Sierra Wireless Reports Fourth Quarter and Fiscal Year 2009 Results
TSX: SW NASDAQ: SWIR - Fourth quarter revenue increased to $144.0 million - up 6% sequentially and 8% over Q4 2008 - Strong momentum in machine-to-machine product lines - sequential revenue increases of 52% in AirPrime(TM) embedded modules and 11% in AirLink(TM) machine-to-machine (M2M) gateways - Launched new AirCard(R) products with AT&T, Sprint, Telus, Telstra and Telefonica - including the world's first 3G/4G mobile hotspot - Fourth quarter cash flow from operations of $3.7 million, total cash of $134.4 million - Expecting continued sequential revenue growth in Q1 2010
"Sierra Wireless continues to build momentum and execute well in our target markets of machine-to-machine and mobile computing," said
"In the fourth quarter of 2009, our M2M product lines experienced strong sequential revenue growth, with sales of our AirPrime embedded modules up 52% to
In mobile computing, we launched important new AirCard products with key customers including AT&T, Telus, Telstra and Telefonica. In January of 2010, we achieved another world first in launching the first ever 3G/4G mobile hot spot with Sprint. Achievements like this underscore our commitment to developing new, differentiated AirCard products supporting leading edge air interface technologies for our key operator partners.
Looking forward, we have good visibility to Q1 revenue growth and believe we are uniquely positioned in our target markets with the industry's broadest product line, strongest global presence and unmatched innovation capability. Furthermore, we believe that our target markets of M2M and mobile computing present compelling growth opportunities and we are investing to bolster our leadership position."
Q4 and Fiscal Year 2009 Financial Results - GAAP
Revenue for the fourth quarter of 2009 was
Revenue for the year ended
Q4 2009 Financial Results - Non-GAAP
Non-GAAP results exclude transaction costs related to Wavecom, restructuring costs, integration costs, stock based compensation expense, acquisition related amortization, foreign exchange on amounts related to the Wavecom acquisition, tax adjustments and non-controlling interest related to non-GAAP adjustments. Adjusting for these amounts, non-GAAP results for Q4 2009 are as follows:
Q4 2009 Q4 2008
---------------------------------- --------
(in millions of Sierra Wavecom Consolidated Consolidated
U.S. dollars) Non-GAAP Non-GAAP Non-GAAP Non-GAAP
-------- -------- -------- --------
Revenue - GAAP and
Non-GAAP $ 101.9 $ 42.1 $ 144.0 $ 132.9
Gross margin - GAAP $ 47.4 $ 36.4
Stock-based
compensation 0.1 0.1
-------- -------
Gross margin - Non-GAAP $ 47.5 $ 36.5
Earnings (loss) from
operations - GAAP $ 2.3 $ (3.4) $ (1.1) $ 9.0
Transaction costs 0.1 - 0.1 -
Restructuring and
other costs - 4.8 4.8 -
Integration costs 1.4 (0.1) 1.3 -
Stock-based
compensation 1.6 0.1 1.7 1.5
Acquisition related
amortization 0.6 (3.7) (3.1) 0.6
------- -------- -------- -------
Earnings (loss) from
operations -
Non-GAAP $ 6.0 $ (2.3) $ 3.7 $ 11.1
------- -------- -------- -------
Net earnings (loss)
- GAAP $ (2.7) $ 34.7
Transaction,
restructuring,
integration,
stock-based
compensation and
acquisition
amortization costs,
net of tax 4.2 1.4
Unrealized foreign
exchange (gain) loss 0.8 (18.4)
Interest expense 0.1 -
Tax impact related to
change in tax asset 0.5 (6.5)
Non-controlling interest (0.2) -
-------- -------
Net earnings - Non-GAAP $ 2.7 $ 11.2
-------- -------
Diluted earnings (loss)
per share - GAAP $(0.09) $ 1.12
Diluted earnings per share - Non-GAAP $ 0.09 $ 0.36
On a non-GAAP basis, results for the fourth quarter of 2009, relative to
guidance provided on October 28, 2009 are as follows:
Fourth quarter revenue for 2009 of $144.0 million was better than
guidance of $143.0 million. Our earnings from operations were $3.7
million, lower than guidance of earnings from operations of $6.0
million. The shortfall in expected earnings from operations is the
result of slightly lower gross margin driven by product mix shifts,
some programmed cost reductions taking more time to realize than
originally expected and selective investments in compelling growth
areas. Net earnings of $2.7 million, or diluted earnings per share of
$0.09, were lower than our guidance of a net earnings of $5.2 million,
or earnings per share of $0.17.
