Sierra Wireless Reports Third Quarter 2008 Results
TSX: SW NASDAQ: SWIR
VANCOUVER, Oct. 28 -- Sierra Wireless, Inc. (NASDAQ: SWIR)
(NASDAQ:TSX:)
(NASDAQ:SW)
is reporting third quarter 2008 results.
Our results are reported in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles.
"During the third quarter of 2008, we achieved 23% year-over-year revenue growth and record cash flow from operations." said Jason Cohenour, President and Chief Executive Officer. "While our year-over-year revenue growth and cash performance was strong, our results fell short of our expectations as a result of missing an expected product launch with a large wireless operator. Notwithstanding our disappointment about the missed product launch, we are encouraged by the strong revenue performance from our recently launched USB products in the face of stiff economic headwinds, as well as the achievement of several important product launches and strategic milestones during the quarter. The success of our new Compass885 for HSPA networks is particularly notable. This product was launched as the USBConnect Mercury by AT&T during the quarter, and by several other operators in Europe and Asia as well. With respect to strategic developments, we commenced a close development collaboration with Telstra, Qualcomm and Ericsson to launch the world's first HSPA+ network service and device, once again highlighting the strength of our position as an innovative developer of products for the world's latest wireless technologies.
Looking ahead, our short term view is cautious given the macro economic conditions in our key markets and expected erosion in sales of our embedded modules to PC OEMs. 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."
Q3 2008 Financial Results
Our revenue for the third quarter of 2008 amounted to $136.8 million, gross margin was $37.8 million, or 27.6% of revenue, operating expenses were $27.9 million and net earnings were $7.3 million, or diluted earnings per share of $0.23. We generated a record $22.8 million of cash from operations during the third quarter and our balance sheet remains strong, with $227.3Â million of cash, short and long-term investments.
Results for the third quarter of 2008, relative to guidance provided on July 23, 2008 are as follows:
Third quarter revenue for 2008 of $136.8 million was lower than our
guidance of $140.0 million. Our earnings from operations were
$9.8 million, lower than our guidance of $11.0 million. Our net earnings
of $7.3 million, or diluted earnings per share of $0.23, were lower than
our guidance of net earnings of $8.5 million, or diluted earnings per
share of $0.27.
Results for the third quarter of 2008 compared to the third quarter of 2007 are as follows:
Third quarter revenue increased by 23% to $136.8 million in 2008 from
$111.5 million for the same period in 2007. Gross margin for the third
quarter of 2008 was 27.6% of revenue, compared to 29.7% for the same
period in 2007. Operating expenses were $27.9 million and earnings from
operations were $9.8Â million in the third quarter of 2008, compared to
$21.4 million and $11.6Â million, respectively, in the same period of
2007. Net earnings for the third quarter of 2008 were $7.3 million, or
diluted earnings per share of $0.23, compared to net earnings of $9.0
million, or diluted earnings per share of $0.33, in the same period of
2007. Our weighted average shares outstanding used in calculating
earnings per share increased to 31.3 million in the third quarter of 2008
from 27.7 million in the prior year, primarily as a result of the
issuance of 3.8 million shares in our October 2007 public offering.
Our results include stock-based compensation expense and amortization
resulting from the acquisitions of AirPrime, Inc. in 2003 and AirLink in
May 2007. Adjusting for these amounts, our non-GAAP results are as
follows:
(in millions of U.S. dollars) Q3 2008 Q3 2007
---------- ----------
Earnings from operations - GAAP $ 9.8 $ 11.6
Stock-based compensation 1.6 1.5
Acquisition related amortization 0.7 1.0
---------- ----------
Earnings from operations - Non-GAAP $ 12.1 $ 14.1
Net earnings - GAAP $ 7.3 $ 9.0
Net earnings - Non-GAAP 8.9 10.9
Diluted earnings per share - GAAP $ 0.23 $ 0.33
Diluted earnings per share - Non-GAAP 0.28 0.39
Results for the third quarter of 2008, compared to the second quarter of 2008 are as follows:
Revenue for the third quarter of 2008 decreased by 12% to $136.8 million,
compared to $155.7 million in the second quarter of 2008. Gross margin
was 27.6% of revenue in the third quarter of 2008, compared to 27.8% in
the second quarter of 2008. Operating expenses were $27.9 million and
earnings from operations were $9.8 million in the third quarter of 2008,
compared to $28.8Â million and $14.4 million, respectively, in the second
quarter of 2008. Net earnings for the third quarter of 2008 were $7.3
million, or diluted earnings per share of $0.23, compared to net earnings
of $11.0 million, or diluted earnings per share of $0.35, in the second
quarter of 2008.
