Record revenue of $121.2 million; 19.5%
year-over-year growth
Sierra Wireless, Inc. (NASDAQ:SWIR) (TSX:SW):
First Quarter 2014 highlights from continuing
operations
- Record revenue of $121.2 million, an
increase of 19.5% compared with Q1 2013
- Adjusted EBITDA of $4.1 million
compared with $1.8 million in Q1 2013
- Non-GAAP earnings from operations of
$0.7 million compared with a non-GAAP loss from operations of $1.4
million in Q1 2013
Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported
results for its first quarter ending March 31, 2014. 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.
“We achieved record revenue in the first quarter and also
completed the acquisition of In Motion Technology. I believe we are
well positioned for continued revenue growth and improving
profitability in the second quarter and beyond,” said Jason
Cohenour, President and Chief Executive Officer. “We continue to
focus on driving profitable organic growth in M2M devices and cloud
services, while pursuing additional strategic acquisitions.”
Revenue for the first quarter of 2014 was $121.2 million, an
increase of 19.5% compared to $101.4 million in the first quarter
of 2013, and an increase of 2.2% compared to $118.6 million in the
fourth quarter of 2013. Revenue from OEM Solutions was $106.2
million in the first quarter of 2014, up 19.0% compared to $89.2
million in the first quarter of 2013. Revenue from Enterprise
Solutions was $15.0 million (including $1.3 million contribution
from In Motion Technology) in the first quarter of 2014, up 23.3%
compared to $12.2 million in the first quarter of 2013.
GAAP
- Gross margin was $38.6 million, or
31.9% of revenue, in the first quarter of 2014, compared to $33.4
million, or 32.9% of revenue, in the first quarter of 2013.
- Operating expenses were $45.3 million
and loss from operations was $6.7 million in the first quarter of
2014, compared to operating expenses of $40.3 million and a loss
from operations of $6.9 million in the first quarter of 2013.
- Net loss from continuing operations was
$4.0 million, or $0.13 per diluted share, in the first quarter of
2014, compared to a net loss from continuing operations of $7.9
million, or $0.26 per diluted share, in the first quarter of
2013.
NON-GAAP
- Gross margin was 32.0% in the first
quarter of 2014, compared to 33.0% in the first quarter of
2013.
- Operating expenses were $38.0 million
and earnings from operations were $0.7 million in the first quarter
of 2014, compared to operating expenses of $34.9 million and a loss
from operations of $1.4 million in the first quarter of 2013.
- Adjusted earnings before interest,
taxes, depreciation and amortization ("Adjusted EBITDA") were $4.1
million in the first quarter of 2014, compared to $1.8 million in
the first quarter of 2013.
- Net earnings from continuing operations
were $0.5 million, or $0.02 per diluted share, in the first quarter
of 2014, compared to a net loss from continuing operations of $0.7
million, or $0.02 per diluted share, in the first quarter of
2013.
Non-GAAP results exclude the impact of stock-based compensation
expense and related social taxes, acquisition costs, gain on sale
of the AirCard business, restructuring costs, integration costs,
disposition costs, acquisition amortization, impairment, 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 about actual operating results and assist in
comparisons from one period to another.
Adjusted EBITDA as defined equates to earnings (loss) from
operations plus stock-based compensation expense and related social
taxes, acquisition costs, restructuring costs, integration costs,
impairment, and amortization. The reconciliation between our GAAP
and non-GAAP results is provided in the accompanying schedules.
Financial Guidance
The Company provides the following guidance for continuing
operations for the second quarter of 2014.
In the second quarter of 2014 we expect revenue
to increase sequentially and on a year-over-year basis, driven by
organic growth as well as the addition of revenue for a full
quarter from In Motion Technology. We expect gross margin
percentage to improve slightly from the first quarter of 2014 and
operating expenses to increase, primarily reflecting the addition
of In Motion Technology expenses for a full quarter.
Q2 2014 Guidance
Consolidated
Non-GAAP
Revenue $128.0 to $131.0 million Earnings from operations
$2.7 to $3.5 million Net earnings $1.9 to $2.5 million Earnings per
share $0.06 to $0.08 per share
This non-GAAP guidance for the second quarter of 2014 reflects
current business indicators and expectations. 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 above. All figures are approximations based on
management's current beliefs and assumptions.