On a non-GAAP basis, results for the fourth quarter of 2009, compared to
the fourth quarter of 2008 are as follows:
Fourth quarter revenue increased to $144.0 million in 2009, compared to
$132.9 million for the same period in 2008. Gross margin for the fourth
quarter of 2009 was 33.0% of revenue, compared to 27.5% for the same
period in 2008. Operating expenses were $43.8 million and earnings from
operations were $3.7 million in the fourth quarter of 2009, compared to
$25.5 million and $11.1 million, respectively, in the same period of
2008. Net earnings for the fourth quarter of 2009 were $2.7 million, or
diluted earnings per share of $0.09, compared to net earnings of $11.2
million, or diluted earnings per share of $0.36, in the same period of
2008.
On a non-GAAP basis, results for the fourth quarter of 2009, compared to
the third quarter of 2009 are as follows:
Revenue for the fourth quarter of 2009 increased to $144.0 million,
compared to $135.7 million in the third quarter of 2009. Gross margin
was 33.0% of revenue in the fourth quarter of 2009, compared to 34.9%
of revenue in the third quarter of 2009. Operating expenses were $43.8
million and earnings from operations were $3.7 million in the fourth
quarter of 2009, compared to $42.3 million and $5.1 million,
respectively, in the third quarter of 2009. Net earnings for the fourth
quarter of 2009 were $2.7 million, or diluted earnings per share of
$0.09, compared to $5.9 million, or diluted earnings per share of $0.19
in the third quarter of 2009.
Our balance sheet remains strong, with $134.4 million of cash, cash
equivalents and short-term investments at December 31, 2009. In the fourth
quarter of 2009, we generated $3.7 million of cash from operations on a GAAP
basis.
Fourth Quarter and Recent Highlights Included:
- On January 6, 2010, Sprint launched the Overdrive(TM) by Sierra
Wireless, the world's first 3G/4G Mobile Hotspot. Overdrive allows
multiple Wi-Fi enabled devices to be connected simultaneously through
a single connection to Sprint's high speed 3G and 4G networks.
- AT&T launched the USBConnect Lightning, a new HSPA AirCard from Sierra
Wireless. Lightning is now available in AT&T retail, business and
online channels across the US.
- We introduced the MC8795V embedded module, a high performance HSPA
device for OEMs. This latest addition to the AirPrime embedded module
family supports 7.2 Mbps downlink speeds, quad-band operation, and
antenna diversity.
- Telefonica launched our new AirCard(R) USB 307 - the first HSPA+
device available in Spain, supporting download speeds of up to 21
Mbps.
- We launched a world-first embedded SIM solution based on our inSIM
technology with Vodacom and Tracker in South Africa. Vodacom and
Tracker intend to target vehicle tracking opportunities with the
solution.
- We launched a major new release of M2M Studio, our fully integrated
environment for the development of embedded M2M software, enabling
developers to easily create, compile, download, debug and test their
M2M applications.
- We announced a collaboration with Atos Worldline who intends to
leverage our AirVantage services platform for the development and
deployment of large scale M2M solutions in Europe.
- We announced a collaboration with MobiPower to develop asset
protection solutions based on the Sierra Wireless AirPrime WMP100
Wireless Microprocessor(R) and Open AT(R) application environment.
Financial Guidance
The following guidance for the first quarter of 2010 reflects our current business indicators and expectations. This guidance is presented on a non-GAAP basis, which excludes Wavecom transaction and integration costs, restructuring costs, stock-based compensation expense, acquisition amortization, foreign exchange on amounts related to the Wavecom acquisition and non-controlling interest related to non-GAAP adjustments.
Our guidance for the first quarter of 2010 reflects the uncertain macro economic environment and expected component supply constraints on certain products. Our guidance also includes some revenue contribution from recent and 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.
