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Sierra Wireless Reports Second Quarter 2010 Loss
Friday, July 30, 2010
Website | News Archive
Vancouver, BC, July 30, 2010--(T-Net)--Sierra Wireless, Inc. (NASDAQ: SWIR, TSX: SW) today reported second quarter 2010 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 2010 was $159.1 million, an increase of 18% compared to $135.3 million in the second quarter of 2009 and an increase of 5% compared to $151.3 million in the first quarter of 2010. Our record revenue was driven by strong demand for both Machine-to-Machine ("M2M") and Mobile Computing products in the quarter. M2M revenue increased to $83.6 million, up 53% compared to $54.6 million in second quarter of 2009. Mobile Computing revenue was $75.5 million, down 6% compared to $80.7 million in the second quarter of 2009, but up 21% sequentially from the first quarter of 2010.
"Strong, broad based demand, combined with lower operating expenses, enabled us to deliver record quarterly revenue and better than expected earnings, despite industry wide component supply constraints," said Jason Cohenour, President and Chief Executive Officer. "Our sequential revenue growth was driven by the launch of new AirCard products with key customers, while our M2M business experienced exceptional year over year growth across a number of key market segments."
On a GAAP basis, gross margin was 29.0% in the second quarter of 2010, compared to 35.8% in the same period of 2009. Operating expenses were $49.7 million and loss from operations was $3.5 million in the second quarter of 2010, compared to $64.7 million and $16.2 million, respectively, in the same period of 2009. Our net loss was $8.6 million, or loss per share of $0.28, compared to a net loss of $5.9 million, or loss per share of $0.19, in the second quarter of 2009.
On a non-GAAP basis, gross margin in the second quarter of 2010 was 29.1%, compared to 35.9% in the second quarter of 2009. Operating expenses and earnings from operations were $41.7 million and $4.7 million, respectively, compared to $45.8 million and $2.8 million, respectively, in the second quarter of 2009. Net earnings were $4.4 million, or $0.14 per diluted share, compared to net earnings of $1.5 million, or $0.05 per diluted share, in the second quarter of 2009.
Non-GAAP results exclude transaction costs related the Wavecom acquisition, restructuring costs, acquisition related integration costs, stock based compensation expense, acquisition related amortization, foreign exchange gains or losses, tax adjustments and non-controlling interest related to non-GAAP adjustments. The reconciliation between GAAP and non-GAAP results of operations is provided in the accompanying schedules.
Financial Guidance
The following guidance for the third quarter of 2010 reflects current business indicators and expectations. Relative to Q2, we expect further revenue growth driven by higher demand, particularly for our AirCard(R) products. Our guidance also reflects the uncertain macroeconomic environment and expected component supply constraints. 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
Q3 2010 Guidance Non-GAAP
---------------- ------------
Revenue $168.0 - $173.0 million
Earnings from operations $5.4 - $6.4 million
Net earnings $4.5 - $5.4 million
Diluted earnings per share $0.15 - $0.17/share
About Sierra Wireless
Sierra Wireless (NASDAQ: SWIR - TSX: SW) is expanding the wireless world with a comprehensive offering of hardware, software, and connected services for mobile lifestyles and machine-to-machine communications. Our customers count on us to help them succeed with early access to new wireless technologies and innovative, reliable, high-performing solutions for a broad range of applications. For more information about Sierra Wireless, visit www.sierrawireless.com.
AirCard is a registered trademark, and AirPrime, AirLink, and AirVantage are trademarks belonging to 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 Six months ended
------------------ ----------------
June 30, June 30,
-------- --------
2010 2009 2010 2009
---- ---- ---- ----
Revenue...................... $ 159,116 $ 135,348 $ 310,433 $ 246,755
Cost of goods sold........... 112,906 86,895 217,889 166,781
--------- --------- --------- ---------
Gross margin................. 46,210 48,453 92,544 79,974
--------- --------- --------- ---------
Expenses:
Sales and marketing........ 13,183 15,590 27,339 24,952
Research and development... 21,534 22,672 42,075 37,636
Administration............. 8,835 10,792 18,419 17,339
Acquisition costs.......... - 804 - 7,326
Restructuring.............. 1,581 8,869 3,192 10,595
Integration................ 1,631 936 3,477 1,190
Amortization............... 2,919 5,001 6,025 7,421
--------- --------- --------- ---------
49,683 64,664 100,527 106,459
--------- --------- --------- ---------
Loss from operations......... (3,473) (16,211) (7,983) (26,485)
Foreign exchange gain (loss). (5,460) 10,957 (9,118) 1,034
Other expense................ (103) (10) (233) (4,032)
--------- --------- --------- ---------
Net loss before income taxes. (9,036) (5,264) (17,334) (29,483)
Income tax expense (recovery) (399) 1,229 (1,088) 962
--------- --------- --------- ---------
Net loss..................... (8,637) (6,493) (16,246) (30,445)
Net loss attributable to the
non-controlling interest.... (82) (622) (170) (909)
--------- --------- --------- ---------
Net loss attributable to
Sierra Wireless, Inc........ (8,555) (5,871) (16,076) (29,536)
Retained earnings (deficit),
beginning of period......... (26,147) (2,392) (18,626) 21,273
--------- --------- --------- ---------
Deficit, end of period....... $ (34,702) $ (8,263) $ (34,702) $ (8,263)
--------- --------- --------- ---------
--------- --------- --------- ---------
Loss per share attributable to Sierra Wireless, Inc.:
Basic...................... $ (0.28) $ (0.19) $ (0.52) $ (0.95)
Diluted.................... $ (0.28) $ (0.19) $ (0.52) $ (0.95)
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of shares (in thousands):
Basic...................... 31,054 31,032 31,053 31,032
Diluted.................... 31,054 31,032 31,053 31,032
--------- --------- --------- ---------
--------- --------- --------- ---------
SIERRA WIRELESS, INC.
Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars)
(Prepared in accordance with U.S. GAAP)
June 30, December 31,
-------- ------------
2010 2009
---- ----
(Unaudited)
Assets
Current assets:
Cash and cash equivalents...................... $ 102,009 $ 107,491
Short-term investments......................... 13,428 26,898
Accounts receivable, net of allowance for
doubtful accounts of $4,208 (2009 - $6,504)... 102,620 86,466
Inventories.................................... 29,308 24,708
Deferred income taxes.......................... 6,485 6,168
Prepaid expenses............................... 10,780 14,039
--------- ---------
264,630 265,770
Fixed assets..................................... 23,653 27,956
Intangible assets................................ 70,820 86,674
Goodwill......................................... 88,504 95,064
Deferred income taxes............................ 1,642 1,794
Other............................................ 2,971 7,261
--------- ---------
$ 452,220 $ 484,519
--------- ---------
--------- ---------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable............................... $ 81,195 $ 71,035
Accrued liabilities............................ 52,190 54,419
Deferred revenue and credits................... 615 750
Current portion of long-term obligations....... 1,437 3,371
Current portion of obligations under capital
leases........................................ 204 293
--------- ---------
135,641 129,868
Long-term obligations............................ 2,045 3,197
Obligations under capital leases................. 249 245
Other long-term liabilities...................... 24,491 32,663
Deferred income taxes............................ 1,547 1,950
Shareholders' equity:
Share capital.................................. 326,084 326,043
Shares held for restricted share unit ("RSU")
distribution, at cost......................... (4,461) (6,442)
Additional paid-in capital..................... 14,182 13,133
Deficit........................................ (34,702) (18,626)
Accumulated other comprehensive loss........... (14,016) (37)
--------- ---------
287,087 314,071
Non-controlling interest in Wavecom S.A.......... 1,160 2,525
--------- ---------
Total shareholders' equity....................... 288,247 316,596
--------- ---------
$ 452,220 $ 484,519
--------- ---------
--------- ---------
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 Six months ended
------------------ ----------------
June 30, June 30,
-------- --------
2010 2009 2010 2009
---- ---- ---- ----
Cash flows from operating
activities:
Net loss..................... $ (8,637) $ (6,493) $ (16,246) $ (30,445)
Adjustments to reconcile net
loss to net cash provided
by (used in) operating
activities
Amortization............... 8,763 11,620 17,484 18,366
Stock-based compensation... 1,750 2,631 3,444 4,734
Non-cash restructuring and
other..................... (901) - (897) -
Deferred income taxes...... (690) 5 (698) -
Gain on disposal........... (11) (50) (11) (49)
Unrealized foreign exchange
(gain) loss on restricted
cash...................... - (66) - 15,653
Unrealized foreign exchange
loss on term loan......... - - - 1,215
Changes in operating assets
and liabilities
Accounts receivable........ (5,016) 15,317 (17,343) 34,175
Inventories................ (7,106) 12,287 (6,511) 12,804
Prepaid expenses and other
assets.................... 6,169 (6,293) 6,120 (17)
Accounts payable........... 11,338 (8,437) 14,801 (17,517)
Accrued liabilities........ (4,458) (1,863) (6,920) (10,102)
Deferred revenue and
credits................... 57 (204) 127 91
--------- --------- --------- ---------
Net cash provided by (used
in) operating activities.. 1,258 18,454 (6,650) 28,908
Cash flows from investing
activities:
Business acquisition,
net of cash acquired of
$139,785.................. - (19,575) - (26,493)
Acquisition of OCEANE
convertible bonds......... - - - (104,767)
Decrease in restricted cash - 29,543 - 175,820
Purchase of Wavecom S.A.