Conference call, webcast and instant replay details
Sierra Wireless President and CEO, Jason Cohenour, and CFO,
David McLennan, will host a conference call and webcast with
analysts and investors to review the results on Thursday, May 1,
2014, at 5:30 PM Eastern Time (2:30 PM PT). A live slide
presentation will be available for viewing during the call from the
link provided below.
To participate in this conference call, please dial the
following number approximately ten minutes prior to the
commencement of the call:
- Toll-free (Canada and US):
1-877-201-0168
- Alternate number: 1-647-788-4901
- Conference ID: 15895706
For those unable to participate in the live call, a replay will
be available until June 1, 2014. Dial 1-855-859-2056 or
1-800-585-8367 and enter the Conference ID number above to access
the replay.
To access the webcast, please follow the link below:
Sierra Wireless Q1 2014 Conference Call and Webcast
If the above link does not work, please copy and paste the
following URL into your browser:
http://www.snwebcastcenter.com/webcast/sierrawireless/2014q1/
The webcast will remain available at the above link for one year
following the call.
To access a full copy of our Q1 2014 earnings release, please
follow the link below:
http://www.sierrawireless.com/AboutUs/investorinformation.aspx
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 2014 and our fiscal year 2014, 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 cost of goods sold;
- Expected component supply
constraints;
- Our ability to “win” new business;
- Expected deployment of next generation
networks by wireless network operators;
- 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. 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, continuing uncertain economic
conditions, price and product competition, different product mix,
the loss of any of our significant customers, or 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;
- Unanticipated costs associated with
litigation or settlements associated with intellectual property
matters; and
- Higher than anticipated costs;
disruption of, and demands on, our ongoing business; and diversion
of management's time and attention in connection with acquisitions
or divestitures.
About Sierra Wireless
Sierra Wireless (NASDAQ: SWIR) (TSX: SW) is the global leader in
machine-to-machine (M2M) devices and cloud services, delivering
intelligent wireless solutions that simplify the connected world.
We offer the industry's most comprehensive portfolio of 2G, 3G and
4G embedded modules and gateways, seamlessly integrated with our
secure M2M cloud services. Customers worldwide, including OEMs,
enterprises, and mobile network operators, trust our innovative
solutions to get their connected products and services to market
faster. Sierra Wireless has more than 900 employees globally and
has R&D centers in North America, Europe and Asia. For more
information about Sierra Wireless, visit
www.sierrawireless.com.
"AirPrime," "AirLink," and "AirVantage" are 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 AND COMPREHENSIVE LOSS(In thousands of
U.S. dollars, except where otherwise stated)(unaudited)
Three months ended March 31,
2014
2013
Revenue $ 121,163 $
101,401 Cost of goods sold
82,566 68,023
Gross margin 38,597 33,378
Expenses Sales and marketing
12,366 10,356 Research
and development
20,017 18,363 Administration
9,333
8,123 Restructuring
— 117 Integration
20 27
Acquisition
950 — Amortization
2,583 3,276
45,269 40,262
Loss from
operations (6,672 ) (6,884 ) Foreign exchange
gain (loss)
392 (2,370 ) Other income (expense)
26
(132 )
