portion of obligations under capital
       leases........................................      204           293
                                                      ---------    ---------
                                                       135,641       129,868

    Long-term obligations............................    2,045         3,197
    Obligations under capital leases.................      249           245
    Other long-term liabilities......................   24,491        32,663
    Deferred income taxes............................    1,547         1,950

    Shareholders' equity:
      Share capital..................................   326,084      326,043
      Shares held for restricted share unit ("RSU")
       distribution, at cost.........................    (4,461)      (6,442)
      Additional paid-in capital.....................    14,182       13,133
      Deficit........................................   (34,702)     (18,626)
      Accumulated other comprehensive loss...........   (14,016)         (37)
                                                      ---------    ---------
                                                        287,087      314,071
    Non-controlling interest in Wavecom S.A..........     1,160        2,525
                                                      ---------    ---------
    Total shareholders' equity.......................   288,247      316,596
                                                      ---------    ---------
                                                      $ 452,220    $ 484,519
                                                      ---------    ---------
                                                      ---------    ---------



                            SIERRA WIRELESS, INC.

                    Consolidated Statements of Cash Flows
                  (Expressed in thousands of U.S. dollars)
                   (Prepared in accordance with U.S. GAAP)
                                 (Unaudited)

                                    Three months ended      Six months ended
                                    ------------------      ----------------
                                           June 30,              June 30,
                                           --------              --------
                                       2010       2009       2010       2009
                                       ----       ----       ----       ----
    Cash flows from operating
     activities:
    Net loss..................... $  (8,637) $  (6,493) $ (16,246) $ (30,445)
    Adjustments to reconcile net
     loss to net cash provided
     by (used in) operating
     activities
      Amortization...............     8,763     11,620     17,484     18,366
      Stock-based compensation...     1,750      2,631      3,444      4,734
      Non-cash restructuring and
       other.....................      (901)         -       (897)         -
      Deferred income taxes......      (690)         5       (698)         -
      Gain on disposal...........       (11)       (50)       (11)       (49)
      Unrealized foreign exchange
       (gain) loss on restricted
       cash......................         -        (66)         -     15,653
      Unrealized foreign exchange
       loss on term loan.........         -          -          -      1,215
    Changes in operating assets
     and liabilities
      Accounts receivable........    (5,016)    15,317    (17,343)    34,175
      Inventories................    (7,106)    12,287     (6,511)    12,804
      Prepaid expenses and other
       assets....................     6,169     (6,293)     6,120        (17)
      Accounts payable...........    11,338     (8,437)    14,801    (17,517)
      Accrued liabilities........    (4,458)    (1,863)    (6,920)   (10,102)
      Deferred revenue and
       credits...................        57       (204)       127         91
                                  ---------  ---------  ---------  ---------
      Net cash provided by (used
       in) operating activities..     1,258     18,454     (6,650)    28,908

    Cash flows from investing
     activities:
      Business acquisition,
       net of cash acquired of
       $139,785..................         -    (19,575)         -    (26,493)
      Acquisition of OCEANE
       convertible bonds.........         -          -          -   (104,767)
      Decrease in restricted cash         -     29,543          -    175,820
      Purchase of Wavecom S.A.
       shares....................    (1,553)         -     (1,553)         -
      Proceeds on disposal.......         6         96          6         96
      Purchase of fixed assets...    (3,803)    (4,343)    (5,718)    (6,819)
      Increase in intangible
       assets....................    (1,022)      (453)    (1,999)    (1,480)
      Purchase of short-term
       investments...............    (7,409)    (2,497)   (14,499)   (24,447)
      Proceeds on maturity of
       short-term investments....     5,083     23,591     27,969     24,060
                                  ---------  ---------  ---------  ---------
      Net cash provided by (used
       in) investing activities..    (8,698)    26,362      4,206     35,970

    Cash flows from financing
     activities:
      Proceeds on issuance of
       term loan.................         -          -          -    102,716
      Repayment of term loan.....         -          -          -   (103,931)
      Financing costs............         -          7          -     (3,914)
      Issuance of common shares,
       net of share issue costs..         7          -         28          -
      Purchase of treasury shares
       for RSU distribution......         -          -          -     (2,518)
      Proceeds on exercise of
       Wavecom options...........         -          -          -      4,148
      Repayment of long-term
       liabilities...............    (1,675)       (34)    (2,097)      (566)
                                  ---------  ---------  ---------  ---------
      Net cash used in financing
       activities................    (1,668)       (27)    (2,069)    (4,065)

    Effect of foreign exchange
     changes on cash and cash
     equivalents                       (140)    (7,847)      (969)   (11,088)
                                  ---------  ---------  ---------  ---------

    Net increase (decrease) in
     cash and cash equivalents..     (9,248)    36,942     (5,482)    49,725
    Cash and cash equivalents,
     beginning of period........    111,257     76,041    107,491     63,258
                                  ---------  ---------  ---------  ---------
    Cash and cash equivalents,
     end of period..............  $ 102,009  $ 112,983  $ 102,009  $ 112,983
                                  ---------  ---------  ---------  ---------
                                  ---------  ---------  ---------  ---------



                            SIERRA WIRELESS, INC.

