Sierra Wireless Reports Second Quarter 2011 Results

Aug 04, 2011, 16:44 ET from Sierra Wireless, Inc.

TSX:   SW
NASDAQ:   SWIR

  • Revenue in the second quarter 2011 of $139.9 million, in-line with guidance
  • Non-GAAP loss from operations of $0.8 million and diluted loss per share of $0.03
  • Core M2M revenue up 14% year-over-year
  • Mobile Computing business launching new 4G LTE AirCard® products in Q3
  • Company expects significant sequential revenue growth in the second half

VANCOUVER, Aug. 4, 2011 /PRNewswire/ - Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX:  SW) today reported second quarter 2011 results. All results are reported in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles ("GAAP"), except as otherwise indicated below.

Revenue for the second quarter of 2011 was $139.9 million, a decrease of 12% compared to $159.1 million in the second quarter of 2010, and a decrease of 3% compared to $144.3 million in the first quarter of 2011. The year-over-year revenue decrease was principally driven by the loss of revenue from Barnes & Noble and Clearwire, which together accounted for nearly $25 million in revenue in the second quarter of 2010.   Mobile Computing revenue was $66.0 million, down 13% compared to $75.5 million in the second quarter of 2010.  Machine-to-Machine ("M2M") revenue was $73.9 million, down 12% compared to $83.6 million in the second quarter of 2010.  Excluding sales to Barnes & Noble, the company's core M2M business increased 14% in the second quarter of 2011 on a year-over-year basis. 

"Notwithstanding a slower than expected start to 2011, Sierra Wireless remains well positioned in our two target markets.  In Mobile Computing, we are launching several new 4G LTE products with key operators and PC OEMs.  In M2M, we continue to build on our global leadership position and successfully drive value chain expansion," said Jason Cohenour, President and Chief Executive Officer.  "Our growth drivers remain intact and despite some product launch delays, we expect significant sequential revenue and earnings growth in the second half of 2011."

On a GAAP basis, gross margin was $39.1 million, or 28.0% of revenue, in the second quarter of 2011 compared to $46.2 million, or 29.0% of revenue, in the second quarter of 2010.  Operating expenses were $45.4 million and loss from operations was $6.3 million in the second quarter of 2011, compared to operating expenses of $49.7 million and a loss from operations of $3.5 million in the second quarter of 2010.  Net loss was $6.8 million, or $0.22 per diluted share, in the second quarter of 2011, compared to a net loss of $8.6 million, or $0.28 per diluted share, in the second quarter of 2010.

On a non-GAAP basis, gross margin was 28.0% in the second quarter of 2011, compared to 29.1% in the second quarter of 2010. Operating expenses were $40.0 million and loss from operations was $0.8 million in the second quarter of 2011, compared to operating expenses of $41.7 million and earnings from operations of $4.7 million in the second quarter of 2010.  Net loss was $1.0 million, or $0.03 per diluted share, in the second quarter of 2011 compared to net earnings of $4.4 million, or $0.14 per diluted share, in the second quarter of 2010.

Non-GAAP results exclude the impact of stock-based compensation expense, acquisition amortization, integration costs, restructuring costs, foreign exchange gains or losses on translation of balance sheet accounts, and certain tax adjustments.  We disclose non-GAAP amounts as we believe that these measures provide our shareholders with better information on actual operating results and assist in comparisons from one period to another.  The reconciliation between our GAAP and non-GAAP results of operations is provided in the accompanying schedules.

Financial Guidance

The following guidance for the third quarter of 2011 reflects current business indicators and expectations. In the third quarter of 2011, we expect revenue to improve significantly relative to the second quarter, driven by the launch of new 4G AirCard products, as well as continued steady year-over-year growth in our core M2M product lines.

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. 

                  Q3 2011 Guidance                               Consolidated Non-GAAP
                                                     
                    Revenue Earnings from operations Net earnings Earnings per share                               $150 to 155 million $1.0 to $2.0 million $0.8 to $1.6 million $0.03 to $0.05 per share

Conference Call, Webcast and Instant Replay Details

We will host a conference call to review our results on Thursday, August  4, 2011 at 3:00 p.m. PDT, 6:00 p.m. EDT. You can participate in the conference call either via telephone or webcast. To participate in this conference call, please dial the following number approximately ten minutes prior to the commencement of the call.

