Sierra Wireless Reports Third Quarter 2008 Results



    
    TSX: SW
    NASDAQ:   SWIR
    

    VANCOUVER, Oct. 28 /CNW/ - Sierra Wireless, Inc. (NASDAQ:   SWIR, TSX: SW)
is reporting third quarter 2008 results.
    Our results are reported in U.S. dollars and are prepared in accordance
with United States generally accepted accounting principles.
    "During the third quarter of 2008, we achieved 23% year-over-year revenue
growth and record cash flow from operations." said Jason Cohenour, President
and Chief Executive Officer. "While our year-over-year revenue growth and cash
performance was strong, our results fell short of our expectations as a result
of missing an expected product launch with a large wireless operator.
Notwithstanding our disappointment about the missed product launch, we are
encouraged by the strong revenue performance from our recently launched USB
products in the face of stiff economic headwinds, as well as the achievement
of several important product launches and strategic milestones during the
quarter. The success of our new Compass885 for HSPA networks is particularly
notable. This product was launched as the USBConnect Mercury by AT&T during
the quarter, and by several other operators in Europe and Asia as well. With
respect to strategic developments, we commenced a close development
collaboration with Telstra, Qualcomm and Ericsson to launch the world's first
HSPA+ network service and device, once again highlighting the strength of our
position as an innovative developer of products for the world's latest
wireless technologies.
    Looking ahead, our short term view is cautious given the macro economic
conditions in our key markets and expected erosion in sales of our embedded
modules to PC OEMs. 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."

    Q3 2008 Financial Results

    Our revenue for the third quarter of 2008 amounted to $136.8 million,
gross margin was $37.8 million, or 27.6% of revenue, operating expenses were
$27.9 million and net earnings were $7.3 million, or diluted earnings per
share of $0.23. We generated a record $22.8 million of cash from operations
during the third quarter and our balance sheet remains strong, with
$227.3 million of cash, short and long-term investments.

    Results for the third quarter of 2008, relative to guidance provided on
July 23, 2008 are as follows:

    
    Third quarter revenue for 2008 of $136.8 million was lower than our
    guidance of $140.0 million. Our earnings from operations were
    $9.8 million, lower than our guidance of $11.0 million. Our net earnings
    of $7.3 million, or diluted earnings per share of $0.23, were lower than
    our guidance of net earnings of $8.5 million, or diluted earnings per
    share of $0.27.

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

    Third quarter revenue increased by 23% to $136.8 million in 2008 from
    $111.5 million for the same period in 2007. Gross margin for the third
    quarter of 2008 was 27.6% of revenue, compared to 29.7% for the same
    period in 2007. Operating expenses were $27.9 million and earnings from
    operations were $9.8 million in the third quarter of 2008, compared to
    $21.4 million and $11.6 million, respectively, in the same period of
    2007. Net earnings for the third quarter of 2008 were $7.3 million, or
    diluted earnings per share of $0.23, compared to net earnings of $9.0
    million, or diluted earnings per share of $0.33, in the same period of
    2007. Our weighted average shares outstanding used in calculating
    earnings per share increased to 31.3 million in the third quarter of 2008
    from 27.7 million in the prior year, primarily as a result of the
    issuance of 3.8 million shares in our October 2007 public offering.

    Our results include 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 2008    Q3 2007
                                                        ---------- ----------

    Earnings from operations - GAAP                      $    9.8   $   11.6
      Stock-based compensation                                1.6        1.5
      Acquisition related amortization                        0.7        1.0
                                                        ---------- ----------
    Earnings from operations - Non-GAAP                  $   12.1   $   14.1

    Net earnings - GAAP                                  $    7.3   $    9.0
    Net earnings - Non-GAAP                                   8.9       10.9

    Diluted earnings per share - GAAP                    $   0.23   $   0.33
    Diluted earnings per share - Non-GAAP                    0.28       0.39


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

    Revenue for the third quarter of 2008 decreased by 12% to $136.8 million,
    compared to $155.7 million in the second quarter of 2008. Gross margin
    was 27.6% of revenue in the third quarter of 2008, compared to 27.8% in
    the second quarter of 2008. Operating expenses were $27.9 million and
    earnings from operations were $9.8 million in the third quarter of 2008,
    compared to $28.8 million and $14.4 million, respectively, in the second
    quarter of 2008. Net earnings for the third quarter of 2008 were $7.3
    million, or diluted earnings per share of $0.23, compared to net earnings
    of $11.0 million, or diluted earnings per share of $0.35, in the second
    quarter of 2008.

