Q1 2015 revenue of $150.4 million; 24.1%
year-over-year growth
Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW):
- Record revenue of $150.4 million, an
increase of 24.1% compared to Q1 2014
- Non-GAAP earnings from operations of
$8.8 million compared to $0.7 million in Q1 2014
- Adjusted EBITDA of $11.3 million
compared to $4.1 million in Q1 2014
- Non-GAAP EPS of $0.22 compared to $0.02
in Q1 2014
Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported
results for its first quarter, ending March 31, 2015. 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 delivered record revenue and strong year-over-year growth in
profitability in the first quarter of 2015,” said Jason Cohenour,
President and Chief Executive Officer. “We also significantly
expanded our position in the Internet of Things value chain with
the acquisition of Wireless Maingate, adding connectivity and
managed services to our device-to-cloud solutions. As we continue
to strengthen our device-to-cloud offering, we remain focused on
profitable growth and enhancing our leadership position with
strategic acquisitions.”
Revenue for the first quarter of 2015 was $150.4 million, an
increase of 24.1% compared to $121.2 million in the first quarter
of 2014. Revenue from OEM Solutions was $133.0 million in the first
quarter of 2015, up 25.3% compared to $106.2 million in the first
quarter of 2014. Revenue from Enterprise Solutions was $17.4
million in the first quarter of 2015, up 15.8% compared to $15.0
million in the first quarter of 2014.
GAAP RESULTS
- Gross margin was $48.8 million, or
32.5% of revenue, in the first quarter of 2015, compared to $38.6
million, or 31.9% of revenue, in the first quarter of 2014.
- Operating expenses were $46.4 million
and earnings from operations were $2.5 million in the first quarter
of 2015, compared to operating expenses of $45.3 million and a loss
from operations of $6.7 million in the first quarter of 2014.
- Net loss was $9.7 million, or $0.30 per
diluted share, in the first quarter of 2015, compared to a net loss
of $4.0 million, or $0.13 per diluted share, in the first quarter
of 2014. The first quarter of 2015 included an $11.8 million
after-tax foreign exchange loss associated with the translation of
certain foreign denominated balances, compared to a $0.4 million
foreign exchange gain in the first quarter of 2014.
NON-GAAP RESULTS
- Gross margin was 32.6% in the first
quarter of 2015, compared to 32.0% in the first quarter of
2014.
- Operating expenses were $40.2 million
and earnings from operations were $8.8 million in the first quarter
of 2015, compared to operating expenses of $38.0 million and
earnings from operations of $0.7 million in the first quarter of
2014.
- Net earnings were $7.2 million, or
$0.22 per diluted share, in the first quarter of 2015, compared to
net earnings of $0.5 million, or $0.02 per diluted share, in the
first quarter of 2014. The non-GAAP tax rate in the first quarter
of 2015 was 19.8%.
- Adjusted earnings before interest,
taxes, depreciation and amortization ("Adjusted EBITDA") were $11.3
million in the first quarter of 2015, compared to $4.1 million in
the first quarter of 2014.
Cash and cash equivalents at the end of the first quarter of
2015 were $99.6 million, representing a decrease of $107.5 million,
compared to the end of the fourth quarter of 2014. The decrease was
primarily due to the payment of $88.4 million (net of cash
acquired), for the purchase of Wireless Maingate AB and higher
working capital requirements in the quarter.
We disclose non-GAAP financial measures as we believe they
provide useful information on actual operating results and assist
in comparisons from one period to another. Readers are cautioned
that non-GAAP financial measures do not have any standardized
meaning prescribed by U.S. GAAP and therefore may not be comparable
to similar measures presented by other companies.
Non-GAAP results exclude the impact of stock-based compensation
expense and related social taxes, acquisition costs, restructuring
costs, integration costs, acquisition amortization, impairment,
foreign exchange gains or losses on translation of balance sheet
accounts, and certain tax adjustments.
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
In the second quarter of 2015, we expect
revenue to grow sequentially and on a year-over-year basis, gross
margin percentage to be similar to the first quarter of 2015 and
operating expenses to increase slightly compared to the first
quarter of 2015. This guidance does not include any contribution
from the acquisition of Accel Networks (see below). This results in
the following non-GAAP guidance for the second quarter of 2015:
Q2 2015 Guidance Consolidated
Non-GAAP
Revenue $153.0 to $156.0 million Earnings from operations
$8.5 to $10.0 million Net earnings $6.7 to $7.9 million Earnings
per share $0.21 to $0.24 per share
This non-GAAP guidance for the second quarter of 2015 reflects
current business indicators and expectations, including a continued
tight component supply environment. 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.