Loss before income taxes (6,254
) (9,386 ) Income tax recovery
2,249 1,448
Net loss from continuing operations (4,005
) (7,938 ) Net earnings from discontinued operations
— 1,863
Net loss $ (4,005
) $ (6,075 ) Other comprehensive income (loss): Foreign
currency translation adjustments, net of taxes of $nil
20
(904 )
Comprehensive loss $ (3,985
) $ (6,979 )
Basic and diluted net earnings (loss) per
share attributable to the Company’scommon shareholders (in
dollars)
Continuing operations
$ (0.13 ) $ (0.26 )
Discontinued operations
0.00 0.06
$
(0.13 ) $ (0.20 ) Weighted average number of shares
outstanding (in thousands) Basic
31,235 30,695 Diluted
31,235 30,695
SIERRA WIRELESS, INC.CONSOLIDATED
BALANCE SHEETS(In thousands of U.S. dollars)(unaudited)
March 31, 2014 December 31, 2013
Assets Current assets Cash and cash equivalents
$
151,339 $ 177,416 Short-term investments
— 2,470
Accounts receivable, net of allowance for
doubtful accounts of $2,326(December 31, 2013 - $2,279)
116,796 112,490 Inventories
9,191 8,253 Deferred
income taxes
2,393 2,391 Prepaids and other
23,965
28,741
303,684 331,761 Property and equipment
21,076 21,982 Intangible assets
53,578 43,631
Goodwill
112,015 102,718 Deferred income taxes
4,208
7,176 Other assets
7,490 4,732
$
502,051 $ 512,000
Liabilities
Current liabilities Accounts payable and accrued liabilities
$ 111,015 $ 124,846 Deferred revenue and credits
4,155 2,481
115,170 127,327 Long-term
obligations
22,890 21,550 Deferred income taxes
505
127
138,565 149,004
Equity Shareholders’ equity
Common stock: no par value; unlimited
shares authorized; issued andoutstanding 31,431,851 shares
(December 31, 2013 -31,097,844 shares)
333,945
329,628
Preferred stock: no par value; unlimited
shares authorized;issued and outstanding: nil shares
— —
Treasury stock: at cost 81,475 shares
(December 31, 2013 – 507,147 shares)
(796 ) (5,137 ) Additional paid-in capital
21,813 25,996 Retained earnings
15,362 19,367
Accumulated other comprehensive loss
(6,838 ) (6,858
)
363,486 362,996
$
502,051 $ 512,000
SIERRA WIRELESS, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWS(In thousands of U.S.
dollars)(unaudited)
Three months ended March 31,
2014
2013
Cash flows provided by (used in):
Operating activities Net loss
$ (4,005
) $ (6,075 )
Items not requiring (providing) cash
Amortization
6,483 7,511 Stock-based compensation
2,251 1,928 Deferred income taxes
2,966 (31 ) Gain on
disposal of property and equipment
(14 ) — Impairment
of assets related to discontinued operations
— 1,004 Other
14 1,750 Taxes paid related to net settlement of equity
awards
(501 ) (250 ) Changes in non-cash working
capital Accounts receivable
860 (6,643 ) Inventories
139 7,354 Prepaid expenses and other
5,098 (9,044 )
Accounts payable and accrued liabilities
(17,238 )
(3,079 ) Deferred revenue and credits
52 28
Cash flows used in operating activities
(3,895 )
(5,547 )
Investing activities Additions to property and
equipment
(1,430 ) (2,199 ) Proceeds from sale of
property and equipment
37 11 Increase in intangible assets
(527 ) (659 ) Acquisition of In Motion Technology,
net of cash acquired
(22,578 ) — Net change in
short-term investments
2,470 — Increase in other assets
(2,748 ) —
Cash flows used in investing
activities
(24,776 ) (2,847 )
Financing activities
Issuance of common shares
2,725 2,104 Repurchase of common
shares for cancellation
— (1,377 ) Decrease in other
long-term obligations
(112 ) (627 )
Cash flows provided by financing
activities
2,613 100 Effect of foreign exchange rate
changes on cash and cash equivalents
(19 ) 571
Cash and cash equivalents, decrease in the period