Telephone participation:

          Toll free (Canada and U.S.):  or Outside Canada and the U.S.:       1-888-231-8191 1-647-427-7450       Passcode:  Not required Passcode:  Not required

Webcast:

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

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

http://event.on24.com/r.htm?e=320350&s=1&k=27E9B717B77398D8964785B3B2661291

Should you be unable to participate, Instant Replay (audio) will be available following the conference call for 7 business days. The webcast will be available at the above link for 90 days following the call.

Audio only dial: 1-800-642-1687 or 1-416-849-0833 Passcode:  73603290 #

We look forward to having you participate in our call.

Cautionary Note Regarding Forward-Looking Statements

Certain statements and information in this press release are not based on historical facts and constitute forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities laws ("forward-looking statements") including statements and information relating to our financial guidance for the second quarter of 2011 and our fiscal year 2011, our business outlook for the short and longer term and our strategy, plans and future operating performance.  Forward-looking statements are provided to help you understand our views of our short and longer term prospects. We caution you that forward-looking statements may not be appropriate for other purposes. We will not update or revise our forward-looking statements unless we are required to do so by securities laws.

Forward-looking statements:

  • Typically include words and phrases about the future such as  "outlook",  "may", "estimates", "intends", "believes", "plans", "anticipates" and "expects"
  • Are not promises or guarantees of future performance. They represent our current views and may change significantly;
  • Are based on a number of material assumptions, including those listed below, which could prove to be significantly incorrect:
    • Our ability to develop, manufacture and sell new products and services that meet the needs of our customers and gain commercial acceptance;
    • Our ability to continue to sell our products and services in the expected quantities at the expected prices and expected times;
    • Expected transition period to our 4G products;
    • Expected cost of goods sold;
    • Expected component supply constraints;
    • Our ability to "win" new business;
    • That wireless network operators will deploy next generation networks when expected;
    • Our operations are not adversely disrupted by component shortages or other development, operating or regulatory risks; and
    • Expected tax rates and foreign exchange rates.
  • Are subject to substantial known and unknown material risks and uncertainties.  Many factors could cause our actual results, achievements and developments in our business to differ significantly from those expressed or implied by our forward-looking statements, including without limitation, the following factors, most of which are discussed in greater detail.  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. 
    • Actual sales volumes or prices for our products and services may be lower than we expect for any reason including, without limitation, the continuing uncertain economic conditions, price and product competition, different product mix, the loss of any of our significant customers, competition from new or established wireless communication companies;
    • The cost of products sold may be  higher than planned or necessary component supplies may not be available, are delayed or are not available on commercially reasonable terms;
    • We may be unable to enforce our intellectual property rights or may be subject to litigation that has an adverse outcome;
    • The development and timing of the introduction of our new products may be later than we expect or may be indefinitely delayed.
    • Transition periods associated with the migration to new technologies may be longer than we expect.

About Sierra Wireless

Sierra Wireless (NASDAQ: SWIR) (TSX: SW) offers industry-leading mobile computing and machine-to-machine (M2M) communications products and solutions that connect people, devices, and applications over cellular networks. Wireless service providers, equipment manufacturers, enterprises and government organizations around the world depend on us for reliable wireless technology. We offer 2G, 3G and 4G wireless modems, routers and gateways as well as a comprehensive suite of software, tools, and services that ensure our customers can successfully bring wireless applications to market.  For more information about Sierra Wireless, visit www.sierrawireless.com

"AirCard" is a registered trademark of Sierra Wireless. "AirPrime," "AirLink," and "AirVantage" are also trademarks 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

(in thousands of U.S. dollars, except where otherwise stated)

(unaudited)