Consolidated
Q1 2010 Guidance Non-GAAP
---------------- ------------
Revenue $150.0 million
Earnings from operations $3.5 million
Net earnings $3.3 million
Diluted earnings per share $0.11/share
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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 first 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
About Sierra Wireless
Sierra Wireless (NASDAQ: SWIR -TSX: SW) products connect people and machines to wireless networks around the world. We offer an advanced, comprehensive product line, addressing consumer, enterprise, original equipment manufacturer and specialized vertical industry markets. We also offer a wide range of professional and operated services. Our solutions are used for mobile computing, transportation, industrial M2M (machine-to-machine), enterprise, residential and consumer communications applications. 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 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 Year ended
------------------ ----------
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Revenue...................... $ 143,952 $ 132,867 $ 526,384 $ 567,308
Cost of goods sold........... 96,576 96,482 353,931 410,611
---------- ---------- ---------- ----------
Gross margin................. 47,376 36,385 172,453 156,697
---------- ---------- ---------- ----------
Expenses:
Sales and marketing........ 14,551 8,204 52,804 32,684
Research and development... 20,179 13,166 80,821 54,060
Administration............. 8,617 4,871 32,990 20,567
Acquisition costs.......... 95 - 7,785 -
Restructuring.............. 4,678 - 20,605 -
Integration................ 1,337 - 3,859 -
Amortization............... (997) 1,186 11,313 4,814
---------- ---------- ---------- ----------
48,460 27,427 210,177 112,125
---------- ---------- ---------- ----------
Earnings (loss) from
operations.................. (1,084) 8,958 (37,724) 44,572
Foreign exchange gain
(loss)...................... (1,754) 20,800 1,261 20,583
Other income (expense)....... (279) 1,112 (4,399) 5,579
---------- ---------- ---------- ----------
Earnings (loss) before
income taxes................ (3,117) 30,870 (40,862) 70,734
Income tax expense
(recovery).................. 12 (3,809) 340 8,151
---------- ---------- ---------- ----------
Net earnings (loss).......... (3,129) 34,679 (41,202) 62,583
Net loss attributable to the
non-controlling interest.... (394) - (1,303) -
---------- ---------- ---------- ----------
Net earnings (loss)
attributable to Sierra
Wireless, Inc............... (2,735) 34,679 (39,899) 62,583
Retained earnings (deficit),
beginning of period......... (15,891) (13,406) 21,273 (40,602)
Excess of purchase price over
assigned value of common
shares acquired............. - - - (708)
---------- ---------- ---------- ----------
Retained earnings (deficit),
end of period............... $ (18,626) $ 21,273 $ (18,626) $ 21,273
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings (loss) per share:
Basic...................... $ (0.09) $ 1.12 $ (1.29) $ 2.00
Diluted.................... $ (0.09) $ 1.12 $ (1.29) $ 2.00
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
shares (in thousands):
Basic...................... 31,042 31,032 31,035 31,254
Diluted.................... 31,042 31,032 31,035 31,323
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SIERRA WIRELESS, INC.
Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars)
(Prepared in accordance with U.S. GAAP)
December 31, December 31,
------------ ------------
2009 2008
---- ----
Assets
Current assets:
Cash and cash equivalents..................... $ 107,491 $ 63,258
Restricted cash............................... - 191,473
Short-term investments........................ 26,898 18,003
Accounts receivable........................... 86,466 67,058
Inventories................................... 24,708 33,031
Deferred income taxes......................... 6,168 5,565
Prepaid expenses and other.................... 14,039 6,233
---------- ----------
265,770 384,621
Fixed assets.................................... 27,956 22,935
Intangible assets............................... 86,674 15,291
Goodwill........................................ 95,064 33,013
Deferred income taxes........................... 1,794 2,296
Other assets.................................... 7,261 4,230
---------- ----------
$ 484,519 $ 462,386
---------- ----------
---------- ----------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable.............................. $ 71,035 $ 38,631
Accrued liabilities........................... 54,419 47,568
Deferred revenue and credits.................. 750 683
Current portion of long-term obligations...... 3,371 193