    Third Quarter and Recent Highlights Included:

    -   Together with AT&T, we announced the availability of the AT&T
        USBConnect Mercury, also known as the Sierra Wireless Compass885, the
        smallest device in AT&T's lineup of HSPA LaptopConnect devices.

    -   We also announced the availability of our Compass885 HSPA USB modem
        with O2 in the UK, Swisscom in Switzerland and Telstra in Australia.
        During the quarter, we commenced commercial shipments of the
        Compass885 to other operators around the world as well. The
        Compass885 is our latest HSPA device, featuring download speeds of up
        to 7.2 Mbps, upload speeds of up to 2 Mbps, on board file storage and
        TRU-Install set up capability.

    -   We announced that our latest EVDO Rev A mobile broadband modem, the
        Compass 597, is now available from TELUS in Canada and from Telecom
        New Zealand.

    -   We partnered with Telstra and NetComm Limited to launch two new
        mobile broadband devices, the Telstra Turbo 7 Series Wireless Gateway
        and BigPond 7.2 Wireless Broadband Home Network Gateway, each of
        which combine three capabilities in one unit - super-fast mobile
        broadband, a secure Wi-Fi Gateway and Ethernet connectivity.

    -   Microboard, a leading notebook computer supplier in Brazil, selected
        our embedded modules to provide 3G wireless connectivity to the
        Microboard Ellite notebook computer. The Microboard Ellite 3G
        notebook is available in Brazil with service on the Claro mobile
        broadband network, and can be purchased in Claro retail stores.

    -   We announced the availability of a new software development kit (SDK)
        for Original Equipment Manufacturers supporting Windows CE operating
        systems. The Windows CE SDK offers OEM customers a more streamlined
        and cost efficient development cycle for devices using Sierra
        Wireless 3G embedded modules.

    -   We announced that our ALEOS(TM) embedded intelligence software has
        been enhanced and now includes events reporting capabilities for the
        AirLink(TM) PinPoint X and PinPoint XT mobile gateways. The ALEOS
        Events Reporting Engine provides PinPoint customers with real-time
        event status that is highly customizable and can be remotely managed,
        controlled, and configured.

    -   CalAmp selected our embedded modules to provide 3G wireless broadband
        connectivity for CalAmp's recently launched WiMetry Internet
        Protocol-based wireless communications platform used in Automatic
        Meter Reading and Advanced Metering Infrastructure applications.

    -   OneAccess, a leading European supplier of networking equipment
        located in France, selected our HSPA embedded modules to provide 3G
        mobile broadband connectivity for the new ONECell35 business router.
        The ONECell35 leverages the 3G services offered by mobile operators
        to provide users with high speed wireless back up capability.

    -   We introduced the MC8792V for HSPA networks, the first Sierra
        Wireless embedded module to offer UMTS 900 MHz frequency band
        support, providing new and existing OEM customers the ability to
        expand their product offering with this feature-rich mobile broadband
        solution.

    -   We completed an agreement to purchase the assets of Junxion, Inc., an
        innovative supplier of routers and device management solutions for
        machine to machine applications. The transaction has closed and
        Junxion products and technology are being integrated into our Mobile
        and M2M product plans.

    -   During the second quarter, we received regulatory approval to
        purchase up to 1,567,378 of our common shares by way of a normal
        course issuer bid on the Toronto Stock Exchange and the NASDAQ Global
        Market. As of September 30, 2008, 407,700 common shares were
        purchased and subsequently cancelled.
    

