Sierra Wireless Reports First Quarter 2009 Results
TSX: SW NASDAQ: SWIR
VANCOUVER, April 30 -- Sierra Wireless, Inc. (NASDAQ:SWIR)
(NASDAQ:TSX:)
(NASDAQ:SW)
is reporting first quarter 2009 results.
Our results are reported in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles.
"In the first quarter of 2009, we posted better than expected financial results, introduced and launched several market leading products and completed our acquisition of Wavecom," said Jason Cohenour, President and Chief Executive Officer. "Our first quarter revenue, non-GAAP earnings and cash flow from operations were all better than expected. We launched the world's first HSPA+ products with Telstra in Australia and CSL in Hong Kong, while also introducing new embedded module solutions and launching important high volume successor products with key customers.
While executing on our business, we were also able to complete our acquisition of Wavecom and acquire the voting rights required to implement the squeeze out of the remaining shareholders. We built strong momentum with our integration activities and demonstrated the power of our combination at the CTIA conference in April and with key customers. We firmly believe that this combination will establish Sierra Wireless as a uniquely positioned global leader in wireless for mobile computing and M2M.
As we look forward, we are focused on continued strong business execution in a challenging environment and a successful integration with Wavecom. We remain confident that when the business cycle strengthens, we will be well positioned with a broad and diversified product line, a long list of blue chip customers and partners, a strong global presence and an excellent team."
Q1 2009 Financial Results - GAAP
Our revenue for the first quarter of 2009 amounted to $111.4 million, gross margin was $30.7 million, or 27.6% of revenue, operating expenses were $41.0 million, loss from operations was $10.3 million and our net loss was $23.7 million, or loss per share of $0.76.
Q1 2009 Financial Results - Non-GAAP
Our non-GAAP results exclude the results of Wavecom from the date of acquisition until March 31, 2009, transaction costs related to Wavecom, restructuring costs, integration costs, stock based compensation expense, acquisition related amortization, and foreign exchange gains and losses and interest expense related to the Wavecom acquisition. Adjusting for these amounts, our non-GAAP results for Q1 2009 are as follows:
(in millions of U.S. dollars) Q1 09 Q1 08
----- -----
Revenue - GAAP...................................... $ 111.4 $ 141.9
Wavecom revenue from March 1, 2009 to
March 31, 2009................................... (11.0) -
--------- ---------
Revenue - Non-GAAP.................................. $ 100.4 $ 141.9
--------- ---------
Gross margin - GAAP $ 30.7 $ 39.3
Wavecom gross margin from March 1, 2009 to
March 31, 2009................................... (3.5) -
Stock-based compensation.......................... 0.1 0.1
--------- ---------
Gross margin - Non-GAAP............................. $ 27.3 $ 39.4
--------- ---------
Earnings (loss) from operations - GAAP.............. $ (10.3) $ 11.4
Wavecom loss from operations from March 1, 2009 to
March 31, 2009................................... 3.0 -
Transaction costs................................. 6.5 -
Restructuring costs............................... 1.1 -
Integration costs................................. 0.3 -
Stock-based compensation.......................... 2.0 1.6
Acquisition related amortization.................. 2.2 1.0
--------- ---------
Earnings from operations - Non-GAAP................. $ 4.8 $ 14.0
--------- ---------
Net earnings (loss) - GAAP.......................... $ (23.7) $ 9.7
Wavecom net loss from March 1, 2009 to
March 31, 2009................................... 3.0 -
Transaction, restructuring, integration, stock-based
compensation and acquisition amortization costs, net
of tax........................................... 11.9 1.8
Unrealized foreign exchange loss.................. 9.1 -
Interest expense.................................. 4.3 -
Non-controlling interest.......................... (0.3) -
--------- ---------
Net earnings - Non-GAAP............................. $ 4.3 $ 11.5
--------- ---------
Diluted earnings (loss) per share - GAAP............ $ (0.76) $ 0.31
Diluted earnings per share - Non-GAAP............... 0.14 0.37
On a non-GAAP basis, results for the first quarter of 2009, relative to guidance provided on February 10, 2009 are as follows:
First quarter revenue for 2009 of $100.4 million was better than our
guidance of $93.0 million. Our earnings from operations were
$4.8 million, better than our guidance of a loss from operations of
$0.5 million. Our net earnings of $4.3 million, or diluted earnings per
share of $0.14, were better than our guidance of net earnings and diluted
earnings per share of nil.
