Sierra Wireless Reports Third Quarter 2009 Results
TSX: SW NASDAQ: SWIR
Our results are reported in U.S. dollars and are prepared in accordance with
"In the third quarter of 2009, solid revenue, strong gross margin and significant cost reductions drove better than expected non-GAAP earnings from operations. We also continued to deliver strong cash flow from operations and added to our cash position." said
As we look forward, we are focused on continued strong business execution in a challenging environment and completing our successful integration with Wavecom. We believe that our demand outlook has improved, although short term growth is likely to be tempered by constraints in the flash memory supply chain. We remain confident that as the business environment strengthens, we are well positioned with a broad and diversified product line, a long list of blue chip customers and partners, a strong global presence, a strong balance sheet and an excellent team."
Q3 2009 Financial Results - GAAP
Our revenue for the third quarter of 2009 was
Q3 2009 Financial Results - Non-GAAP
Our non-GAAP results exclude transaction costs related to Wavecom, restructuring costs, integration costs, stock based compensation expense, acquisition related amortization, and foreign exchange gains and losses related to the Wavecom acquisition. Adjusting for these amounts, our non-GAAP results for Q3 2009 are as follows:
Q3 2009 Q3 2008
-------------------------------- ---------
(in millions of Sierra Wavecom Consolidated Consolidated
U.S. dollars) Non-GAAP Non-GAAP Non-GAAP Non-GAAP
-------- -------- -------- --------
Revenue - GAAP and
Non-GAAP $ 102.6 $ 33.1 $ 135.7 $ 136.8
Gross margin - GAAP $ 33.0 $ 14.2 $ 47.2 $ 37.8
Stock-based compensation 0.1 - 0.1 0.1
-------- -------- -------- --------
Gross margin - Non-GAAP $ 34.6 $ 14.2 $ 47.3 $ 37.9
Earnings (loss) from
operations - GAAP $ 6.0 $ (16.2) $ (10.2) $ 9.8
Transaction costs 0.4 - 0.4 -
Restructuring costs - 5.3 5.3 -
Integration costs 0.8 0.5 1.3 -
Stock-based
compensation 1.6 0.1 1.7 1.6
Acquisition related
amortization 0.6 5.9 6.5 0.7
-------- -------- -------- --------
Earnings from operations
- Non-GAAP $ 9.5 $ (4.4) $ 5.1 $ 12.1
-------- -------- -------- --------
Net earnings (loss) -
GAAP $ (7.6) $ 7.3
Transaction,
restructuring,
integration, stock-
based compensation and
acquisition amortization
costs, net of tax 15.0 1.6
Unrealized foreign exchange gain (1.5) -
Non-controlling interest - -
-------- --------
Net earnings - Non-GAAP $ 5.9 $ 8.9
-------- --------
Diluted earnings (loss) per share - GAAP $ (0.25) $ 0.23
Diluted earnings per share - Non-GAAP $ 0.19 $ 0.28
On a non-GAAP basis, results for the third quarter of 2009, relative
to guidance provided on July 30, 2009 are as follows:
Third quarter revenue for 2009 of $135.7 million was consistent
with our guidance of $135.0 million. Our earnings from operations
were $5.1 million, better than our guidance of earnings from
operations of $2.0 million. Our net earnings of $5.9 million, or
diluted earnings per share of $0.19, were better than our guidance
of a net earnings of $2.0 million, or earnings per share of $0.06.
On a non-GAAP basis, results for the third quarter of 2009, compared
to the third quarter of 2008 are as follows:
Third quarter revenue decreased slightly to $135.7 million in
2009, compared to $136.8 million for the same period in 2008.
Gross margin for the third quarter of 2009 was 34.9% of revenue,
compared to 27.7% for the same period in 2008. Operating expenses
were $42.3 million and earnings from operations were $5.1 million
in the third quarter of 2009, compared to $25.7 million and
$12.2 million, respectively, in the same period of 2008. Net
earnings for the third quarter of 2009 were $5.9 million, or
diluted earnings per share of $0.19, compared to net earnings of
$8.9 million, or diluted earnings per share of $0.28, in the same
period of 2008. Our weighted average shares outstanding used in
calculating earnings per share decreased to 31.1 million in the
third quarter of 2009 from 31.3 million in the prior year because
we repurchased shares under our normal course issuer bid.
