- Revenue of $142.8 million compared to
$150.4 million in Q1 2015
- Non-GAAP earnings from operations of
$3.6 million compared to $8.8 million in Q1 2015
- Adjusted EBITDA of $6.7 million
compared to $11.3 million in Q1 2015
- Non-GAAP net earnings of $2.6 million
and diluted EPS of $0.08
Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported
results for its first quarter ending March 31, 2016. 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 and non-GAAP earnings in the first quarter were
slightly better than expected, and we continue to expect our
business to gain strength over the course of the year as new
customer programs move into production and we introduce new
leading-edge IoT products and solutions,” said Jason Cohenour,
President and CEO.
Revenue for the first quarter of 2016 was $142.8 million, a
decrease of 5.1% compared to $150.4 million in the first quarter of
2015. Revenue from OEM Solutions was $120.9 million in the first
quarter of 2016, down 9.1% compared to $133.0 million in the first
quarter of 2015. Revenue from Enterprise Solutions was $15.0
million in the first quarter of 2016, up 9.0% compared to $13.8
million in the first quarter of 2015. Revenue from Cloud and
Connectivity Services was $6.9 million in the first quarter of
2016, up 92.0% compared to $3.6 million in the first quarter of
2015. Our gross margin in the first quarter of 2016 was 32.8%,
compared to 32.5% in the same period of 2015. During the quarter,
we received $2.3 million from a legal settlement with a supplier
related to a quality issue with a component used in some of our
gateway products. The settlement resulted in favorable impacts of
$1.9 million in cost of goods sold and $0.4 million in
administration expense.
GAAP RESULTS
- Gross margin was $46.8 million, or
32.8% of revenue, in the first quarter of 2016, compared to $48.8
million, or 32.5% of revenue, in the first quarter of 2015.
- Operating expenses were $48.1 million
and loss from operations was $1.3 million in the first quarter of
2016, compared to operating expenses of $46.4 million and earnings
from operations of $2.5 million in the first quarter of 2015.
- Net earnings were $0.7 million, or
$0.02 per diluted share, in the first quarter of 2016, compared to
a net loss of $9.7 million, or $0.30 per diluted share, in the
first quarter of 2015.
NON-GAAP RESULTS
- Gross margin was 32.9% in the first
quarter of 2016, compared to 32.6% in the first quarter of
2015.
- Operating expenses were $43.3 million
and earnings from operations were $3.6 million in the first quarter
of 2016, compared to operating expenses of $40.2 million and
earnings from operations of $8.8 million in the first quarter of
2015.
- Net earnings were $2.6 million, or
$0.08 per diluted share, in the first quarter of 2016, compared to
net earnings of $7.2 million, or $0.22 per diluted share, in the
first quarter of 2015. The non-GAAP tax rate in the first quarter
of 2016 was 28.5%.
- Adjusted earnings before interest,
taxes, depreciation and amortization ("Adjusted EBITDA") were $6.7
million in the first quarter of 2016, compared to $11.3 million in
the first quarter of 2015.
- Excluding the previously mentioned
recovery of $2.3 million in the quarter, gross margin was 31.5%;
operating expenses were $43.7 million; adjusted EBITDA was $4.4
million; earnings from operations were $1.3 million; and EPS was
$0.03 per share.
Cash and cash equivalents at the end of the first quarter of
2016 were $86.1 million, representing a decrease of $7.8 million
compared to the end of the fourth quarter of 2015. Cash generated
from operations during the first quarter was $7.6 million.
During the quarter, we received approval from the TSX of our
Notice of Intention to make a Normal Course Issuer Bid and utilized
$6.1 million to repurchase and cancel 549,583 shares. We also used
$4.2 million to purchase shares for our Restricted Share Unit long
term incentive plan.
We disclose non-GAAP financial measures as we believe they
provide useful information on actual operating performance 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-related 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-related 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
For the second quarter of 2016, we expect revenue to be in the
range of $150 million to $160 million and non-GAAP earnings per
share to be in the range of $0.09 to $0.17. For the full year 2016
we expect revenue to be in the range of $630 million to $670
million and non-GAAP earnings per share to be in the range of $0.60
to $0.90, which remains unchanged from the guidance that we
provided on February 4, 2016.