Sierra Wireless acquires Accel Networks
Sierra Wireless has entered into a definitive agreement to
purchase substantially all of the assets of Accel Networks
("Accel") for US$9.3 million in cash with the potential for an
additional US$1.5 million under a performance-based earnout
formula. Accel is a leading provider of 4G LTE managed connectivity
services with more than 300 enterprise customers in sectors such as
retail, finance, security, energy, and hospitality. With 4G LTE
providing high connectivity speeds and legacy carriers
transitioning from copper-based networks, many distributed
enterprises are adopting wireless connectivity. Accel’s revenue in
2014 was US$8.5 million. The transaction is expected to close in
June 2015. Following the completion of the acquisition, we expect
revenue in the next 12 months of approximately $10 million and to
break even on an adjusted EBITDA basis. Approximately 80 percent of
Accel’s annual revenue is subscription-based and recurring. Accel
was founded in 2002 and has 28 employees. Its head office is in
Florida, with its primary operations center located in Georgia.
Conference call and webcast 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 7,
2015, 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 start of
the call:
- Toll-free (Canada and US):
1-877-201-0168
- Alternate number: 1-647-788-4901
- Conference ID: 92170371
To access the webcast, please follow the link below:
Sierra Wireless Q1 Conference Call and Webcast
The webcast will remain available at the above link for one year
following the call.
To access a full copy of our Q1 2015 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 2015 and our fiscal year 2015, our business outlook for
the short and longer term and statements regarding our strategy,
plans and future operating performance. Forward-looking statements
are provided to help you understand our views of our short and
longer term plans, expectations and prospects. We caution you that
forward-looking statements may not be appropriate for other
purposes. We do not intend to 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”, “will”, “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;
- Our ability to integrate acquired
businesses and realize expected benefits;
- Expected deployment of next generation
networks by wireless network operators;
- Our operations not being 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;
- 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;
- The cost of products sold may be higher
than planned or necessary component supplies may not be available,
may be delayed or may not be 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;
and
- Unanticipated costs associated with
litigation or settlements associated with intellectual property
matters.
About Sierra Wireless
Sierra Wireless (NASDAQ: SWIR) (TSX: SW) is building the
Internet of Things with intelligent wireless solutions that empower
organizations to innovate in 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 cloud
and connectivity services. OEMs and enterprises worldwide trust our
innovative solutions to get their connected products and services
to market faster. Sierra Wireless has more than 950 employees
globally and operates R&D centers in North America, Europe and
Asia. For more information, 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 EARNINGS (LOSS)(In
thousands of U.S. dollars, except where otherwise
stated)(unaudited)
Three months ended March 31,
2015
2014
Revenue $
150,406
$
121,163
Cost of goods sold
101,570
82,566
Gross margin
48,836
38,597
Expenses Sales and marketing
13,145
12,366
Research and development
19,092
20,017
Administration
10,420
9,333
Acquisition and integration
1,103
970
Amortization
2,602
2,583