Third Quarter and Recent Highlights Included:
- Together with AT&T, we announced the availability of the AT&T
USBConnect Mercury, also known as the Sierra Wireless Compass885, the
smallest device in AT&T's lineup of HSPA LaptopConnect devices.
- We also announced the availability of our Compass885 HSPA USB modem
with O2 in the UK, Swisscom in Switzerland and Telstra in Australia.
During the quarter, we commenced commercial shipments of the
Compass885 to other operators around the world as well. The
Compass885 is our latest HSPA device, featuring download speeds of up
to 7.2 Mbps, upload speeds of up to 2 Mbps, on board file storage and
TRU-Install set up capability.
- We announced that our latest EVDO Rev A mobile broadband modem, the
Compass 597, is now available from TELUS in Canada and from Telecom
New Zealand.
- We partnered with Telstra and NetComm Limited to launch two new
mobile broadband devices, the Telstra Turbo 7 Series Wireless Gateway
and BigPond 7.2 Wireless Broadband Home Network Gateway, each of
which combine three capabilities in one unit - super-fast mobile
broadband, a secure Wi-Fi Gateway and Ethernet connectivity.
- Microboard, a leading notebook computer supplier in Brazil, selected
our embedded modules to provide 3G wireless connectivity to the
Microboard Ellite notebook computer. The Microboard Ellite 3G
notebook is available in Brazil with service on the Claro mobile
broadband network, and can be purchased in Claro retail stores.
- We announced the availability of a new software development kit (SDK)
for Original Equipment Manufacturers supporting Windows CE operating
systems. The Windows CE SDK offers OEM customers a more streamlined
and cost efficient development cycle for devices using Sierra
Wireless 3G embedded modules.
- We announced that our ALEOS(TM) embedded intelligence software has
been enhanced and now includes events reporting capabilities for the
AirLink(TM) PinPoint X and PinPoint XT mobile gateways. The ALEOS
Events Reporting Engine provides PinPoint customers with real-time
event status that is highly customizable and can be remotely managed,
controlled, and configured.
- CalAmp selected our embedded modules to provide 3G wireless broadband
connectivity for CalAmp's recently launched WiMetry Internet
Protocol-based wireless communications platform used in Automatic
Meter Reading and Advanced Metering Infrastructure applications.
- OneAccess, a leading European supplier of networking equipment
located in France, selected our HSPA embedded modules to provide 3G
mobile broadband connectivity for the new ONECell35 business router.
The ONECell35 leverages the 3G services offered by mobile operators
to provide users with high speed wireless back up capability.
- We introduced the MC8792V for HSPA networks, the first Sierra
Wireless embedded module to offer UMTS 900 MHz frequency band
support, providing new and existing OEM customers the ability to
expand their product offering with this feature-rich mobile broadband
solution.
- We completed an agreement to purchase the assets of Junxion, Inc., an
innovative supplier of routers and device management solutions for
machine to machine applications. The transaction has closed and
Junxion products and technology are being integrated into our Mobile
and M2M product plans.
- During the second quarter, we received regulatory approval to
purchase up to 1,567,378 of our common shares by way of a normal
course issuer bid on the Toronto Stock Exchange and the NASDAQ Global
Market. As of September 30, 2008, 407,700 common shares were
purchased and subsequently cancelled.
