Sierra Wireless Reports Second Quarter 2008 Results
TSX: SW Nasdaq: SWIR
VANCOUVER, July 23 -- Sierra Wireless, Inc. (NASDAQ: SWIR)
(NASDAQ:TSX:)
(NASDAQ:SW)
is reporting second quarter 2008 results.
Our results are reported in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles.
"In the second quarter of 2008, we experienced strong momentum in our business and achieved record quarterly revenue and operating earnings" said Jason Cohenour, President and Chief Executive Officer. "Our revenue grew by 45% and earnings from operations were up 77% compared to the second quarter of 2007. Our strong year over year improvement was driven by continued momentum in sales of our PC Adapter products, growth in our embedded modules business, the addition of AirLink and disciplined cost management.
Looking ahead, our short term view is cautious given the expected erosion in sales of our embedded modules to PC OEMs combined with macro economic uncertainty in our key markets. Longer term, we continue to be encouraged by the growth opportunities in our market segments. Mobile broadband services continue to expand and improve around the world, customer awareness of these compelling services is growing, market segments and applications are expanding and overall market penetration is still very low. Based on this outlook and our confidence in our ability to execute, we are continuing to invest in further strengthening and broadening our market position."
Q2 2008 Financial Results
Our revenue for the second quarter of 2008 amounted to a record $155.7Â million, gross margin was $43.2 million, or 27.8% of revenue, operating expenses were $28.8 million and net earnings were $11.0 million, or diluted earnings per share of $0.35. Our results for Q2 2008 include $0.7 million of pre-tax transaction costs related to the termination of the CradlePoint acquisition. Excluding these transaction costs, earnings per share would have been $0.36. We generated $14.6 million of cash from operations during the second quarter and our balance sheet remains strong, with $217.0 million of cash, short and long-term investments.
Results for the second quarter of 2008, relative to guidance provided on April 29, 2008 are as follows:
Second quarter revenue for 2008 of $155.7 million was better than our
guidance of $154.0 million. Our earnings from operations were $14.4
million, better than our guidance of $13.9 million. Our net earnings of
$11.0 million, or diluted earnings per share of $0.35, were in line with
our guidance of net earnings of $11.0 million, or diluted earnings per
share of $0.35.
Results for the second quarter of 2008, compared to the second quarter of 2007 are as follows:
Second quarter revenue increased by 45% to $155.7 million in 2008 from
$107.4 million for the same period in 2007. Gross margin for the second
quarter of 2008 was 27.8% of revenue, compared to 27.0% for the same
period in 2007. Operating expenses were $28.8 million and earnings from
operations were $14.4 million in the second quarter of 2008, compared to
$20.9 million and $8.1 million, respectively, in the same period of 2007.
Net earnings for the second quarter of 2008 were $11.0 million, or
diluted earnings per share of $0.35, compared to net earnings of $6.7
million, or diluted earnings per share of $0.25, in the same period of
2007.
Our results include stock-based compensation expense and amortization
resulting from the acquisitions of AirPrime, Inc. in 2003 and AirLink in
May 2007. In addition, our results also include transaction costs related
to the termination of the CradlePoint acquisition. Adjusting for these
amounts, our non-GAAP results are as follows:
(in millions of U.S. dollars) Q2 2008 Q2 2007
--------- ---------
Earnings from operations - GAAP $ 14.4 $ 8.1
Stock-based compensation 1.7 1.2
Acquisition related amortization 0.9 0.6
Transaction costs related to terminated acquisition 0.7 -
--------- ---------
Earnings from operations - Non-GAAP $ 17.7 $ 9.9
Net earnings - GAAP $ 11.0 $ 6.7
Net earnings - Non-GAAP 13.3 8.0
Diluted earnings per share - GAAP $ 0.35 $ 0.25
Diluted earnings per share - Non-GAAP 0.42 0.30
Results for the second quarter of 2008, compared to the first quarter of 2008 are as follows:
Revenue for the second quarter of 2008 increased by 10% to
$155.7 million, compared to $141.9 million in the first quarter of 2008.
Gross margin was 27.8% of revenue in the second quarter of 2008, compared
to 27.7% in the first quarter of 2008. Operating expenses were
$28.8 million and earnings from operations were $14.4 million in the
second quarter of 2008, compared to $28.0 million and $11.4 million,
respectively, in the first quarter of 2008. Net earnings for the second
quarter of 2008 were $11.0 million, or diluted earnings per share of
$0.35, compared to net earnings of $9.7 million, or diluted earnings per
share of $0.31, in the first quarter of 2008.
