Sierra Wireless Reports Third Quarter 2007 Results



    TSX: SW
    Nasdaq:   SWIR

    VANCOUVER, Oct. 25 /CNW/ - Sierra Wireless, Inc. (NASDAQ:   SWIR, TSX: SW)
is reporting third quarter 2007 results.
    Our results are reported in US dollars and are prepared in accordance
with United States generally accepted accounting principles.
    "During the third quarter of 2007 we experienced continued strong
momentum in our business and achieved record quarterly revenue and earnings"
said Jason Cohenour, President and Chief Executive Officer. "Our strong
results were driven by a combination of continued solid shipments of our
AirCard products to existing operator channels, initial shipments of our new
HSUPA products, growth in our OEM business and a full quarter of contribution
from AirLink. These factors contributed to year over year revenue growth of
112%, improved gross margin and a significantly improved operating margin of
10.4%. During the quarter, our channels reported record sell through of our
products and our bookings were strong. These trends, combined with new HSUPA
product momentum, give us good revenue visibility and support our expectations
for growth and improved profitability in Q4.
    Early in Q4, we also achieved an important strategic milestone, closing a
new equity issue and raising gross proceeds of $85.1M. We intend to use the
net proceeds from this transaction to help fuel the execution of our strategy,
including potential acquisitions that we believe will help drive further gains
in shareholder value."

    Q3 2007 Financial Results

    Our revenue for the third quarter of 2007 amounted to a record
$111.5 million, gross margin was $33.1 million, or 29.7% of revenue, operating
expenses were $21.4 million and net earnings were $9.0 million, or diluted
earnings per share of $0.33. Integration costs related to the AirLink
Communications, Inc. ("AirLink") acquisition were not material in the third
quarter of 2007. Our balance sheet remains strong, with $102.8 million of cash
and short and long-term investments, which includes the generation of cash
from operations of $14.2 million and excludes the proceeds raised from the
equity issue that closed in early Q4.

    
    Results for the third quarter of 2007, relative to guidance provided on
July 26, 2007 are as follows:

        Third quarter revenue for 2007 of $111.5 million was better than our
        guidance of $109.0 million. Our earnings from operations were
        $11.6 million, better than our guidance of $9.4 million. Our net
        earnings of $9.0 million, or diluted earnings per share of $0.33,
        were also better than our guidance of net earnings of $7.6 million,
        or diluted earnings per share of $0.27.

    Results for the third quarter of 2007, compared to the third quarter of
2006 are as follows:

        Third quarter revenue increased by 112% to $111.5 million in 2007
        from $52.5 million for the same period in 2006. Gross margin for the
        third quarter of 2007 was 29.7% of revenue, compared to 30.2% for the
        same period in 2006. Operating expenses were $21.4 million in the
        third quarter of 2007, compared to $15.8 million in the same period
        of 2006. Net earnings for the third quarter of 2007 were
        $9.0 million, or diluted earnings per share of $0.33, compared to net
        earnings of $1.1 million, or diluted earnings per share of $0.04, in
        the same period of 2006.

        Our third quarter results for 2007 include a full quarter of
        contribution from AirLink. AirLink contributed revenue of
        $9.5 million at a gross margin of 53.2% in the third quarter of 2007.

        Included in our results are stock-based compensation expense and
        amortization resulting from the acquisitions of AirPrime, Inc. in
        2003 and AirLink in May 2007. Adjusting for these amounts, our
        non-GAAP results are as follows:


        (in millions of U.S. dollars)                    Q3 2007     Q3 2006
                                                        ---------   ---------

        Earnings from operations - GAAP                 $  11.6      $  0.1
           Stock-based compensation                         1.5         1.0
           Acquisition related amortization                 1.0         0.3
                                                        ---------   ---------
        Earnings from operations  - Non-GAAP            $  14.1      $  1.4

        Net income - GAAP                                $  9.0      $  1.1
        Net income - Non-GAAP                              10.9         2.1

        Diluted earnings per share - GAAP                $ 0.33      $ 0.04
        Diluted earnings per share - Non-GAAP              0.39        0.08

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

        Revenue for the third quarter of 2007 increased by 4% to
        $111.5 million, compared to $107.4 million in the second quarter of
        2007. Gross margin was 29.7% of revenue in the third quarter of 2007,
        compared to 27.0% in the second quarter of 2007. Operating expenses
        were $21.4 million in the third quarter of 2007, compared to
        $20.9 million in the second quarter of 2007. Net earnings for the
        third quarter of 2007 were $9.0 million, or diluted earnings per
        share of $0.33, compared to net earnings of $6.7 million, or diluted
        earnings per share of $0.25, in the second quarter of 2007.

    Third Quarter Highlights Included:

        -  Commercial availability of our AirCard(R) 595U USB modem from
           Verizon Wireless for use on Verizon's Broadband Access service.

        -  Commercial availability of the AirCard 595U USB modem and the
           AirCard 597E ExpressCard from Telecom New Zealand for use on the
           Telecom Mobile Broadband service.