    Financial Guidance

    The following guidance for the fourth quarter of 2008 reflects our
current business indicators and expectations.
    Our guidance for the fourth quarter reflects expected erosion in sales of
our embedded modules to PC OEMs, combined with macro economic headwinds in our
key markets. Our guidance also includes revenue contribution from expected new
product launches and the uncertainties associated with these launches could
affect our ability to achieve guidance.
    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.

    
                                         Non-GAAP Adjustments
                                     ----------------------------
                                     Stock      Acquisition
    Q4 2008 Guidance      GAAP        Comp     Amortization(1)      Non-GAAP
    ----------------      -----      ------    ----------------     ---------
    Revenue         $140.0 million                             $140.0 million
    Earnings from
     operations      $10.0 million  $1.6 million  $0.6 million  $12.2 million
    Net earnings      $7.3 million  $1.1 million  $0.5 million   $8.9 million
    Diluted earnings
     per share         $0.23/share                                $0.28/share

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

    Conference Call, Webcast and Instant Replay

    We will host a conference call to review our results on Tuesday,
October 28, 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:

    http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2381500

        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: 21280223 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.
    

    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 fourth quarter of 2008, 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) 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       Nine months ended
                                 ------------------       -----------------
                                    September 30,            September 30,
                                    -------------            -------------
                                  2008        2007        2008        2007
                                  ----        ----        ----        ----
    Revenue................... $ 136,794   $ 111,515   $ 434,441   $ 304,322
    Cost of goods sold........    99,025      78,446     314,129     218,940
                               ----------  ----------  ----------  ----------
    Gross margin..............    37,769      33,069     120,312      85,382
                               ----------  ----------  ----------  ----------

    Expenses:
      Sales and marketing.....     8,717       5,963      24,480      14,983
      Research and
       development............    13,062       9,692      40,894      31,183
      Administration..........     5,011       4,508      15,696      11,097
      Amortization............     1,135       1,271       3,628       2,828
                               ----------  ----------  ----------  ----------
                                  27,925      21,434      84,698      60,091
                               ----------  ----------  ----------  ----------
    Earnings from
     operations...............     9,844      11,635      35,614      25,291

    Other income..............       522         743       4,250       2,750
                               ----------  ----------  ----------  ----------
    Earnings before income
     taxes....................    10,366      12,378      39,864      28,041
    Income tax expense........     3,110       3,343      11,960       7,079
                               ----------  ----------  ----------  ----------
    Net earnings..............     7,256       9,035      27,904      20,962
    Deficit, beginning of
     period...................   (19,954)    (61,134)    (40,602)    (73,061)
    Excess of purchase price
     over assigned value of
     common shares............      (708)          -        (708)          -
                               ----------  ----------  ----------  ----------
    Deficit, end of period ... $ (13,406)  $ (52,099)  $ (13,406)  $ (52,099)
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Earnings per share for the period:
      Basic................... $    0.23   $    0.33   $    0.89   $    0.79
      Diluted................. $    0.23   $    0.33   $    0.89   $    0.78
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Weighted average number of shares (in thousands):
      Basic...................    31,273      27,355      31,328      26,509
      Diluted.................    31,324      27,674      31,421      26,799
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------



                            SIERRA WIRELESS, INC.

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

                                                       September    December
                                                       ---------    --------
                                                        30, 2008    31, 2007
                                                       ---------    --------
                                                      (Unaudited)
    Assets
    Current assets:
      Cash and cash equivalents....................... $ 119,385   $  83,624
      Short-term investments..........................    82,861      92,980
      Accounts receivable.............................    88,713      83,015
      Inventories.....................................    33,284      24,989
      Deferred income taxes...........................     1,760       3,556
      Prepaid expenses................................     5,788       9,229
                                                       ----------  ----------
                                                         331,791     297,393

    Long-term investments.............................    25,047      19,757
    Fixed assets......................................    21,892      15,274
    Intangible assets.................................    15,979      17,418
    Goodwill..........................................    33,007      32,541
    Deferred income taxes.............................     1,359       1,156
    Other.............................................         -       1,482
                                                       ----------  ----------
                                                       $ 429,075   $ 385,021
                                                       ----------  ----------
                                                       ----------  ----------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable................................ $  39,447   $  31,163
      Accrued liabilities.............................    63,830      53,691
      Deferred revenue and credits....................       544         534
      Current portion of long-term liabilities........       231         277
                                                       ----------  ----------
                                                         104,052      85,665