Second Quarter and Recent Highlights Included:
- We launched our new Compass 597 USB modem with Sprint and commenced
commercial volume shipments. The Compass 597 is the smallest USB modem
on the market and supports many innovative features, including
integrated GPS, on board memory for file storage, our TRU-Install
software for rapid, easy installation without a CD and TRU-Flow, which
substantially accelerates data throughput for end users.
- We commenced our first shipments of the Compass 885, our new USB modem
for HSPA networks, to O2 in the UK. The Compass 885 is the smallest
HSPA USB modem on the market and supports the same, robust feature set
as the Compass 597.
- We introduced the MC8790 and MC8790V embedded modules for HSPA
networks which we expect will provide our OEM customers with two new
highly functional, yet cost effective embedded solutions.
- CalAmp Corp. selected our embedded modules to provide mobile broadband
connectivity for CalAmp's recently launched Dataradio CiPHR IP
Router/Radio Modem, a rugged wireless data communications and
networking platform for public safety applications.
- Alcatel-Lucent selected Sierra Wireless to supply embedded modules for
its wireless laptop security, management, and tracking system, the
OmniAccess 3500 Nonstop Laptop Guardian (NLG). The NLG is currently
available to enterprises through Sprint as the SprintSecure Laptop
Guardian.
- ERCO & GENER, a provider of communication systems for the French and
export markets, selected our embedded modules to provide HSPA network
connectivity for the GenPro 30e modem. The GenPro 30e modem is
designed for M2M applications and is currently available in several
European markets.
- We announced a significant enhancement to our line of AirLink(TM) MP
rugged intelligent gateways. The new MP 595W, MP 880W and MP 881W
intelligent gateways support Wi-Fi hotspot and full routing
capabilities to simplify installation and communication between the
gateways and mobile computers.
- We announced the addition of IPsec virtual private network security
enhancements to ALEOS(TM), the robust embedded intelligence available
exclusively in our line of AirLink intelligent wireless gateways. This
enhancement will improve data security on ALEOS-powered Sierra
Wireless AirLink platforms.
- We added the PinPoint XT, an intelligent gateway ideally suited for
vehicle tracking, fleet management and telematics solutions, to our
AirLink product line. The PinPoint XT is expected to be available for
GSM and CDMA networks worldwide in the second half of 2008.
- The AirLink HSUPA product line was certified for use on the AT&T
BroadbandConnect high-speed wireless network in the United States. The
AirLink Raven X, Pinpoint X and MP 881W are the first HSUPA-enabled
standalone rugged mobile and M2M devices available that take full
advantage of the faster data speeds provided by AT&T's HSUPA network.
- On April 7, 2008, we signed a definitive agreement to acquire
CradlePoint, Inc. Under the terms of the definitive agreement, we had
expected to pay cash consideration of $21.8 million and would have
issued 462,963 shares to the shareholders of CradlePoint. On July 7,
2008, we announced that we had terminated the agreement to acquire
CradlePoint as a result of one of the conditions of closing not being
met.
- During the second quarter, we received regulatory approval to purchase
up to 1,567,378 of our common shares (representing approximately 5% of
our common shares outstanding as of May 21, 2008) by way of a normal
course issuer bid ("the Bid") on the Toronto Stock Exchange and the
NASDAQ Global Market. As of June 30, 2008, no common shares have been
purchased under the Bid.
Financial Guidance
The following guidance for the third quarter of 2008 reflects our current business indicators and expectations.
Our guidance for the third quarter reflects the expected erosion in sales of our embedded modules to PC OEMs combined with macro economic uncertainty in our key markets.
Inherent in this guidance are risk factors that are described in 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.
Non-GAAP Adjustments
-----------------------------
Q3 2008 Acquisition Non-
Guidance GAAP Stock Comp Amortization(1) GAAP
---------- -------------- -------------- ------------- -------------
Revenue $140.0 million $140.0 million
Earnings from
operations $11.0 million $1.7 million $0.7 million $13.4 million
Net earnings $8.5 million $1.1 million $0.5 million $10.1 million
Diluted
earnings per
share $ 0.27/share $0.32/share
(1) Represents purchase price amortization associated with the
acquisition of AirLink Communications, Inc. in May 2007 and the
acquisition of AirPrime, Inc. in 2003.
Conference Call, Webcast and Instant Replay
We will host a conference call to review our results on Wednesday, July 23, 2008 at 2:30 PM PST, 5:30 PM EST. You can participate in the conference call either via telephone or webcast. To participate in this conference call, please connect approximately ten minutes prior to the commencement of the call.
Telephone participation:
Please dial the following number:
1-800-733-7560 Passcode: Not required
or
1-416-644-3414 Passcode: Not required
Webcast (to listen):
The Company will also broadcast its conference call over the Internet.