        -  Commercial availability of our AirCard 595 PC card and the
           AirLink PinPoint X and Raven X products from Bell Mobility of
           Canada for use on Bell's high-speed EVDO Rev A network.

        -  Commercial availability of the new HSUPA AirCard 880U USB modem
           and AirCard 880E ExpressCard from Telstra of Australia for use on
           Telstra's Enhanced Next G(TM) HSPA network.

        -  Together with Fujitsu PC Asia Pacific, we announced that our
           MC8780 embedded module is integrated into the new LifeBook P7230
           and S6410 to provide HSUPA mobile broadband connectivity. Both
           platforms are now commercially available in Hong Kong for use on
           the SmarTone-Vodafone network and in Japan for use on the
           NTT DoCoMo network.

        -  We announced a bought deal to raise gross proceeds of
           US$78.4 million from the sale of 3,500,000 common shares in the
           United States and Canada at a price of US$22.40 per share. On
           October 2, 2007, after the quarter end, we closed the offering and
           sold 3,800,000 common shares from treasury, which included
           300,000 shares issuable upon the exercise by the underwriters of
           the over-allotment option. Gross proceeds of this offering were
           $85.1 million. We expect to use the net proceeds from the offering
           for general corporate purposes, working capital and potential
           future acquisitions.
    

    Financial Guidance

    The following guidance for the fourth quarter of 2007 reflects our
current business indicators and expectations.
    Our revenue expectations for the fourth quarter of 2007 are driven by
strong demand that is moderated by expected supply constraints on some
components.
    Similar to the third quarter of 2007, our guidance for the fourth quarter
includes a significant revenue contribution from expected new product and
channel launches. There are uncertainties associated with the launch and early
ramp of new products that could affect our ability to achieve guidance. As a
result of our anticipated new product launch activity, we expect fourth
quarter operating expenses to increase relative to the third quarter.
    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
                                 --------------------------------------------
                                               Acquisition     Integration
    Q4 2007 Guidance     GAAP      Stock Comp  Amortization(1)     Costs
    ----------------     ----      ----------  ---------------  ------------

    Revenue        $125 million
    Earnings from
     operations    $12.8 million  $1.5 million  $1.0 million    $0.2 million
    Net earnings   $11.1 million  $1.1 million  $0.8 million    $0.1 million
    Diluted
     earnings
     per share     $ 0.35/share


                     Non-GAAP
                     --------

    Revenue        $125 million
    Earnings from
     operations    $15.5 million
    Net earnings   $13.1 million
    Diluted
     earnings
     per share     $0.42/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 Thursday, October
25, 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:
        1-800-733-7560   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
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1973620

        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: 21243588 followed by the number sign.

    Webcast (available for 90 days) 
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1973620
    No Passcode is required.

    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 fourth 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 modems and software connect people all over the world
with mobile broadband networks that keep them in touch, informed and
productive from wherever they need to be. The Company offers a diverse product
portfolio addressing enterprise, consumer, original equipment manufacturer,
machine-to-machine, and specialized vertical industry markets and provides
professional services to customers requiring expertise in wireless design,
integration and carrier certification. Sierra Wireless is headquartered in
Richmond, British Columbia, Canada with additional offices in Carlsbad and
Hayward, California; London; and Hong Kong. For more information about Sierra
Wireless, 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.


    
                            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      Nine months ended
                                 ------------------      -----------------
                                    September 30,           September 30,
                                    -------------           -------------
                                  2007        2006        2007        2006
                                 ------      ------      ------      ------
    Revenue................... $ 111,515   $  52,535   $ 304,322   $ 152,982
    Cost of goods sold........    78,446      36,651     218,940     101,584
                               ----------  ----------  ----------  ----------
    Gross margin..............    33,069      15,884      85,382      51,398
                               ----------  ----------  ----------  ----------

    Expenses
      Sales and marketing.....     5,963       2,820      14,983      10,296
      Research and
       development............     9,692       8,830      31,183      25,263
      Administration..........     4,508       3,427      11,097       9,475
      Amortization............     1,271         697       2,828       2,204
                               ----------  ----------  ----------  ----------
                                  21,434      15,774      60,091      47,238
                               ----------  ----------  ----------  ----------
    Earnings from operations..    11,635         110      25,291       4,160

    Other income..............       743       1,146       2,750       3,627
                               ----------  ----------  ----------  ----------
    Earnings before income
     taxes....................    12,378       1,256      28,041       7,787
    Income tax expense........     3,343         188       7,079         362
                               ----------  ----------  ----------  ----------
    Net earnings..............     9,035       1,068      20,962       7,425
    Deficit, beginning of
     period...................   (61,134)    (76,500)    (73,061)    (82,857)
                               ----------  ----------  ----------  ----------
    Deficit, end of period.... $ (52,099)  $ (75,432)  $ (52,099)  $ (75,432)
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Earnings per share for
     the period:
      Basic................... $    0.33   $    0.04   $    0.79  $     0.29
      Diluted................. $    0.33   $    0.04   $    0.78  $     0.29
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Weighted average number
     of shares (in thousands)
      Basic...................    27,355      25,660      26,509      25,585
      Diluted.................    27,674      25,874      26,799      25,857
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------



                            SIERRA WIRELESS, INC.