    Long-term liabilities.............................       404         581
    Deferred income taxes.............................     2,959       3,451

    Shareholders' equity:
      Share capital...................................   324,406     328,323
      Additional paid-in capital......................     9,456       6,374
      Warrants........................................     1,538       1,538
      Deficit.........................................   (13,406)    (40,602)
      Accumulated other comprehensive loss............      (334)       (309)
                                                       ----------  ----------
                                                         321,660     295,324
                                                       ----------  ----------
                                                       $ 429,075   $ 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       Nine months ended
                                 ------------------       -----------------
                                    September 30,            September 30,
                                    -------------            -------------
                                  2008        2007        2008        2007
                                  ----        ----        ----        ----
    Cash flows from operating
     activities:
      Net earnings for the
       period................. $   7,256   $   9,035   $  27,904   $  20,962
      Adjustments to reconcile
       net earnings to net
       cash provided by
       operating activities
        Amortization..........     4,076       3,520      11,875      10,445
        Stock-based
         compensation.........     1,618       1,510       4,913       3,614
        Tax benefit related to
         stock option
         deduction............         -         635           -         635
        Loss (gain) on
         disposal.............         -           -          73         (20)
        Utilization of
         pre-acquisition tax
         losses...............         -           -           -         802
        Deferred income
         taxes................     1,272         373       1,102         414
      Changes in operating
       assets and liabilities
        Accounts receivable...     9,230        (604)     (7,081)     (9,319)
        Inventories...........    (6,371)      7,642      (8,295)     (5,906)
        Prepaid expenses and
         other assets.........     1,956       1,292       4,923       3,641
        Accounts payable......     2,750     (11,716)      8,285       6,637
        Accrued liabilities...       785       2,787      10,139        (708)
        Deferred revenue and
         credits..............       180        (241)          9         (24)
                               ----------  ----------  ----------  ----------

      Net cash provided by
       operating activities...    22,752      14,233      53,847      31,173

    Cash flows from investing
     activities:
        Business acquisition..         -        (264)        (35)    (12,157)
        Proceeds on disposal..         -           -           2          21
        Purchase of fixed
         assets...............    (4,971)     (2,073)    (14,990)     (6,792)
        Increase in intangible
         assets...............    (1,694)       (379)     (2,578)       (761)
        Purchase of long-term
         investments..........    (5,169)     (4,310)     (5,169)     (4,310)
        Purchase of short-term
         investments..........   (67,175)    (36,532)   (142,771)   (100,636)
        Proceeds on maturity
         of short-term
         investments..........    38,214      13,922     154,134     100,796
                               ----------  ----------  ----------  ----------
      Net cash used by
       investing activities...   (40,795)    (29,636)    (11,407)    (23,839)

    Cash flows from financing
     activities:
        Issue of common shares,
         net of share issue
         costs................       339         744       1,023       3,293
        Purchase of shares for
         restricted share unit
         plans................    (1,487)          -      (2,498)          -
        Repurchase of common
         shares...............    (4,982)          -      (4,982)          -
        Increase (decrease) in
         long-term
         liabilities..........       (83)         16        (222)       (481)
                               ----------  ----------  ----------  ----------
      Net cash provided by
       (used in) financing
       activities.............    (6,213)        760      (6,679)      2,812
                               ----------  ----------  ----------  ----------

    Net increase (decrease) in
     cash and cash
     equivalents..............   (24,256)    (14,643)     35,761      10,146
    Cash and cash equivalents,
     beginning of period......   143,641      71,227      83,624      46,438
                               ----------  ----------  ----------  ----------
    Cash and cash equivalents,
     end of period............ $ 119,385   $  56,584   $ 119,385   $  56,584
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------
    

    %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

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SIERRA WIRELESS, INC.

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