To access the web broadcast, click on this URL or enter:
www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2284040
This webcast event will be optimized for Microsoft Windows Media Player
version 9. To download go to:
http://www.microsoft.com/windows/windowsmedia/download.
Should you be unable to participate, Instant Replay (audio) will be available following the conference call for 7 business days.
Audio only dial: 1-877-289-8525 or 1-416-640-1917
Passcode: 21271682 followed by the number sign.
The webcast will be available at the above link for 90 days following the call.
We look forward to having you participate in our call.
Forward-Looking Statements
Certain statements in this press release that are not based on historical facts constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). These forward-looking statements are not promises or guarantees of future performance but are only predictions that relate to future events, conditions or circumstances or our future results, performance, achievements or developments and are subject to substantial known and unknown risks, assumptions, uncertainties and other factors that could cause our actual results, performance, achievements or developments in our business or in our industry to differ materially from those expressed, anticipated or implied by such forward-looking statements. Forward-looking statements include all financial guidance for the third quarter of 2008, disclosure regarding possible events, conditions, circumstances or results of operations that are based on assumptions about future economic conditions, courses of action and other future events. We caution you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. These forward-looking statements appear in a number of different places in this press release and can be identified by words such as "may", "estimates", "projects", "expects", "intends", "believes", "plans", "anticipates", or their negatives or other comparable words. Forward-looking statements include statements regarding the outlook for our future operations, plans and timing for the introduction or enhancement of our services and products, statements concerning strategies or developments, statements about future market conditions, supply conditions, end customer demand conditions, channel inventory and sell through, revenue, gross margin, operating expenses, profits, forecasts of future costs and expenditures, the outcome of legal proceedings, and other expectations, intentions and plans that are not historical fact. The risk factors and uncertainties that may affect our actual results, performance, achievements or developments are many and include, amongst others, our ability to develop, manufacture, supply and market new products that we do not produce today that meet the needs of customers and gain commercial acceptance, our reliance on the deployment of next generation networks by major wireless operators, the continuous commitment of our customers, and increased competition. These risk factors and others are discussed in our Annual Information Form, 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. Many of these factors and uncertainties are beyond the control of the Company. Consequently, all forward-looking statements in this press release are qualified by this cautionary statement and there can be no assurance that actual results, performance, achievements or developments anticipated by the Company will be realized. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions and the Company does not undertake any obligation to update forward-looking statements should the assumptions related to these plans, estimates, projections, beliefs and opinions change.
About Sierra Wireless
Sierra Wireless (NASDAQ:SWIR)
(NASDAQ:-)
(NASDAQ:TSX:)
(NASDAQ:SW)
modems and software connect people and systems to mobile broadband networks around the world. The Company offers a diverse product portfolio addressing enterprise, consumer, original equipment manufacturer, specialized vertical industry, and machine-to-machine markets, and provides professional services to customers requiring expertise in wireless design, integration and carrier certification. For more information about Sierra Wireless, visit www.sierrawireless.com.
"AirCard" is a registered trademark 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 Deficit
(Expressed in thousands of United States dollars,
except per share amounts)
(Prepared in accordance with United States generally accepted
accounting principles (GAAP))
(Unaudited)
Three months ended Six months ended
--------------------- ---------------------
June 30, June 30,
---------- ----------
2008 2007 2008 2007
--------- --------- --------- ----------
Revenue...................... $ 155,698 $ 107,379 $ 297,647 $ 192,807
Cost of goods sold........... 112,490 78,383 215,104 140,494
--------- --------- --------- ----------
Gross margin................. 43,208 28,996 82,543 52,313
--------- --------- --------- ----------
Expenses
Sales and marketing........ 7,928 4,923 15,763 9,020
Research and development... 14,063 11,606 27,832 21,491
Administration............. 5,601 3,448 10,685 6,589
Amortization............... 1,212 889 2,493 1,557
--------- --------- --------- ----------
28,804 20,866 56,773 38,657
--------- --------- --------- ----------
Earnings from operations..... 14,404 8,130 25,770 13,656
Other income................. 1,269 758 3,728 2,007
--------- --------- --------- ----------
Earnings before
income taxes................ 15,673 8,888 29,498 15,663
Income tax expense........... 4,702 2,218 8,850 3,736
--------- --------- --------- ----------
Net earnings................. 10,971 6,670 20,648 11,927
Deficit, beginning
of period................... (30,925) (67,804) (40,602) (73,061)
--------- --------- --------- ----------
Deficit, end of period....... $ (19,954) $ (61,134) $ (19,954) $ (61,134)
--------- --------- --------- ----------
--------- --------- --------- ----------
Earnings per share for
the period:
Basic...................... $ 0.35 $ 0.25 $ 0.66 $ 0.46
Diluted.................... $ 0.35 $ 0.25 $ 0.66 $ 0.45
--------- --------- --------- ----------
--------- --------- --------- ----------
Weighted average number of
shares (in thousands)
Basic...................... 31,371 26,405 31,356 26,065
Diluted.................... 31,512 26,722 31,469 26,340
--------- --------- --------- ----------
--------- --------- --------- ----------
SIERRA WIRELESS, INC.