(26,077
) (7,723 ) Cash and cash equivalents, beginning of period
177,416 63,646
Cash and cash equivalents,
end of period $ 151,339 $ 55,923
SIERRA
WIRELESS, INC.RECONCILIATION OF GAAP AND NON-GAAP
RESULTS
(in thousands of U.S. dollars, except where otherwise stated)
2014 2013
Q1 Total Q4
Q3 Q2 Q1 Gross margin
- GAAP $ 38,597 $ 145,641 $ 38,443 $ 37,346 $ 36,474 $ 33,378
Stock-based compensation and related social taxes 160
406 119 117 95 75
Gross margin - Non-GAAP $ 38,757 $
146,047 $ 38,562 $ 37,463 $ 36,569 $
33,453
Loss from operations - GAAP $ (6,672 )
$ (17,664 ) $ (3,547 ) $ (3,301 ) $ (3,932 ) $ (6,884 ) Stock-based
compensation and related social taxes 3,304 7,990 2,177 2,145 2,013
1,655 Acquisition 950 508 369 139 — — Restructuring — 171 14 14 26
117 Integration 20 27 — — — 27 Impairment of an asset in R&D —
280 — — — 280 Acquisition related amortization 3,118
13,741 3,580 3,405 3,363 3,393
Earnings (loss) from operations - Non-GAAP $ 720 $
5,053 $ 2,593 $ 2,402 $ 1,470 $ (1,412 ) Amortization (excluding
acquisition related amortization) 3,365 13,649
3,566 3,468 3,403 3,212
Adjusted EBITDA $ 4,085 $ 18,702
$ 6,159 $ 5,870 $ 4,873 $ 1,800
Net earnings (loss) from continuing operations - GAAP $
(4,005 ) $ (15,550 ) $ (1,945 ) $ 1,075 $ (6,742 ) $ (7,938 )
Stock-based compensation and related
social taxes,restructuring and other, integration, and
acquisitionrelated amortization, net of tax
7,389 22,620 6,112 5,760 5,393 5,355 Unrealized foreign exchange
loss (gain) (382 ) (3,912 ) (1,970 ) (2,457 ) (1,359 ) 1,874 Income
tax adjustments (2,519 ) 3,784 925 (895 )
3,754 —
Net earnings (loss) from continuing
operations - Non-GAAP $ 483 $ 6,942 $
3,122 $ 3,483 $ 1,046 $ (709 )
Net
earnings (loss) from discontinued operations – GAAP $ — $
70,588 $ 1,078 $ (505 ) $ 68,152 $ 1,863 Stock-based compensation
and disposition costs — 4,014 3 1,402 876 1,733 Gain on sale of
AirCard business — (70,182 ) (1,056 ) (49 ) (69,077 )
—
Net earnings (loss) from discontinued operations -
Non-GAAP $ — $ 4,420 $ 25 $ 848
$ (49 ) $ 3,596
Net earnings (loss) -
GAAP $ (4,005 ) $ 55,038 $ (867 ) $ 570 $ 61,410 $ (6,075 )
Net earnings (loss) - Non-GAAP 483 11,362 3,147 4,331 997
2,887
Diluted earnings (loss) from continuing operations
per share GAAP - (in dollars) $ (0.13 ) $ (0.50 ) $ (0.06 ) $
0.03 $ (0.22 ) $ (0.26 ) Non-GAAP - (in dollars) $ 0.02 $ 0.23 $
0.10 $ 0.11 $ 0.03 $ (0.02 )
Net earnings (loss) per
share - diluted GAAP - (in dollars) $ (0.13 ) $ 1.79 $ (0.03 )
$ 0.02 $ 2.00 $ (0.20 ) Non-GAAP - (in dollars) $ 0.02
$ 0.37 $ 0.10 $ 0.14 $
0.03 $ 0.09
SIERRA WIRELESS, INC.SEGMENTED
RESULTS
(In thousands of U.S. dollars, except
where otherwise stated)
2014 2013
Q1 Total Q4 Q3
Q2 Q1 OEM Solutions Revenue $
106,162 $ 382,016 $ 101,858 $ 95,850 $ 95,076 $ 89,232 Cost of
goods sold 75,634 266,867 72,336 66,395
65,514 62,622 Gross margin $ 30,528 $ 115,149
$ 29,522 $ 29,455 $ 29,562 $ 26,610 Gross
margin % 28.8% 30.1% 29.0% 30.7% 31.1% 29.8%
Enterprise
Solutions Revenue $ 15,001 $ 59,844 $ 16,750 $ 16,412 $ 14,513
$ 12,169 Cost of goods sold 6,932 29,352 7,829
8,521 7,601 5,401 Gross margin $ 8,069 $
30,492 $ 8,921 $ 7,891 $ 6,912 $ 6,768
Gross margin % 53.8% 51.0% 53.3% 48.1% 47.6% 55.6%
Sierra Wireless, Inc.Media Contact:Sharlene Myers, +1
604-232-1445Manager, Global Public
Relationssmyers@sierrawireless.comorInvestor Contact:David
Climie, +1 604-231-1137Senior Director, Investor
Relationsdclimie@sierrawireless.comorDavid G. McLennan, +1
604-231-1181Chief Financial Officerinvestor@sierrawireless.com
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