Financial Guidance
The following guidance for the fourth quarter of 2008 reflects our current business indicators and expectations.
Our guidance for the fourth quarter reflects expected erosion in sales of our embedded modules to PC OEMs, combined with macro economic headwinds in our key markets. Our guidance also includes revenue contribution from expected new product launches and the uncertainties associated with these launches could affect our ability to achieve guidance.
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.
Non-GAAP Adjustments
----------------------------
Stock Acquisition
Q4 2008 Guidance GAAP Comp Amortization(1) Non-GAAP
---------------- ----- ------ ---------------- ---------
Revenue $140.0 million $140.0 million
Earnings from
operations $10.0 million $1.6 million $0.6 million $12.2 million
Net earnings $7.3 million $1.1 million $0.5 million $8.9 million
Diluted earnings
per share $0.23/share $0.28/share
(1) Represents purchase price amortization associated with the
acquisition of AirLink Communications, Inc. in May 2007.
Conference Call, Webcast and Instant Replay
We will host a conference call to review our results on Tuesday, October 28, 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:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2381500
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: 21280223 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.
Cautionary Note Regarding 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 the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian 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 in this press release include all financial guidance for the fourth quarter of 2008, and all other 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", "continue", "growing", "expanding", 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 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. Many of these factors and uncertainties are beyond our control. Consequently, all forward-looking statements in this press release are qualified by this cautionary statement and we cannot assure you that actual results, performance, achievements or developments that we anticipate will be realized. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions and we do not undertake any obligation to update forward-looking statements should the assumptions related to these plans, estimates, projections, beliefs and opinions change, except as required by law.
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 Nine months ended
------------------ -----------------
September 30, September 30,
------------- -------------
2008 2007 2008 2007
---- ---- ---- ----
Revenue................... $ 136,794 $ 111,515 $ 434,441 $ 304,322
Cost of goods sold........ 99,025 78,446 314,129 218,940
---------- ---------- ---------- ----------
Gross margin.............. 37,769 33,069 120,312 85,382
---------- ---------- ---------- ----------
Expenses:
Sales and marketing..... 8,717 5,963 24,480 14,983
Research and
development............ 13,062 9,692 40,894 31,183
Administration.......... 5,011 4,508 15,696 11,097
Amortization............ 1,135 1,271 3,628 2,828
---------- ---------- ---------- ----------
27,925 21,434 84,698 60,091
---------- ---------- ---------- ----------
Earnings from
operations............... 9,844 11,635 35,614 25,291
Other income.............. 522 743 4,250 2,750
---------- ---------- ---------- ----------
Earnings before income
taxes.................... 10,366 12,378 39,864 28,041
Income tax expense........ 3,110 3,343 11,960 7,079
---------- ---------- ---------- ----------
Net earnings.............. 7,256 9,035 27,904 20,962
Deficit, beginning of
period................... (19,954) (61,134) (40,602) (73,061)
Excess of purchase price
over assigned value of
common shares............ (708) - (708) -
---------- ---------- ---------- ----------
Deficit, end of period ... $ (13,406) $ (52,099) $ (13,406) $ (52,099)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share for the period:
Basic................... $ 0.23 $ 0.33 $ 0.89 $ 0.79
Diluted................. $ 0.23 $ 0.33 $ 0.89 $ 0.78
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of shares (in thousands):
Basic................... 31,273 27,355 31,328 26,509
Diluted................. 31,324 27,674 31,421 26,799
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SIERRA WIRELESS, INC.