                 
        Three months ended June 30   Six months ended June 30
        2011 2010   2011 2010
Revenue             $ 139,888       $ 159,116         $ 284,163       $ 310,433
Cost of goods sold       100,788 112,906   205,599 217,889
Gross margin       39,100 46,210   78,564 92,544
Expenses                
      Sales and marketing       Research and development       Administration       Restructuring       Integration       Amortization       11,326 22,025 8,810 (350) 765 2,794 13,183 21,534 8,835 1,581 1,631 2,919             23,594 45,537 18,195 (25) 1,305 5,642 27,339 42,075 18,419 3,192 3,477 6,025
        45,370 49,683   94,248 100,527
Loss from operations Foreign exchange gain (loss) Other expense, net       (6,270) (221) (13) (3,473) (5,460) (103)       (15,684) 201 (53) (7,983) (9,118) (233)
Loss before income taxes Income tax expense (recovery)       (6,504) 275 (9,036) (399)     (15,536) (924) (17,334) (1,088)
Net loss Net loss attributable to non-controlling interest (6,779) (13) (8,637) (82)     (14,612) (57) (16,246) (170)
Net loss attributable to the Company             $ (6,766)       $ (8,555)         $ (14,555)       $ (16,076)
Basic and diluted net loss per share attributable to the    Company's common shareholders (in dollars)             $ (0.22)       $ (0.28)         $ (0.47)       $ (0.52)
Weighted average number of Company common shares   outstanding (in thousands)       31,267 31,054   31,252 31,053
             

SIERRA WIRELESS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. dollars)

(unaudited)

             
          June 30, 2011     December 31, 2010
Assets Current assets       Cash and cash equivalents       Short-term investments       Accounts receivable, net of allowance for doubtful accounts        of $4,020 (2010 - $4,606)       Inventories       Deferred income taxes       Prepaid expenses and other               $ 101,685 17,470 97,029 41,984 11,805 23,541                       $ 85,443 26,405 117,397 22,134 9,577 24,542
        293,514   285,498
Property, plant and equipment Intangible assets Goodwill Deferred income taxes Other assets       23,289 66,096 93,137 433 675           22,635 69,024 90,953 836 622
              $ 477,144         $ 469,568
Liabilities Current liabilities       Accounts payable and accrued liabilities       Deferred revenue and credits       Current portion of obligations under capital leases               $ 150,045 932 290                 $ 138,940 987 324
  Long-term obligations Obligations under capital leases Deferred income taxes 151,267 27,742 343 740         140,251 24,724 263 1,143
        180,092   166,381
Equity Shareholders' equity       Common stock: no par value; unlimited shares authorized; issued        and outstanding: 31,294,724 shares (December 31, 2010 -        31,222,786 shares)       Preferred stock: no par value; unlimited shares authorized;         issued and outstanding: nil shares       Treasury stock: at cost 296,542 shares (December 31, 2010 - 643,042 shares)       Additional paid-in capital       Deficit       Accumulated other comprehensive income (loss)           328,361 - (1,886) 17,209 (47,722) 1,090                     327,668 - (3,908) 16,926 (33,167) (5,471)
  Non-controlling interest (deficit) 297,052 -     302,048 1,139
        297,052   303,187
              $ 477,144         $ 469,568
         

SIERRA WIRELESS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of U.S. dollars)

(unaudited)

           
  Three months ended June 30   Six months ended June 30
  2011 2010   2011 2010
Cash flows provided (used) by: Operating activities       Net earnings (loss)       Items not requiring (providing) cash             Amortization             Stock-based compensation             Non-cash restructuring and other             Deferred income taxes             Loss (gain) on disposal of property, plant and equipment       Changes in non-cash working capital             Accounts receivable             Inventories             Prepaid expenses and other             Accounts payable and accrued liabilities             Deferred revenue and credits           $ (6,779)   8,456 1,697 - (2,219) 41   9,447 665 3,624 2,302 (50)           $ (8,637)   8,763 1,750 (901) (690) (11)   (5,016) (7,106) 6,169 6,880 57             $ (14,612)   17,068 3,329 - (2,219) 33   21,667 1,999 2,503 (11,016) (92)           $ (16,246)   17,484 3,444 (897) (698) (11)   (17,343) (6,511) 6,120 7,881 127
Cash flows provided (used) by operating activities 17,184 1,258   18,660 (6,650)
Investing activities       Purchase of Wavecom S.A. shares       Additions to property, plant and equipment       Proceeds from sale of property, plant and equipment       Increase in intangible assets       Net change in short-term investments   (1,505) (6,600) 2 (1,216) 7,089   (1,553) (3,803) 6 (1,022) (2,326)     (1,505) (8,562) 15 (1,957) 8,935   (1,553) (5,718) 6 (1,999) 13,470
      Cash flows provided (used) by investing activities (2,230) (8,698)   (3,074) 4,206
Financing activities       Issuance of common shares, net of share issue costs       Repayment of long-term obligations   259 11   7 (1,675)     465 (627)   28 (2,097)
      Cash flows provided (used) by financing activities 270 (1,668)   (162) (2,069)
Effect of foreign exchange rate changes on cash and cash equivalents 264 (140)   818 (969)
Cash and cash equivalents, increase (decrease) in the period Cash and cash equivalents, beginning of period 15,488 86,197 (9,248) 111,257   16,242 85,443 (5,482) 107,491
Cash and cash equivalents, end of period       $ 101,685       $ 102,009         $ 101,685       $ 102,009
Supplemental disclosures:       Net Income taxes paid (received)       Net interest paid (received)       Non-cash purchase of property, plant and equipment (funded by         obligation under capital lease)         $ (2,212) 54 0         $ 478 (9) 151           $ (1,911) (53) 0         $ 501 238 151
           