On a non-GAAP basis, results for the first quarter of 2009, compared to the first quarter of 2008 are as follows:
First quarter revenue decreased by 29% to $100.4 million in 2009,
compared to $141.9 million for the same period in 2008. Gross margin for
the first quarter of 2009 was 27.2% of revenue, compared to 27.8% for the
same period in 2008. Operating expenses were $22.4 million and earnings
from operations were $4.8 million in the first quarter of 2009, compared
to $25.5 million and $14.0 million, respectively, in the same period of
2008. Net earnings for the first quarter of 2009 were $4.3 million, or
diluted earnings per share of $0.14, compared to net earnings of
$11.5 million, or diluted earnings per share of $0.37, in the same period
of 2008. Our weighted average shares outstanding used in calculating
earnings per share decreased to 31.0 million in the first quarter of 2009
from 31.4 million in the prior year because our options outstanding did
not have any dilutive impact and we had repurchased shares under our
normal course issuer bid.
On a non-GAAP basis, results for the first quarter of 2009, compared to the fourth quarter of 2008 are as follows:
Revenue for the first quarter of 2009 decreased by 24% to $100.4 million,
compared to $132.9 million in the fourth quarter of 2008. Gross margin
was 27.2% of revenue in the first quarter of 2009, compared to 27.5% in
the fourth quarter of 2008. Operating expenses were $22.4 million and
earnings from operations were $4.8 million in the first quarter of 2009,
compared to $25.5 million and $11.1 million, respectively, in the fourth
quarter of 2008. Net earnings for the first quarter of 2009 were
$4.3 million, or diluted earnings per share of $0.14, compared to net
earnings of $11.2 million, or diluted earnings per share of $0.36, in the
fourth quarter of 2008.
Our balance sheet remains strong, with $145.1 million of cash, cash equivalents and short-term investments at March 31, 2009. Of the $145.1 million, $29.5 million is restricted cash that provides security for the letter of credit issued in connection with the acquisition of Wavecom. In the first quarter of 2009, we generated $10.5 million of cash from operations on a GAAP basis. On a non-GAAP basis, we generated approximately $4.5 million of cash from operations.
First Quarter and Recent Highlights Included:
- We launched our USB 598 modem for EV-DO Rev A networks with Sprint for
use on the Sprint Mobile Broadband Network.
- We announced that our USB 598 is available for use on the Verizon
Wireless network, following successful completion of testing under the
operator's Open Development Initiative.
- We introduced our USB 306 and USB 307, the world's first mobile
broadband USB modems for HSPA+ networks. The new modems nearly triple
the speed of other mobile broadband devices, with peak download speeds
of 21 megabits per second (Mbps), making them the fastest mobile
broadband devices available.
- Our new USB modem for HSPA+ networks became commercially available in
Telstra's retail stores. The Next G Turbo 21 modem, also known as the
Sierra Wireless USB 306, is the world's first commercially available
HSPA+ mobile broadband modem.
- CSL Limited, a mobile network operator in Hong Kong, selected two
Sierra Wireless USB modems to provide high-speed wireless connectivity
for notebook computer users on the CSL network. The 1010 Next G
Express 7, an HSPA USB modem also known as the Compass 889, is
currently available and the 1010 Next G Express 21, an HSPA+ USB modem
also known as the USB 306, is expected to be available in April
through CSL's retail brands and enterprise channels.
- In February, we collaborated with Telefónica to demonstrate HSPA+
mobile broadband technology at Mobile World Congress in Barcelona,
using the new Sierra Wireless USB 306.
- We introduced our AirCard 402 for EV-DO Rev A networks, a 2-in-1
mobile broadband card designed to fit both PC card and ExpressCard
slots, ensuring compatibility for future notebook upgrades. Our
AirCard 402 commenced commercial shipments in Q1 and was launched by
Sprint early in Q2.
- We introduced our new embedded module for HSPA+ networks, the MC8700,
that allows OEMs to take advantage of the fastest mobile broadband
speed available worldwide. Our MC8700 offers downlink speeds of up to
21 Mbps and uplink speeds of up to 5.76 Mbps.
- Magneti Marelli, a broad range automotive supplier, selected our
mobile broadband embedded modules with EMConnect(TM) firmware features
for integration into its telematics products for safety, entertainment
and satellite navigation applications.
- We introduced our new AirLink Helix line of integrated 3G wireless
routers that provide critical business continuity and remote site
connectivity with onboard intelligence, extensive routing features and
comprehensive remote management capabilities.
- We announced that our AirLink line of intelligent Mobile and M2M
(machine-to-machine) gateways, initially the PinPoint X and the Raven
X, are expected to be available in Australia in the second quarter of
2009.
- Wavecom and Telenor Connexion signed an agreement that allows them to
offer a solution that provides easy accessibility to Telenor's network
with Wavecom Wireless CPU devices by embedding the Telenor Connexion
SIM component into the Wavecom devices. This solution targets high-
volume applications such as telematics systems for automotive, on-
board equipment for intelligent transport systems and smart meters for
utility companies.