Consolidated Balance Sheets
(Expressed in thousands of United States dollars)
(Prepared in accordance with United States GAAP)
September December
--------- --------
30, 2008 31, 2007
--------- --------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents....................... $ 119,385 $ 83,624
Short-term investments.......................... 82,861 92,980
Accounts receivable............................. 88,713 83,015
Inventories..................................... 33,284 24,989
Deferred income taxes........................... 1,760 3,556
Prepaid expenses................................ 5,788 9,229
---------- ----------
331,791 297,393
Long-term investments............................. 25,047 19,757
Fixed assets...................................... 21,892 15,274
Intangible assets................................. 15,979 17,418
Goodwill.......................................... 33,007 32,541
Deferred income taxes............................. 1,359 1,156
Other............................................. - 1,482
---------- ----------
$ 429,075 $ 385,021
---------- ----------
---------- ----------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable................................ $ 39,447 $ 31,163
Accrued liabilities............................. 63,830 53,691
Deferred revenue and credits.................... 544 534
Current portion of long-term liabilities........ 231 277
---------- ----------
104,052 85,665
Long-term liabilities............................. 404 581
Deferred income taxes............................. 2,959 3,451
Shareholders' equity:
Share capital................................... 324,406 328,323
Additional paid-in capital...................... 9,456 6,374
Warrants........................................ 1,538 1,538
Deficit......................................... (13,406) (40,602)
Accumulated other comprehensive loss............ (334) (309)
---------- ----------
321,660 295,324
---------- ----------
$ 429,075 $ 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 Nine months ended
------------------ -----------------
September 30, September 30,
------------- -------------
2008 2007 2008 2007
---- ---- ---- ----
Cash flows from operating
activities:
Net earnings for the
period................. $ 7,256 $ 9,035 $ 27,904 $ 20,962
Adjustments to reconcile
net earnings to net
cash provided by
operating activities
Amortization.......... 4,076 3,520 11,875 10,445
Stock-based
compensation......... 1,618 1,510 4,913 3,614
Tax benefit related to
stock option
deduction............ - 635 - 635
Loss (gain) on
disposal............. - - 73 (20)
Utilization of
pre-acquisition tax
losses............... - - - 802
Deferred income
taxes................ 1,272 373 1,102 414
Changes in operating
assets and liabilities
Accounts receivable... 9,230 (604) (7,081) (9,319)
Inventories........... (6,371) 7,642 (8,295) (5,906)
Prepaid expenses and
other assets......... 1,956 1,292 4,923 3,641
Accounts payable...... 2,750 (11,716) 8,285 6,637
Accrued liabilities... 785 2,787 10,139 (708)
Deferred revenue and
credits.............. 180 (241) 9 (24)
---------- ---------- ---------- ----------
Net cash provided by
operating activities... 22,752 14,233 53,847 31,173
Cash flows from investing
activities:
Business acquisition.. - (264) (35) (12,157)
Proceeds on disposal.. - - 2 21
Purchase of fixed
assets............... (4,971) (2,073) (14,990) (6,792)
Increase in intangible
assets............... (1,694) (379) (2,578) (761)
Purchase of long-term
investments.......... (5,169) (4,310) (5,169) (4,310)
Purchase of short-term
investments.......... (67,175) (36,532) (142,771) (100,636)
Proceeds on maturity
of short-term
investments.......... 38,214 13,922 154,134 100,796
---------- ---------- ---------- ----------
Net cash used by
investing activities... (40,795) (29,636) (11,407) (23,839)
Cash flows from financing
activities:
Issue of common shares,
net of share issue
costs................ 339 744 1,023 3,293
Purchase of shares for
restricted share unit
plans................ (1,487) - (2,498) -
Repurchase of common
shares............... (4,982) - (4,982) -
Increase (decrease) in
long-term
liabilities.......... (83) 16 (222) (481)
---------- ---------- ---------- ----------
Net cash provided by
(used in) financing
activities............. (6,213) 760 (6,679) 2,812
---------- ---------- ---------- ----------
Net increase (decrease) in
cash and cash
equivalents.............. (24,256) (14,643) 35,761 10,146
Cash and cash equivalents,
beginning of period...... 143,641 71,227 83,624 46,438
---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period............ $ 119,385 $ 56,584 $ 119,385 $ 56,584
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