Current portion of obligations under capital
leases....................................... 293 -
---------- ----------
129,868 87,075
Long-term liabilities........................... 3,197 316
Obligations under capital leases................ 245 -
Other long-term liabilities..................... 32,663 14,789
Deferred income taxes........................... 1,950 2,758
Shareholders' equity:
Share capital................................. 326,043 325,893
Treasury shares, at cost...................... (6,442) (1,487)
Additional paid-in capital.................... 13,133 12,518
Retained earnings (deficit)................... (18,626) 21,273
Accumulated other comprehensive loss.......... (37) (749)
---------- ----------
314,071 357,448
Non-controlling interest in Wavecom S.A....... 2,525 -
---------- ----------
Total shareholders' equity.................... 316,596 357,448
---------- ----------
$ 484,519 $ 462,386
---------- ----------
---------- ----------
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 Year ended
------------------ ----------
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Cash flows from operating
activities:
Net earnings (loss)........ $ (3,129) $ 34,679 $ (41,202) $ 62,583
Adjustments to reconcile
net earnings (loss) to
net cash provided by
operating activities
Amortization............. 2,159 4,434 32,704 16,309
Stock-based
compensation............ 1,670 1,468 8,097 6,381
Non-cash restructuring
and other............... 1,748 - 5,911 -
Deferred income taxes.... 282 (4,944) 282 (3,842)
Loss on disposal......... 211 304 204 377
Unrealized foreign
exchange loss (gain)
on restricted cash...... - (18,416) 15,653 (18,416)
Unrealized foreign
exchange loss on term
loan.................... - - 1,215 -
Tax benefit related to
stock option deduction.. - 57 - 57
Gain on sale of
investments............. - (565) - (565)
Changes in operating
assets and liabilities
Accounts receivable...... (1,686) 21,840 20,175 14,759
Inventories.............. (1,472) 252 15,676 (8,043)
Prepaid expenses and
other assets............ 2,878 (4,675) 3,888 248
Accounts payable......... 5,935 (817) (1,301) 7,468
Accrued liabilities...... (4,587) (1,471) (12,793) 8,668
Deferred revenue and
credits................. (353) 140 (810) 149
---------- ---------- ---------- ----------
Net cash provided by
operating activities...... 3,656 32,286 47,699 86,133
Cash flows from investing
activities:
Business acquisition,
net of cash acquired
of $139,785............. - - (26,493) (35)
Acquisition of OCEANE
convertible bonds....... - - (104,767) -
Decrease (increase) in
restricted cash......... - (173,057) 175,820 (173,057)
Proceeds on disposal..... 32 - 155 2
Purchase of fixed
assets.................. (5,024) (4,663) (13,296) (19,653)
Increase in intangible
assets.................. (1,468) (447) (6,543) (3,025)
Purchase of long-term
investments............. - (14,962) - (20,131)
Proceeds on sale of
long-term investments... - 39,797 - 39,797
Purchase of short-term
investments............. (20,888) (94,595) (68,333) (237,366)
Proceeds on maturity of
short-term investments.. 19,300 159,641 59,560 313,775
---------- ---------- ---------- ----------
Net cash provided by
(used in) investing
activities.............. (8,048) (88,286) 16,103 (99,693)
Cash flows from financing
activities:
Proceeds on issuance of
term loan............... - - 102,716 -
Repayment of term loan... - - (103,931) -
Financing costs.......... (57) - (3,971) -
Issuance of common shares,
net of share issue
costs................... 91 - 96 1,023
Purchase of treasury
shares for RSU
distribution............ - - (6,417) (2,498)
Repurchase of common
shares.................. - - - (4,982)
Proceeds on exercise of
Wavecom options......... - - 4,148 -
Decrease in long-term
liabilities............. (1,338) (127) (2,238) (349)
---------- ---------- ---------- ----------
Net cash used in financing
activities................ (1,304) (127) (9,597) (6,806)
Effect of foreign exchange
on cash and cash
equivalents................. 2,602 - (9,972) -
---------- ---------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents... (3,094) (56,127) 44,233 (20,366)
Cash and cash equivalents,
beginning of period......... 110,585 119,385 63,258 83,624
---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period............... $ 107,491 $ 63,258 $ 107,491 $ 63,258
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
%SEDAR: 00011917E
For further information: Sierra Wireless, Inc., David G. McLennan, Chief Financial Officer, (604) 231-1181, Website: www.sierrawireless.com, Email: [email protected]
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