shares.................... (1,553) - (1,553) -
Proceeds on disposal....... 6 96 6 96
Purchase of fixed assets... (3,803) (4,343) (5,718) (6,819)
Increase in intangible
assets.................... (1,022) (453) (1,999) (1,480)
Purchase of short-term
investments............... (7,409) (2,497) (14,499) (24,447)
Proceeds on maturity of
short-term investments.... 5,083 23,591 27,969 24,060
--------- --------- --------- ---------
Net cash provided by (used
in) investing activities.. (8,698) 26,362 4,206 35,970
Cash flows from financing
activities:
Proceeds on issuance of
term loan................. - - - 102,716
Repayment of term loan..... - - - (103,931)
Financing costs............ - 7 - (3,914)
Issuance of common shares,
net of share issue costs.. 7 - 28 -
Purchase of treasury shares
for RSU distribution...... - - - (2,518)
Proceeds on exercise of
Wavecom options........... - - - 4,148
Repayment of long-term
liabilities............... (1,675) (34) (2,097) (566)
--------- --------- --------- ---------
Net cash used in financing
activities................ (1,668) (27) (2,069) (4,065)
Effect of foreign exchange
changes on cash and cash
equivalents (140) (7,847) (969) (11,088)
--------- --------- --------- ---------
Net increase (decrease) in
cash and cash equivalents.. (9,248) 36,942 (5,482) 49,725
Cash and cash equivalents,
beginning of period........ 111,257 76,041 107,491 63,258
--------- --------- --------- ---------
Cash and cash equivalents,
end of period.............. $ 102,009 $ 112,983 $ 102,009 $ 112,983
--------- --------- --------- ---------
--------- --------- --------- ---------
SIERRA WIRELESS, INC.
Reconciliation of GAAP and Non-GAAP Results
Three months ended Six months ended
------------------ ----------------
June 30, June 30,
-------- --------
(in millions of U.S. dollars) 2010 2009 2010 2009
---- ---- ---- ----
Revenue - GAAP and Non-GAAP $ 159.1 $ 135.3 $ 310.4 $ 246.8
Gross margin - GAAP $ 46.2 $ 48.5 $ 92.5 $ 80.0
Stock-based compensation 0.1 0.1 0.3 0.2
--------- --------- --------- ---------
Gross margin - Non-GAAP $ 46.3 $ 48.6 $ 92.8 $ 80.2
--------- --------- --------- ---------
--------- --------- --------- ---------
Loss from operations - GAAP $ (3.5) $ (16.2) $ (8.0) $ (26.5)
Stock-based compensation 1.8 2.6 3.4 4.7
Transaction costs - 0.8 - 7.3
Restructuring and other
costs 1.6 8.5 3.2 9.7
Integration costs 1.6 0.9 3.5 1.2
Acquisition related
amortization 3.2 6.2 6.7 8.6
--------- --------- --------- ---------
Earnings from operations
- Non-GAAP $ 4.7 $ 2.8 $ 8.8 $ 5.0
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss - GAAP $ (8.6) $ (5.9) $ (16.1) $ (29.5)
Stock-based compensation,
transaction,
restructuring,
integration and
acquisition amortization
costs, net of tax 7.5 18.8 15.6 30.9
Foreign exchange (gain)
loss 5.5 (11.0) 9.1 (1.0)
Interest expense - - - 4.3
Non-controlling interest - (0.4) (0.1) (0.7)
--------- --------- --------- ---------
Net earnings - Non-GAAP $ 4.4 $ 1.5 $ 8.5 $ 4.0
--------- --------- --------- ---------
--------- --------- --------- ---------
Loss per share - GAAP $ (0.28) $ (0.19) $ (0.52) $ (0.95)
Diluted earnings per share
- Non-GAAP $ 0.14 $ 0.05 $ 0.27 $ 0.13
SIERRA WIRELESS, INC.
REVENUE BY BUSINESS LINE
(Expressed as a percentage of revenue)
Three months ended Six months ended
------------------ ----------------
June 30, June 30,
-------- --------
2010 2009 2010 2009
---- ---- ---- ----
M2M.......................... 53% 40% 55% 35%
Mobile computing............. 47 60 45 65
--------- --------- --------- ---------
100% 100% 100% 100%
--------- --------- --------- ---------
--------- --------- --------- ---------
SIERRA WIRELESS, INC.
REVENUE BY PRODUCT LINE
(Expressed as a percentage of revenue)
Three months ended Six months ended
------------------ ----------------
June 30, June 30,
-------- --------
2010 2009 2010 2009
---- ---- ---- ----
AirPrime Intelligent Embedded
Modules..................... 47% 33% 50% 28%
AirCard Mobile Broadband
Devices..................... 43 57 41 62
AirLink Intelligent Gateways
and Routers................. 8 8 7 8
AirVantage Solutions and
Other....................... 2 2 2 2
--------- --------- --------- ---------
100% 100% 100% 100%
--------- --------- --------- ---------
--------- --------- --------- ---------
For further information
Investor Contact: David G. McLennan, Chief Financial Officer, (604) 231-1181
Media Contact: Sharlene Myers, Public & Media Relations, (604) 232-1445, Sierra Wireless, Inc., Website: www.sierrawireless.com, Email: investor@sierrawireless.com
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