- We announced our first technology collaboration with Wavecom with our
EVDO Fastrack Extreme, a wireless CPU that is equipped with our MC5727
EV-DO Rev A embedded module.
- Our test laboratories in Richmond, BC, Canada and Carlsbad, CA, USA
were granted CTIA Authorized Test Lab status which allows our OEM
customers to undergo Over The Air (OTA) performance testing in our
facilities, rather than having to send their solutions to an outside
lab, thereby streamlining the development and launch process.
- We announced the expansion of our patent-pending TRU-Flow(TM)
technology to include interoperability with Sierra Wireless EV-DO
products. First launched in the company's HSPA product line in 2007 to
address the issue of reduced data transfer speed during simultaneous
upload and download, TRU-Flow is the only technology in the world to
improve web page load times during uplink congestion, even with a
virtual private network connection enabled.
Acquisition of Wavecom S.A.
On December 2, 2008, we announced an all-cash offer to purchase the ordinary shares and OCEANE convertible bonds ("OCEANEs") of Wavecom S.A. ("Wavecom"), a global leader in wireless M2M solutions. The total value of the transaction was approximately EUR 218 million, representing an enterprise value of approximately EUR 85.5 million. We made a cash offer of EUR 8.50 per ordinary share of Wavecom, and EUR 31.93 per OCEANE. The transaction was implemented by way of concurrent but separate public tender offers in both France and the United States for all Wavecom shares, all American Depository Shares ("ADSs") representing Wavecom's ordinary shares and all OCEANEs issued by Wavecom. On February 27, 2009, we completed our acquisition of 90.57% of the voting rights of Wavecom and on March 11, 2009, we announced the re-opening of the tender offer for a subsequent offering period which expired on March 31, 2009.
In total, the first offer and subsequent offer resulted in 14,401,859 ordinary shares (including ordinary shares represented by ADSs) and 2,571,037 OCEANEs being tendered. In addition, we also purchased 160,643 Wavecom ordinary shares on the market during the subsequent offering period. Taking into account the treasury shares and the shares held by officers and employees that are subject to put/call arrangements, as of the close of the subsequent offering period, we had acquired 95.4% of the voting rights of Wavecom.
In accordance with applicable laws and regulations, we intend to implement a squeeze-out of the Wavecom shares and OCEANEs that have not been tendered to the offer and to request the delisting of Wavecom shares and OCEANEs from Euronext and ADSs from Nasdaq. We expect the squeeze-out and delisting to be completed during the second quarter of 2009.
We expect the combination to establish Sierra Wireless as a uniquely positioned global leader in wireless for mobile computing and M2M. We expect the acquisition to significantly expand our position in the global M2M market and increase our scale and capabilities in Europe and Asia.
Expense Reduction Program
On January 29, 2009, we implemented an expense reduction program that is expected to reduce labor costs by approximately $5.5 million on an annualized basis. This program, which was completed during the first quarter of 2009, included the elimination of approximately 56 positions, representing 10% of our workforce. In the first quarter of 2009, we incurred a pre-tax charge of approximately $1.6 million, which includes $0.5 million of stock-based compensation expense. The organizational changes included the resignation of Mr. Trent Punnett, Senior Vice-President, Marketing and Corporate Development.
Financial Guidance
The following guidance for the second quarter of 2009 reflects our current business indicators and expectations. This guidance is presented on a non-GAAP basis, which excludes Wavecom transaction and integration costs, restructuring costs, stock-based compensation expense, acquisition amortization and foreign exchange on amounts related to the Wavecom acquisition.
Our guidance for the second quarter of 2009 reflects the uncertain macro economic environment. Our guidance also includes some 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.
Sierra Wavecom Consolidated
------ ------- ------------
Q2 2009 Guidance Non-GAAP Non-GAAP Non-GAAP
---------------- -------- -------- --------
Revenue $108.0 million $31.0 million $139.0 million
Earnings (loss) from
operations $7.5 million $(9.5) million $(2.0) million
Net loss $(2.0) million
Loss per share $(0.06) /share
Conference Call, Webcast and Instant Replay
We will host a conference call to review our results on Thursday, April 30, 2009 at 2:30 pm PDT, 5:30 pm EDT. 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:
1-800-732-6179 Passcode: Not required
or
1-416-644-3416 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=2561240
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: 21299390 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 second quarter of 2009, 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.
About Wavecom
Wavecom is a leading provider of embedded wireless technology for M2M communication. The company provides a range of GSM/GPRS, CDMA, EDGE and 3G Wireless CPUs; programmable processors which also act as wireless modules or wireless modems. These are backed by a C and Lua-based cellular wireless software suite which includes a real-time operating system (RTOS), a software development environment based on Eclipse(TM), and several Plug-Ins (GPS, TCP/IP, security, Bluetooth(TM), Lua script and more). The company also offers a wide range of professional and operated services. Wavecom solutions are used for automotive telematics, smart metering, fleet management, GSM/GPS/satellite tracking, wireless alarms, wireless POS (point of sales), WLL (fixed voice), remote monitoring and many other M2M applications.