46,362
45,269
Earnings (loss) from operations
2,474
(6,672
) Foreign exchange gain (loss)
(11,893
)
392
Other income
105
26
Loss before income taxes
(9,314
)
(6,254
) Income tax expense (recovery)
339
(2,249
)
Net loss $
(9,653
) $
(4,005
) Other comprehensive income (loss): Foreign currency translation
adjustments, net of taxes of $nil
(3,518
)
20
Comprehensive loss $
(13,171
) $
(3,985
) Basic and diluted net loss per share (in dollars)
$
(0.30
) $
(0.13
) Weighted average number of shares outstanding (in thousands)
Basic and diluted
31,983
31,235
SIERRA WIRELESS, INC.CONSOLIDATED
BALANCE SHEETS(In thousands of U.S. dollars, except where
otherwise stated)(unaudited)
March 31, 2015 December 31, 2014
Assets Current assets Cash and cash equivalents
$ 99,555 $
207,062
Accounts receivable, net of allowance for
doubtful accounts of $2,404
(December 31, 2014 - $2,275)
128,469 106,799 Inventories
19,104 17,445 Deferred
income taxes
4,778 4,779 Prepaids and other
6,707 7,826
258,613 343,911 Property and
equipment
20,319 20,717 Intangible assets
79,597
37,893 Goodwill
141,222 103,966 Deferred income taxes
3,560 3,898 Other assets
4,455 4,979
$ 507,766 $ 515,364
Liabilities Current liabilities Accounts payable and accrued
liabilities
$ 122,164 $ 128,196 Deferred revenue and
credits
3,813 3,245
125,977 131,441
Long-term obligations
27,864 26,608 Deferred income taxes
6,661 453
160,502 158,502
Equity Shareholders’ equity
Common stock: no par value; unlimited
shares authorized;
issued and outstanding 32,132,653
shares(December 31, 2014 - 31,868,541 shares)
343,649
339,640
Preferred stock: no par value; unlimited
shares authorized;
issued and outstanding:nil shares
—
—
Treasury stock: at cost 4,190 shares (December 31, 2014 – 342,645
shares)
(80 ) (6,236 ) Additional paid-in capital
20,317 26,909 Retained earnings (deficit)
(7,139
) 2,514
Accumulated other comprehensive loss
(9,483 ) (5,965 )
347,264
356,862
$ 507,766 $ 515,364
SIERRA WIRELESS, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWS(In thousands of U.S.
dollars)(unaudited)
Three months ended March 31,
2015 2014
Cash flows provided by (used
in): Operating activities Net loss
$
(9,653 ) $ (4,005 ) Items not requiring (providing)
cash Amortization
5,131 6,483 Stock-based compensation
2,297 2,251 Deferred income taxes
—
2,966 Loss (gain) on disposal of property and equipment
1
(14 ) Unrealized foreign exchange loss
6,219 14 Other
(30 )
—
Changes in non-cash working capital Accounts receivable
(22,277 ) 860 Inventories
(2,594 ) 139
Prepaid expenses and other
1,641 5,098 Accounts payable and
accrued liabilities
(3,143 ) (17,238 ) Deferred
revenue and credits
458 52 Cash flows used in
operating activities
(21,950 ) (3,394 )
Investing activities Additions to property and equipment
(1,911 ) (1,430 ) Proceeds from sale of property and
equipment
—
37 Increase in intangible assets
(233 ) (527 )
Acquisition of Wireless Maingate, net of cash acquired
(88,449 )
—
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
(90,593 ) (24,776 )
Financing activities
Issuance of common shares
2,145 2,725 Purchase of treasury
shares for RSU distribution
(797 )
—
Taxes paid related to net settlement of equity awards
(1,742
) (501 ) Excess tax benefits from equity awards
1,670
—
Decrease in other long-term obligations
(74 )
(112 ) Cash flows provided by (used in) financing activities
1,202 2,112 Effect of foreign exchange rate changes
on cash and cash equivalents
3,834 (19 ) Cash and
cash equivalents, decrease in the period
(107,507 )
(26,077 ) Cash and cash equivalents, beginning of period
207,062 177,416
Cash and cash equivalents, end of
period $ 99,555 $ 151,339
SIERRA
WIRELESS, INC.RECONCILIATION OF GAAP AND NON-GAAP
RESULTS
(in thousands of U.S. dollars, except where otherwise stated)