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

                                                       September    December
                                                       ----------   ---------
                                                        30, 2007    31, 2006
                                                        ---------   ---------
                                                       (Unaudited)

    Assets
    Current assets:
      Cash and cash equivalents....................... $  56,584   $  46,438
      Short-term investments..........................    41,794      40,554
      Accounts receivable, net of allowance for
       doubtful accounts of $2,078 (2006 - $1,567)....    69,148      57,441
      Inventories.....................................    28,402      18,889
      Deferred income taxes...........................     1,503         118
      Prepaid expenses................................     2,858       6,032
                                                       ----------  ----------
                                                         200,289     169,472

    Long-term investments.............................     4,394           -
    Fixed assets......................................    13,987      13,400
    Intangible assets.................................    21,658       9,892
    Goodwill..........................................    30,152      18,409
    Deferred income taxes.............................     1,955           -
    Other.............................................       565         435
                                                       ----------  ----------
                                                       $ 273,000   $ 211,608
                                                       ----------  ----------
                                                       ----------  ----------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable................................ $  26,453   $  16,608
      Accrued liabilities.............................    39,846      39,543
      Deferred revenue and credits....................       754         633
      Current portion of long-term liabilities........       576         847
                                                       ----------  ----------
                                                          67,629      57,631

    Long-term liabilities.............................       935       1,145
    Deferred income taxes.............................     4,900           -

    Shareholders' equity:
      Share capital...................................   246,062     221,861
      Additional paid-in capital......................     4,743       3,240
      Warrants........................................     1,538       1,538
      Deficit.........................................   (52,099)    (73,061)
      Accumulated other comprehensive loss............      (708)       (746)
                                                       ----------  ----------
                                                         199,536     152,832
                                                       ----------  ----------
                                                       $ 273,000   $ 211,608
                                                       ----------  ----------
                                                       ----------  ----------



                            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      Nine months ended
                                 ------------------      -----------------
                                    September 30,           September 30,
                                    -------------           -------------
                                  2007        2006        2007        2006
                                 ------      ------      ------      ------

    Cash flows from operating
     activities:
      Net earnings for the
       period................. $   9,035   $   1,068   $  20,962   $   7,425
      Adjustments to
       reconcile net
       earnings to net cash
       provided by (used in)
       operating activities
        Amortization..........     3,520       2,514      10,445       7,007
        Stock-based
         compensation.........     1,510         969       3,614       2,844
        Tax benefit related
         to stock option
         deduction............       635         114         635         114
        Loss (gain) on
         disposal.............         -         (17)        (20)         14
        Utilization of
         pre-acquisition
         tax losses...........         -           -         802           -
        Deferred income
         taxes................       373           -         414           -
      Changes in operating
       assets and liabilities
        Accounts
         receivable...........      (604)    (11,853)     (9,319)    (19,216)
        Inventories...........     7,642      (8,340)     (5,906)    (24,692)
        Prepaid expenses......     1,292         911       3,641       2,677
        Accounts payable......   (11,716)      3,751       6,637      17,817
        Accrued liabilities...     2,787       6,775        (708)      3,650
        Deferred revenue and
         credits..............      (241)       (212)        (24)        170
                               ----------  ----------  ----------  ----------
      Net cash provided by
       (used in) operating
       activities.............    14,233      (4,320)     31,173      (2,190)

    Cash flows from
     investing activities:
      Business acquisition,
       net of cash acquired
       of $1,510..............      (264)          -     (12,157)          -
      Proceeds on disposal....         -          23          21          28
      Purchase of fixed
       assets.................    (2,073)     (2,197)     (6,792)     (7,582)
      Increase in
       intangible assets......      (379)       (790)       (761)     (1,303)
      Purchase of
       long-term
       investments............    (4,310)          -      (4,310)          -
      Purchase of
       short-term
       investments............   (36,532)    (29,840)   (100,636)    (54,045)
      Proceeds on maturity
       of short-term
       investments............    13,922       9,478     100,796      49,569
                               ----------  ----------  ----------  ----------
    Net cash used in
     investing activities.....   (29,636)    (23,326)    (23,839)    (13,333)

    Cash flows from
     financing activities:
      Issue of common
       shares, net of
       share issue costs......     1,309          23       3,858       1,172
      Deferred financing
       costs..................      (565)          -        (565)          -
      Increase (decrease)
       in long-term
       liabilities............        16        (445)       (481)       (817)
                               ----------  ----------  ----------  ----------
    Net cash provided by
     (used in) financing
     activities...............       760        (422)      2,812         355

                               ----------  ----------  ----------  ----------
    Net increase (decrease)
     in cash and cash
     equivalents..............   (14,643)    (28,068)     10,146     (15,168)
    Cash and cash
     equivalents,
     beginning of period......    71,227      77,511      46,438      64,611
                               ----------  ----------  ----------  ----------
    Cash and cash
     equivalents, end
     of period................ $  56,584   $  49,443   $  56,584   $  49,443
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------
    
    %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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