On a non-GAAP basis, results for the third quarter of 2009, compared
to the second quarter of 2009 are as follows:
Revenue for the third quarter of 2009 increased slightly to
$135.7 million, compared to $135.3 million in the second quarter
of 2009. Gross margin was 34.9% of revenue in the third quarter of
2009 as well as the second quarter of 2009. Operating expenses
were $42.3 million and earnings from operations were $5.1 million
in the third quarter of 2009, compared to $44.5 million and
$2.8 million, respectively, in the second quarter of 2009. Net
earnings for the third quarter of 2009 were $5.9 million, or
diluted earnings per share of $0.19, compared to $1.5 million, or
diluted earnings per share of $0.05 in the second quarter of 2009.
Our balance sheet remains strong, with
Third Quarter and Recent Highlights Included:
- We implemented the restructuring and integration of
Anyware Technologies, the Toulouse-based company that was a
subsidiary of Wavecom, SA. As a result of the restructuring,
Anyware's open source consulting business has been spun off and is
now an independent entity, separate from Sierra Wireless. The
remaining team has been fully integrated into Sierra Wireless as the
Solutions and Services business unit. This group is now dedicated to
creating and providing end to end solutions and portal services for
the M2M market. These solutions and services are sold to Operators,
OEMs and system integrators on a software-as-a-service ("SaaS") basis
around the world. The restructuring and integration of Anyware has
enabled us to reduce our fixed cost structure, while sharpening our
focus on end to end solutions for the machine-to-machine ("M2M")
market.
- PSA Peugeot Citroën Group, a global leader in advanced automotive
technology, executed an agreement with our Solutions and Services
business unit to use our device management services for remote device
monitoring and delivery of software upgrades for cars equipped with
Sierra Wireless embedded automotive solutions.
- Orbcomm, a global satellite data communications company, selected our
M2M services platform to enable their customers to manage subscribers
on both celestial and terrestrial networks, as well as for
comprehensive device management. The solution is expected to improve
the control and monitoring of remote devices, help customers manage
wireless service costs and enable simplified billing across multiple
networks.
- We launched ACEnet services, a web based device management platform
tailored for our AirLink intelligent gateway products. Using a SaaS
model, ACEnet Services offers customers a secure hosted platform for
configuring, controlling and managing their entire deployment of
AirLink intelligent gateway devices using a standard web browser. In
the coming months, ACEnet Services will be fully integrated with our
M2M Services platform.
- NetComm further strengthened its 3G offerings under an agreement to
distribute our AirLink range of intelligent gateways in Australia and
New Zealand. This agreement expands our collaborative relationship
with NetComm, which has successfully integrated our embedded modules
into their wireless routers for enterprise, SOHO, and consumer
markets since 2007.
- We signed a Memorandum of Understanding ("MOU") with T-Mobile that is
expected to lead to collaborative market activities and joint
solution offerings for the M2M market. The areas of co-operation
contemplated under the MOU include product development, marketing,
sales and deployment of M2M solutions and related services. The
co-operation targets the European market, with initial focus on
Germany.
- We announced that two of our OEM partners, Outpost Central and
Radiocrafts AS, have introduced smart metering solutions based on our
Fastrack Supreme platform. These two partners highlight our continued
commitment to supporting solutions for the energy management market.
- We announced the addition of five new products to our AirCard(R) line
of data cards and USB modems for mobile broadband networks worldwide.
The AirCard 503, a convertible 2-in-1 card, and our AirCard
USB 308/309 modems are our second generation products for the
emerging HSPA+ technology standard, offering download speeds of up to
21 megabits per second (Mbps). Our AirCard USB 301/302 modems for
HSPA networks incorporate a new design and streamlined feature set
for the value-driven consumer market.
- Following significant development and extensive Microsoft
certification testing, several of our products have been designated
as "Compatible with Windows 7". These products, the AirCard 402,
Compass 885, USB 598 and MC 5728V embedded module, work seamlessly
with the Windows 7 mobile broadband connection manager, streamlining
installation and use of the devices. Microsoft certification testing
of other devices in our product portfolio is currently underway.