2015 2014
Q1 Total
Q4 Q3 Q2 Q1
Gross margin - GAAP $ 48,836 $
178,979 $ 50,006 $ 47,055 $ 43,321 $ 38,597 Stock-based
compensation and related social taxes 248
555 131 134
130 160
Gross margin - Non-GAAP
$ 49,084 $ 179,534 $ 50,137 $ 47,189 $ 43,451 $ 38,757
Earnings (loss) from operations - GAAP $ 2,474 $ (6,594 ) $
3,399 $ 2,943 $ (6,264 ) $ (6,672 ) Stock-based compensation and
related social taxes 2,600 10,464 2,432 2,402 2,326 3,304
Acquisition and integration 1,103 2,670 1,273 356 71 970
Restructuring — 1,598 540 71 987 — Impairment — 3,756 — — 3,756 —
Acquisition related amortization 2,669
10,900 2,389 2,609
2,784 3,118
Earnings from operations
- Non-GAAP $ 8,846 $ 22,794 $ 10,033 $ 8,381 $ 3,660 $ 720
Amortization (excluding acquisition related amortization)
2,462 12,617 2,699
3,400 3,153 3,365
Adjusted EBITDA $ 11,308 $ 35,411 $ 12,732 $ 11,781 $ 6,813
$ 4,085
Net earnings (loss) - GAAP $ (9,653 ) $
(16,853 ) $ (1,701 ) $ (2,904 ) $ (8,243 ) $ (4,005 ) Stock-based
compensation and related social taxes, restructuring, impairment,
acquisition, integration, and acquisition related amortization, net
of tax 6,372 29,337 6,618 5,414 9,916 7,389 Unrealized foreign
exchange loss (gain) 11,835 12,285 3,798 7,953 916 (382 ) Income
tax adjustments (1,372 ) (4,921
) 378 (2,781 ) 1 (2,519 )
Net earnings - Non-GAAP $ 7,182 $ 19,848 $ 9,093 $ 7,682 $
2,590 $ 483
Diluted net earnings (loss) per share
GAAP - (in dollars) $ (0.30 ) $ (0.53 ) $ (0.05 ) $ (0.09 ) $ (0.26
) $ (0.13 ) Non-GAAP - (in dollars) $ 0.22 $ 0.63 $ 0.29 $ 0.24 $
0.08 $ 0.02
Q1 2015 RECONCILIATION OF GAAP AND NON-GAAP
RESULTS
Acquisition & Integration
Stock-basedCompensation& RelatedSocial
Taxes
Foreign Exchange Loss Tax Adjustments
(In thousands of U.S. dollars, except
where otherwise stated)
GAAP Acquisition Related Amortization
Non GAAP
Q1 2015 Q1
2015 Revenue 150,406 150,406 Cost
of goods sold
101,570
248
101,322
Gross margin 48,836 — — (248 ) — —
49,084 GM%
32.5 % 32.6 %
Sales and marketing
13,145 587
12,558 Research and
development
19,092 888 420
17,784 Administration
10,420 1,345
9,075 Acquisition and integration
1,103 1,103
— Amortization
2,602
1,781
821 Total operating expenses
46,362 2,669 1,103 2,352 — —
40,238
Earnings (loss) from operations 2,474
(2,669 ) (1,103 ) (2,600 ) — —
8,846 Foreign exchange
loss
(11,893 ) (11,893 )
— Other income
105
105 Total other income
(expense)
(11,788 ) — — — (11,893 ) —
105
Earnings (loss) before income taxes
(9,314 ) (2,669 ) (1,103 ) (2,600 ) (11,893 ) —
8,951 Income tax expense (recovery)
339 (58 )
(1,372 )
1,769
Net earnings
(loss) (9,653 ) (2,669 ) (1,103 )
(2,600 ) (11,835 ) 1,372
7,182 Diluted earnings (loss) per share
(0.30 ) 0.22 Weighted average diluted
shares
31,983
31,983
SIERRA WIRELESS, INC.SEGMENTED
RESULTS
(In thousands of U.S. dollars, except where otherwise
stated)
2015 2014
Q1 Total
Q4 Q3 Q2 Q1 OEM
Solutions Revenue $ 133,040 $
476,650 $ 129,580 $ 124,329 $ 116,579 $ 106,162 Cost of goods sold
93,079 336,133 90,136
87,453 82,910 75,634
Gross margin $ 39,961 $ 140,517 $ 39,444 $ 36,876 $ 33,669 $
30,528 Gross margin % 30.0 % 29.5 % 30.4 % 29.7 % 28.9 % 28.8 %
Enterprise Solutions Revenue $ 17,366 $ 71,873 $
19,498 $ 18,941 $ 18,433 $ 15,001 Cost of goods sold 8,491
33,411 8,936 8,762
8,781 6,932 Gross margin $ 8,875
$ 38,462 $ 10,562 $ 10,179 $ 9,652 $ 8,069 Gross margin % 51.1 %
53.5 % 54.2 % 53.7 % 52.4 % 53.8 %
Sierra WirelessMedia Contact:Sharlene Myers,
604-232-1445Manager, Global Public
Relationssmyers@sierrawireless.comorInvestor Contact:David
Climie, 604-231-1137Vice President, Investor
Relationsdclimie@sierrawireless.comorDavid G. McLennan,
604-231-1181Chief Financial Officerinvestor@sierrawireless.com
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