Consolidated Balance Sheets
(Expressed in thousands of United States dollars)
(Prepared in accordance with United States GAAP)
June December
---------- ----------
30, 2008 31, 2007
---------- ----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents....................... $ 143,641 $ 83,624
Short-term investments.......................... 53,598 92,980
Accounts receivable............................. 98,358 83,015
Inventories..................................... 26,912 24,989
Deferred income taxes........................... 3,224 3,556
Prepaid expenses................................ 7,744 9,229
---------- ----------
333,477 297,393
Long-term investments............................. 19,764 19,757
Fixed assets...................................... 20,011 15,274
Intangible assets................................. 16,298 17,418
Goodwill.......................................... 31,996 32,541
Deferred income taxes............................. 1,359 1,156
Other............................................. - 1,482
---------- ----------
$ 422,905 $ 385,021
---------- ----------
---------- ----------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable................................ $ 36,698 $ 31,163
Accrued liabilities............................. 63,044 53,691
Deferred revenue and credits.................... 363 534
Current portion of long-term liabilities........ 252 277
---------- ----------
100,357 85,665
Long-term liabilities............................. 466 581
Deferred income taxes............................. 3,151 3,451
Shareholders' equity:
Share capital................................... 329,205 328,323
Additional paid-in capital...................... 8,461 6,374
Warrants........................................ 1,538 1,538
Deficit......................................... (19,954) (40,602)
Accumulated other comprehensive loss............ (319) (309)
---------- ----------
318,931 295,324
---------- ----------
$ 422,905 $ 385,021
---------- ----------
---------- ----------
SIERRA WIRELESS, INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of United States dollars)
(Prepared in accordance with United States GAAP)
(Unaudited)
Three months ended Six months ended
--------------------- ---------------------
June 30, June 30,
---------- ----------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Cash flows from operating
activities:
Net earnings for the
period.................... $ 10,971 $ 6,670 $ 20,648 $ 11,927
Adjustments to reconcile
net earnings to net
cash provided by operating
activities
Amortization............... 4,028 4,116 7,799 6,925
Stock-based compensation..... 1,657 1,219 3,295 2,104
Loss (gain) on disposal.... (2) (20) 73 (20)
Utilization of
pre-acquisition
tax losses................ - 602 - 802
Deferred income taxes...... (54) 41 (170) 41
Changes in operating assets
and liabilities
Accounts receivable........ 2,434 (16,220) (16,311) (8,715)
Inventories................ 3,215 (4,492) (1,924) (13,548)
Prepaid expenses and
other assets.............. 2,115 1,075 2,967 2,349
Accounts payable........... (11,867) 7,193 5,535 18,353
Accrued liabilities........ 2,124 6,783 9,354 (3,495)
Deferred revenue
and credits............... (15) (9) (171) 217
---------- ---------- ---------- ----------
Net cash provided by
operating activities........ 14,606 6,958 31,095 16,940
Cash flows from investing
activities:
Business acquisitions...... (35) (11,512) (35) (11,893)
Proceeds on disposal....... 2 21 2 21
Purchase of fixed assets... (5,110) (1,893) (10,019) (4,719)
Increase in intangible
assets.................... (595) (205) (884) (382)
Purchase of short-term
investments............... (38,024) (9,602) (75,596) (64,104)
Proceeds on maturity of
short-term investments.... 69,723 49,664 115,920 86,874
---------- ---------- ---------- ----------
Net cash provided by
investing activities........ 25,961 26,473 29,388 5,797
Cash flows from financing
activities:
Issue of common shares, net
of share issue costs...... 607 2,420 684 2,549
Purchase of shares for
restricted share
unit plan................. (1,011) - (1,011) -
Increase (decrease) in
long-term liabilities..... (46) 12 (139) (497)
---------- ---------- ---------- ----------
Net cash provided by (used
in) financing activities.. (450) 2,432 (466) 2,052
---------- ---------- ---------- ----------
Net increase in cash and
cash equivalents............ 40,117 35,863 60,017 24,789
Cash and cash equivalents,
beginning of period......... 103,524 35,364 83,624 46,438
---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period............... $ 143,641 $ 71,227 $ 143,641 $ 71,227
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