This non-GAAP guidance for 2016 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 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 5,
2016, 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: 56542837
To access the webcast, please follow the link below:
Sierra Wireless Q1 2016 Conference Call and Webcast
If the above link does not work, please copy and paste the
following URL into your browser:
http://event.on24.com/r.htm?e=1141075&s=1&k=F64A6FBDBC6CBD6D1B0FB86BC2506719
The webcast will remain available at the above link for one year
following the 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 2016 and our fiscal year 2016, our business outlook for
the short and longer term, 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:
- competition from new or established
service providers or from those with greater resources;
- our financial results are subject to
fluctuation;
- disruption of, and demands on, our
ongoing business and diversion of management's time and attention
in connection with acquisitions or divestitures;
- the loss of any of our significant
customers;
- cyber-attacks or other breaches of our
information technology security;
- we may be found to infringe on
intellectual property rights of others;
- we may not be able to obtain necessary
rights to use software or components supplied by third
parties;
- we may be unable to enforce our
intellectual property rights;
- difficult or uncertain global economic
conditions;
- our ability to attract or retain key
personnel;
- we may experience difficulty responding
to changing technology, industry standards and customer
requirements;
- unanticipated costs associated with
litigation or settlements;
- failures of our products or services
due to design flaws and errors, component quality issues,
manufacturing defects or other quality issues;
- our dependence on a limited number of
third party manufacturers;
- our reliance on single source suppliers
for certain components used in our products;
- our dependence on wireless network
carriers to promote and offer acceptable wireless data
services;
- risks related to contractual disputes
with counterparties;
- we are subject to governmental
regulation;
- the transmission, use and disclosure of
user data and personal information could give rise to liability or
additional costs; and
- we have operations outside of North
America and therefore are subject to risks inherent in foreign
jurisdictions.
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 1,000 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,
2016 2015
Revenue $
142,797 $ 150,406 Cost of goods sold
95,982 101,570
Gross margin 46,815 48,836
Expenses Sales and marketing
15,629 13,145 Research
and development
18,778 19,092 Administration
9,527
10,420 Acquisition-related and integration
374 1,103
Amortization
3,762 2,602
48,070 46,362
Earnings (loss) from operations
(1,255)
2,474 Foreign exchange gain (loss)
2,292 (11,893 ) Other
income
26 105
Earnings (loss) before income
taxes 1,063 (9,314 ) Income tax expense
345 339
Net earnings (loss) $ 718 $ (9,653 )
Other comprehensive income (loss): Foreign currency translation
adjustments, net of taxes of $nil
5,132 (3,518 )
Comprehensive earnings (loss) $ 5,850 $
(13,171 ) Net earnings (loss) per share (in dollars) Basic
0.02 (0.30 ) Diluted
0.02 (0.30 ) Weighted average
number of shares outstanding (in thousands) Basic
32,156
31,983 Diluted
32,500 31,983
SIERRA WIRELESS, INC.CONSOLIDATED
BALANCE SHEETS(In thousands of U.S. dollars, except where
otherwise stated)(unaudited)
March 31, 2016 December 31, 2015
Assets Current assets Cash and cash equivalents
$
86,120 $ 93,936 Accounts receivable, net of allowance for
doubtful accounts of $2,129 (December 31, 2015 - $2,088)
118,357 116,246 Inventories
26,529 32,829 Prepaids
and other
12,856 14,179
243,862 257,190
Property and equipment
29,746 28,947 Intangible assets
84,363 84,250 Goodwill
160,998 156,488 Deferred
income taxes
15,118 14,865 Other assets
5,351
4,592
$ 539,438 $ 546,332
Liabilities Current liabilities Accounts payable and
accrued liabilities
$ 122,732 $ 128,537 Deferred
revenue and credits
3,127 3,479
125,859
132,016 Long-term obligations
45,440 44,353 Deferred income
taxes
12,140 11,667
183,439
188,036
Equity Shareholders’ equity
Common stock: no par value; unlimited
shares authorized; issued and
outstanding: 31,906,036 shares (December
31, 2015 - 32,337,201 shares)
342,444 346,453 Preferred stock: no par value; unlimited
shares authorized;
issued and outstanding: nil shares
— — Treasury stock: at cost: 393,110 shares (December 31,
2015 – 240,613 shares)
(5,671 ) (4,017 ) Additional
paid-in capital
21,759 23,998 Retained earnings (deficit)
313 (160 ) Accumulated other comprehensive loss
(2,846 ) (7,978 )
355,999
358,296
$ 539,438 $ 546,332
SIERRA WIRELESS, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWS(In thousands of U.S.