Financial Guidance
The following guidance for the fourth quarter of 2009 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 and foreign exchange on amounts related to the Wavecom acquisition.
Our guidance for the fourth quarter of 2009 reflects the uncertain macro economic environment and expected component supply constraints on certain products. Our guidance also includes some 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.
Sierra Wavecom Consolidated
------ ------- ------------
Q4 2009 Guidance Non-GAAP Non-GAAP Non-GAAP
---------------- -------- -------- --------
Revenue $107.0 million $36.0 million $143.0 million
Earnings (loss) from
operations $9.0 million $(3.0) million $6.0 million
Net earnings $5.2 million
Earnings per share $0.17/share
Conference Call, Webcast and Instant Replay
We will host a conference call to review our results on
Telephone participation:
Please dial the following number:
1-888-231-8191 Passcode: Not required
or
1-647-427-7450 Passcode: Not required
Webcast:
We will also broadcast our conference call over the Internet. To
access the web broadcast, click on this URL or enter: http://w.on24.com/r.htm?e=169699&s=1&k=E0919F8A31A34E50D55156FC356008EB.
This webcast event will be optimized for Microsoft Windows Media
Player version 9. To download go to:
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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: 1-800-695-1018 or 1-402-220-1753
Passcode: 25484347 followed by 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 fourth quarter of 2009, 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 Nine months ended
------------------ -----------------
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Revenue...................... $ 135,677 $ 136,794 $ 382,432 $ 434,441
Cost of goods sold........... 88,436 99,025 257,355 314,129
---------- ---------- ---------- ----------
Gross margin................. 47,241 37,769 125,077 120,312
---------- ---------- ---------- ----------
Expenses:
Sales and marketing........ 14,244 8,717 38,253 24,480
Research and development... 22,705 13,062 60,642 40,894
Administration............. 8,530 5,011 24,373 15,696
Acquisition costs.......... 364 - 7,690 -
Restructuring.............. 5,332 - 15,927 -
Integration................ 1,332 - 2,522 -
Amortization............... 4,889 1,135 12,310 3,628
---------- ---------- ---------- ----------
57,396 27,925 161,717 84,698
---------- ---------- ---------- ----------
Earnings (loss) from
operations.................. (10,155) 9,844 (36,640) 35,614
Foreign exchange gain
(loss)...................... 1,981 (787) 3,015 (217)
Other income (expense)....... (88) 1,309 (4,120) 4,467
---------- ---------- ---------- ----------
Earnings (loss) before income
taxes....................... (8,262) 10,366 (37,745) 39,864
Income tax expense
(recovery).................. (634) 3,110 328 11,960
---------- ---------- ---------- ----------
Net earnings (loss).......... (7,628) 7,256 (38,073) 27,904
Net loss attributable to the
non-controlling interest.... - - (909) -
---------- ---------- ---------- ----------
Net earnings (loss)
attributable to Sierra
Wireless, Inc............... (7,628) 7,256 (37,164) 27,904
Retained earnings (deficit),
beginning of period......... (8,263) (19,954) 21,273 (40,602)
Excess of purchase price over
assigned value of common
shares acquired............. - (708) - (708)
---------- ---------- ---------- ----------
Deficit, end of period....... $ (15,891) $ (13,406) $ (15,891) $ (13,406)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings (loss) per share:
Basic...................... $ (0.25) $ 0.23 $ (1.20) $ 0.89
Diluted.................... $ (0.25) $ 0.23 $ (1.20) $ 0.89
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
shares (in thousands):
Basic...................... 31,032 31,273 31,032 31,328
Diluted.................... 31,032 31,324 31,032 31,421
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SIERRA WIRELESS, INC.
Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars)
(Prepared in accordance with U.S. GAAP)
September December
--------- --------
30, 2009 31, 2008
-------- --------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents........................ $ 110,585 $ 63,258
Restricted cash.................................. - 191,473
Short-term investments........................... 25,304 18,003
Accounts receivable.............................. 85,278 67,058
Inventories...................................... 23,425 33,031
Deferred income taxes............................ 5,293 5,565
Prepaid expenses................................. 15,579 6,233
---------- ----------
265,464 384,621
Fixed assets....................................... 27,772 22,935
Intangible assets.................................. 76,671 15,291
Goodwill........................................... 106,871 33,013
Deferred income taxes.............................. 1,963 2,296
Other.............................................. 8,794 4,230
---------- ----------
$ 487,535 $ 462,386
---------- ----------
---------- ----------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable................................. $ 65,987 $ 38,631
Accrued liabilities.............................. 55,294 47,568
Deferred revenue and credits..................... 1,123 683
Current portion of long-term obligations......... 3,082 193
Current portion of obligations under capital
leases.......................................... 354 -
---------- ----------
125,840 87,075
Long-term obligations.............................. 2,477 316
Obligations under capital leases................... 301 -
Other long-term liabilities........................ 34,687 14,789
Deferred income taxes.............................. 2,152 2,758
Shareholders' equity:
Share capital.................................... 325,901 325,893
Treasury shares, at cost......................... (6,442) (1,487)
Additional paid-in capital....................... 15,185 12,518
Retained earnings (deficit)...................... (15,891) 21,273
Accumulated other comprehensive earnings (loss).. 3,325 (749)
---------- ----------
322,078 357,448
---------- ----------
$ 487,535 $ 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 Nine months ended
------------------ -----------------
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Cash flows from operating
activities:
Net earnings (loss)........ $ (7,628) $ 7,256 $ (38,073) $ 27,904
Adjustments to reconcile
net earnings (loss) to net
cash provided by operating
activities
Amortization............. 12,179 4,076 30,545 11,875
Stock-based
compensation............ 1,693 1,618 6,427 4,913
Non-cash restructuring
and other............... 4,163 - 4,163 -
Deferred income taxes.... - 1,272 - 1,102
Loss (gain) on disposal.. 42 - (7) 73
Unrealized foreign
exchange loss on
restricted cash......... - - 15,653 -
Unrealized foreign exchange
loss on term loan....... - - 1,215 -
Changes in operating assets
and liabilities
Accounts receivable...... (12,314) 9,230 21,861 (7,081)
Inventories.............. 4,344 (6,371) 17,148 (8,295)
Prepaid expenses and other
assets.................. 1,027 1,956 1,010 4,923
Accounts payable......... 10,281 2,750 (7,236) 8,285
Accrued liabilities...... 1,896 785 (8,206) 10,139
Deferred revenue and
credits................. (548) 180 (457) 9
---------- ---------- ---------- ----------
Net cash provided by
operating activities...... 15,135 22,752 44,043 53,847
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 in restricted
cash.................... - - 175,820 -
Proceeds on disposal..... 23 - 119 2
Purchase of fixed
assets.................. (1,449) (4,971) (8,268) (14,990)
Increase in intangible...
assets.................. (3,595) (1,694) (5,075) (2,578)
Purchase of long-term
investments............. - (5,169) - (5,169)
Purchase of short-term
investments............. (22,998) (67,175) (47,445) (142,771)
Proceeds on maturity of
short-term
investments............. 16,200 38,214 40,260 154,134
---------- ---------- ---------- ----------
Net cash provided by (used
in) investing
activities................ (11,819) (40,795) 24,151 (11,407)
Cash flows from financing
activities:
Proceeds on issuance of
term loan............... - - 102,716 -
Repayment of term loan... - - (103,931) -
Financing costs.......... - - (3,914) -
Issuance of common shares,
net of share issue costs 5 339 5 1,023
Purchase of treasury
shares for RSU
distribution............ (3,899) (1,487) (6,417) (2,498)
Repurchase of common
shares.................. - (4,982) - (4,982)
Proceeds on exercise of
Wavecom options......... - - 4,148 -
Repayment of long-term
liabilities (334) (83) (900) (222)
---------- ---------- ---------- ----------
Net cash used in financing
activities................ (4,228) (6,213) (8,293) (6,679)
Effect of foreign exchange
changes on cash and cash
equivalents................. (1,486) - (12,574) -
---------- ---------- ---------- ----------
Net increase (decrease) in
cash and cash
equivalents................. (2,398) (24,256) 47,327 35,761
Cash and cash equivalents,
beginning of period......... 112,983 143,641 63,258 83,624
---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period............... $ 110,585 $ 119,385 $ 110,585 $ 119,385
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
%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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