                 Reconciliation of GAAP and Non-GAAP Results

                                    Three months ended      Six months ended
                                    ------------------      ----------------
                                           June 30,              June 30,
                                           --------              --------
    (in millions of U.S. dollars)      2010       2009       2010       2009
                                       ----       ----       ----       ----

    Revenue - GAAP and Non-GAAP   $   159.1  $   135.3  $   310.4  $   246.8

    Gross margin - GAAP           $    46.2  $    48.5  $    92.5  $    80.0
      Stock-based compensation          0.1        0.1        0.3        0.2
                                  ---------  ---------  ---------  ---------
    Gross margin - Non-GAAP       $    46.3  $    48.6  $    92.8  $    80.2
                                  ---------  ---------  ---------  ---------
                                  ---------  ---------  ---------  ---------

    Loss from operations - GAAP   $    (3.5) $   (16.2) $    (8.0) $   (26.5)
      Stock-based compensation          1.8        2.6        3.4        4.7
      Transaction costs                   -        0.8          -        7.3
      Restructuring and other
       costs                            1.6        8.5        3.2        9.7
      Integration costs                 1.6        0.9        3.5        1.2
      Acquisition related
       amortization                     3.2        6.2        6.7        8.6
                                  ---------  ---------  ---------  ---------
    Earnings from operations
     - Non-GAAP                   $     4.7  $     2.8  $     8.8  $     5.0
                                  ---------  ---------  ---------  ---------
                                  ---------  ---------  ---------  ---------

    Net loss - GAAP               $    (8.6) $    (5.9) $   (16.1) $   (29.5)
      Stock-based compensation,
       transaction,
       restructuring,
       integration and
       acquisition amortization
       costs, net of tax                7.5       18.8       15.6       30.9
      Foreign exchange (gain)
       loss                             5.5      (11.0)       9.1       (1.0)
      Interest expense                    -           -         -        4.3
      Non-controlling interest            -       (0.4)      (0.1)      (0.7)
                                  ---------  ---------  ---------  ---------
    Net earnings - Non-GAAP       $     4.4  $     1.5  $     8.5  $     4.0
                                  ---------  ---------  ---------  ---------
                                  ---------  ---------  ---------  ---------

    Loss per share - GAAP         $   (0.28) $   (0.19) $   (0.52) $   (0.95)
    Diluted earnings per share
     - Non-GAAP                   $    0.14  $    0.05  $    0.27  $    0.13



                            SIERRA WIRELESS, INC.
                          REVENUE BY BUSINESS LINE
                   (Expressed as a percentage of revenue)

                                    Three months ended      Six months ended
                                    ------------------      ----------------
                                           June 30,              June 30,
                                           --------              --------
                                       2010       2009       2010       2009
                                       ----       ----       ----       ----

    M2M..........................       53%        40%        55%        35%
    Mobile computing.............       47         60         45         65
                                  ---------  ---------  ---------  ---------
                                       100%       100%       100%       100%
                                  ---------  ---------  ---------  ---------
                                  ---------  ---------  ---------  ---------



                            SIERRA WIRELESS, INC.
                           REVENUE BY PRODUCT LINE
                   (Expressed as a percentage of revenue)

                                    Three months ended      Six months ended
                                    ------------------      ----------------
                                           June 30,              June 30,
                                           --------              --------
                                       2010       2009       2010       2009
                                       ----       ----       ----       ----
    AirPrime Intelligent Embedded
     Modules.....................       47%        33%        50%        28%
    AirCard Mobile Broadband
     Devices.....................       43         57         41         62
    AirLink Intelligent Gateways
     and Routers.................        8          8          7          8
    AirVantage Solutions and
     Other.......................        2          2          2          2
                                  ---------  ---------  ---------  ---------
                                       100%       100%       100%       100%
                                  ---------  ---------  ---------  ---------
                                  ---------  ---------  ---------  ---------
    

%SEDAR: 00011917E

SOURCE SIERRA WIRELESS, INC.

For further information: For further information: Investor Contact: David G. McLennan, Chief Financial Officer, (604) 231-1181; Media Contact: Sharlene Myers, Public & Media Relations, (604) 232-1445, Sierra Wireless, Inc., Website: www.sierrawireless.com, Email: investor@sierrawireless.com

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