dollars)(unaudited)
Three months ended March 31,
2016
2015
Cash flows provided by (used in): Operating
activities Net earnings (loss)
$ 718 $
(9,653)
Items not requiring (providing) cash Amortization
5,568
5,131 Stock-based compensation
2,035 2,297 Other
4
6,190 Changes in non-cash working capital Accounts receivable
(434)
(22,277)
Inventories
7,080
(2,594)
Prepaid expenses and other
771 1,641 Accounts payable and
accrued liabilities
(7,868)
(3,143)
Deferred revenue and credits
(274)
458 Cash flows provided by (used in) operating activities
7,600
(21,950)
Investing activities Additions to property and equipment
(2,843)
(1,911)
Proceeds from sale of property and equipment
3 — Increase in
intangible assets
(295)
(233)
Acquisition of Wireless Maingate AB, net of cash acquired
—
(88,449)
Cash flows used in investing activities
(3,135)
(90,593)
Financing activities Issuance of common shares
528
2,145 Repurchase of common shares for cancellation
(6,144)
— Purchase of treasury shares for RSU distribution
(4,214)
(797)
Taxes paid related to net settlement of equity awards
(352)
(1,742)
Excess tax benefits from equity awards
—
1,670
Decrease in other long-term obligations
(63)
(74)
Cash flows provided by (used in) financing activities
(10,245)
1,202 Effect of foreign exchange rate changes on cash and cash
equivalents
(2,036)
3,834 Cash and cash equivalents, decrease in the period
(7,816)
(107,507)
Cash and cash equivalents, beginning of period
93,936
207,062
Cash and cash equivalents, end of period $
86,120 $ 99,555
SIERRA
WIRELESS, INC.RECONCILIATION OF GAAP AND NON-GAAP
RESULTS BY QUARTER
2016 2015
(in thousands of U.S. dollars, except
where otherwise stated)
Q1 Q4 Q3 Q2
Q1 Gross margin - GAAP $ 46,815 $ 45,063 $
49,009 $ 50,947 $ 48,836 Stock-based compensation and related
social taxes 106 106 146 147 248
Gross margin - Non-GAAP $
46,921 $ 45,169 $ 49,155 $ 51,094 $ 49,084
Earnings
(loss) from operations - GAAP $
(1,255)
$
(674)
$ 4,202 $ 4,112 $ 2,474 Stock-based compensation and related social
taxes 1,993 1,670 2,557 2,858 2,600 Acquisition-related and
integration 374
(616)
443 1,015 1,103 Restructuring — 201
39
711 — Acquisition related amortization 2,530 2,734 2,234 2,029
2,669
Earnings from operations - Non-GAAP $ 3,642 $ 3,315 $
9,475 $ 10,725 $ 8,846 Amortization (excluding acquisition related
amortization) 3,038 3,030 2,635 2,423 2,462
Adjusted EBITDA
$ 6,680 $ 6,345 $ 12,110 $ 13,148 $ 11,308
Net earnings
(loss) - GAAP $ 718 $
(383)
$ 3,286 $ 4,076 $
(9,653)
Stock-based compensation and related
social taxes,restructuring, impairment, acquisition-related,
integration, andacquisition related amortization, net of tax
4,893 4,016 5,232 6,443 6,372 Unrealized foreign exchange loss
(gain)
(2,292)
1,393
(51)
(1,581)
11,835 Income tax adjustments
(698)
(2,490)
(1,048)
(301)
(1,372)
Net earnings - Non-GAAP $ 2,621 $ 2,536 $ 7,419 $ 8,637 $
7,182
Diluted earnings (loss) per share GAAP - (in
dollars) $ 0.02 $
(0.01)
$ 0.10 $ 0.12 $