SIERRA WIRELESS, INC.

RECONCILLIATION OF GAAP AND NON-GAAP RESULTS

(Unaudited)

                         
(in thousands of U.S. dollars)
    2011   2010
    YTD   Q2   Q1   YTD   Q2   Q1
                         
Revenue - GAAP and Non-GAAP    $ 284,163    $ 139,888    $ 144,275    $ 310,433    $ 159,116    $ 151,317
                         
Gross Margin - GAAP    $ 78,564    $ 39,100    $ 39,464    $ 92,544    $ 46,210    $ 46,334
Stock-based compensation   210   97   113   259   124   135
Gross Margin - Non-GAAP    $ 78,774    $ 39,197    $ 39,577    $ 92,803    $ 46,334    $ 46,469
                         
Loss from operations - GAAP    $ (15,684)    $ (6,270)    $ (9,414)    $ (7,983)    $ (3,473)    $ (4,510)
Stock-based compensation   3,329   1,697   1,632   3,446   1,751   1,695
Restructuring and other   (25)   (350)   325   3,192   1,581   1,611
Integration   1,305   765   540   3,477   1,631   1,846
Acquisition related amortization   6,600   3,312   3,288   6,679   3,194   3,485
Earnings (loss) from operations - Non-GAAP    $ (4,475)    $ (846)    $ (3,629)    $ 8,811    $ 4,684    $ 4,127
                         
Net loss - GAAP    $ (14,555)    $ (6,766)    $ (7,789)    $ (16,076)    $ (8,555)    $ (7,521)
Stock -based compensation, restructuring and other,                        
 integration, and acquisition related amortization, net of tax   11,228   5,503   5,725   15,594   7,518   8,076
Unrealized foreign exchange loss (gain)   (97)   238   (335)   9,118   5,460   3,658
Non-controlling interest   (32)   -   (32)   (125)   (40)   (85)
Net earnings (loss) - Non-GAAP    $ (3,456)    $ (1,025)    $ (2,431)    $ 8,511    $ 4,383    $ 4,128
                         
Loss per share - GAAP    $ (0.47)    $ (0.22)    $ (0.25)    $ (0.52)    $ (0.28)    $ (0.24)
Diluted earnings (loss) per share - Non-GAAP    $ (0.11)    $ (0.03)    $ (0.08)    $ 0.27    $ 0.14    $ 0.13
                         
                         

 SIERRA WIRELESS, INC.

REVENUE BY SEGMENT AND PRODUCT LINE

(Unaudited)

                       
(in thousands of U.S. dollars)
        Three months ended June 30   Six months ended June 30  
        2011   2010   2011   2010  
M2M                      
AirPrime Embedded Wireless Modules (excludes PC OEMs)        $ 62,759    $ 69,529    $ 122,454    $ 145,206  
AirLink Intelligent Gateways and Routers       8,886   12,217   18,982   22,728  
AirVantage M2M Cloud Platform and Other       2,263   1,865   5,200   4,344  
         $ 73,908    $ 83,611    $ 146,636    $ 172,278  
                       
Mobile Computing                      
Aircard Mobile Broadband Devices        53,135   68,994   116,989   125,965  
AirPrime Embedded Wireless Modules for PC OEMs       11,857   5,253   18,604   10,100  
Other       988   1,258   1,934   2,090  
         $ 65,980    $ 75,505    $ 137,527    $ 138,155  
                       
                       

SOURCE Sierra Wireless, Inc.