(0.30)
Non-GAAP - (in dollars) $ 0.08 $ 0.08 $ 0.23 $ 0.26 $ 0.22
Q1 2016 RECONCILIATION OF GAAP AND NON-GAAP
RESULTS
AcquisitionRelatedAmortization
Acquisition-related &Integration
Stock-basedCompensation& Related
Social Taxes
ForeignExchangeGain
TaxAdjustments
(In thousands of U.S. dollars, except
where otherwise stated)
GAAP Non GAAP Q1 2016 Q1 2016
Revenue 142,797 142,797 Cost of goods sold
95,982 106
95,876 Gross margin 46,815 — — (106 ) —
—
46,921 GM%
32.8 % 32.9 %
Sales and marketing
15,629 403
15,226 Research
and development
18,778 113 358
18,307 Administration
9,527 1,126
8,401 Acquisition-related and integration
374 374
— Amortization
3,762 2,417
1,345 Total
operating expenses
48,070 2,530 374 1,887 — —
43,279
Earnings (loss)
from operations (1,255 ) (2,530 ) (374 ) (1,993 )
— —
3,642 Foreign exchange gain
2,292 2,292
— Other income
26
26 Total other income
2,318 — — — 2,292
—
26
Earnings before income taxes
1,063 (2,530 ) (374 ) (1,993 )
2,292 —
3,668 Income tax expense
345 (4 ) (698
)
1,047
Net earnings 718 (2,530 ) (370 ) (1,993 )
2,292 698
2,621 Diluted
earnings per share 0.02 0.08 Weighted
average diluted shares
32,500 32,500
SIERRA WIRELESS, INC.SEGMENTED
RESULTS
(In thousands of U.S. dollars, except
where otherwise stated)
2016 2015 Q1 Total
Q4 Q3 Q2 Q1
OEM Solutions Revenue $ 120,874 $ 523,366 $ 121,540 $
130,653 $ 138,133 $ 133,040 Gross margin - GAAP $ 34,290 $ 151,807
$ 33,416 $ 37,440 $ 40,990 $ 39,961 - Non-GAAP $ 34,380 $ 152,368 $
33,506 $ 37,563 $ 41,119 $ 40,180 Gross margin % - GAAP 28.4 % 29.0
% 27.5 % 28.7 % 29.7 % 30.0 % - Non-GAAP 28.4 % 29.1 % 27.6 % 28.8
% 29.8 % 30.2 %
Enterprise Solutions Revenue $ 14,995
$ 63,072 $ 16,506 $ 17,734 $ 15,074 $ 13,758
Gross margin(1)
- GAAP $ 9,752 $ 33,127 $ 8,837 $ 8,911 $ 7,917 $ 7,462 - Non-GAAP
$ 9,763 $ 33,192 $ 8,848 $ 8,928 $ 7,930 $ 7,486
Gross margin %(1)
- GAAP 65.0 % 52.5 % 53.5 % 50.2 % 52.5 % 54.2 % - Non-GAAP 65.1 %
52.6 % 53.6 % 50.3 % 52.6 % 54.4 %
Cloud and Connectivity
Services Revenue $ 6,928 $ 21,360 $ 6,800 $ 6,194 $ 4,758 $
3,608 Gross margin - GAAP $ 2,773 $ 8,921 $ 2,810 $ 2,658 $ 2,040 $
1,413 - Non-GAAP $ 2,778 $ 8,942 $ 2,815 $ 2,664 $ 2,045 $ 1,418
Gross margin % - GAAP 40.0 % 41.8 % 41.3 % 42.9 % 42.9 % 39.2 % -
Non-GAAP 40.1 % 41.9 % 41.4 % 43.0 % 43.0 % 39.3 %
(1) Q1 2016 Enterprise Solutions results
include a $1.9 million recovery from a legal settlement with a
supplier related to a quality issue with a component used in some
of our gateway products. Excluding this recovery, GAAP and Non-GAAP
gross margin percentage would have been 52.4% and 52.5%,
respectively.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160505006696/en/
Investor and Media Contact:Sierra WirelessDavid Climie,
+1-604-231-1137Vice President, Investor
Relationsdclimie@sierrawireless.comorInvestor Contact:David
G. McLennan, +1-604-231-1181Chief Financial
Officerinvestor@sierrawireless.com
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