SIERRA WIRELESS, INC.
Consolidated Statements of Operations and Retained Earnings (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 March 31, 2009 2008
---------------------------- ----------- -----------
Revenue.......................................... $ 111,407 $ 141,949
Cost of goods sold............................... 80,697 102,614
----------- -----------
Gross margin..................................... 30,710 39,335
----------- -----------
Expenses:
Sales and marketing............................ 8,974 7,835
Research and development....................... 15,014 13,769
Administration................................. 6,074 5,084
Acquisition costs.............................. 6,522 -
Restructuring.................................. 1,726 -
Integration.................................... 254 -
Amortization................................... 2,420 1,281
----------- -----------
40,984 27,969
----------- -----------
Earnings (loss) from operations.................. (10,274) 11,366
Foreign exchange gain (loss)..................... (9,923) 625
Other income (expense)........................... (4,022) 1,834
----------- -----------
Earnings (loss) before income taxes.............. (24,219) 13,825
Income tax expense (recovery).................... (267) 4,148
----------- -----------
Net earnings (loss).............................. (23,952) 9,677
Net loss attributable to the
non-controlling interest........................ (287) -
----------- -----------
Net earnings (loss) attributable to
Sierra Wireless, Inc............................ (23,665) 9,677
Retained earnings (deficit), beginning
of period....................................... 21,273 (40,602)
----------- -----------
Deficit, end of period........................... $ (2,392) $ (30,925)
----------- -----------
----------- -----------
Earnings (loss) per share attributable to
Sierra Wireless, Inc.:
Basic.......................................... $ (0.76) $ 0.31
Diluted........................................ $ (0.76) $ 0.31
----------- -----------
----------- -----------
Weighted average number of shares (in thousands):
Basic.......................................... 31,032 31,341
Diluted........................................ 31,032 31,427
----------- -----------
----------- -----------
SIERRA WIRELESS, INC.
Consolidated Balance Sheets
(Expressed in thousands of United States dollars)
(Prepared in accordance with United States GAAP)
Mar 31 Dec 31
----------- -----------
2009 2008
----------- -----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents...................... $ 76,041 $ 63,258
Restricted cash................................ 29,476 191,473
Short-term investments......................... 39,536 18,003
Accounts receivable............................ 86,360 67,058
Inventories.................................... 39,895 33,031
Deferred income taxes.......................... 5,474 5,565
Prepaid expenses............................... 12,152 6,233
----------- -----------
288,934 384,621
Fixed assets..................................... 36,334 22,935
Intangible assets................................ 76,219 15,291
Goodwill......................................... 99,900 33,013
Deferred income taxes............................ 2,186 2,296
Other............................................ 5,457 4,230
----------- -----------
$ 509,030 $ 462,386
----------- -----------
----------- -----------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable............................... $ 62,066 $ 38,631
Accrued liabilities............................ 53,996 47,568
Deferred revenue and credits................... 1,873 683
Current portion of long-term obligations....... 493 193
Current portion of obligations under
capital leases................................ 344 -
----------- -----------
118,772 87,075
Long-term obligations............................ 1,258 316
Obligations under capital leases................. 307 -
Other long-term liabilities...................... 34,495 14,789
Deferred income taxes............................ 2,556 2,758
Shareholders' equity:
Share capital.................................. 325,893 325,893
Treasury shares, at cost....................... (3,005) (1,487)
Additional paid-in capital..................... 13,621 12,518
Retained earnings (deficit).................... (2,392) 21,273
Accumulated other comprehensive income
(loss)........................................ 188 (749)
----------- -----------
334,305 357,448
Non-controlling interest in Wavecom S.A.......... 17,337 -
----------- -----------
Total shareholders' equity....................... 351,642 357,448
----------- -----------
$ 509,030 $ 462,386
----------- -----------
----------- -----------
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 March 31, 2009 2008
---------------------------- ----------- -----------
Cash flows from operating activities:
Net earnings (loss)............................ $ (23,665) $ 9,677
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities
Amortization................................. 6,746 3,771
Stock-based compensation..................... 2,103 1,638
Deferred income tax.......................... (5) (116)
Loss on disposal............................. 1 75
Unrealized foreign exchange loss on
restricted cash............................. 15,719 -
Unrealized foreign exchange loss
on term loan................................ 1,215 -
Non-controlling interest..................... (287) -
Changes in operating assets and liabilities
Accounts receivable.......................... 18,858 (18,745)
Inventories.................................. 517 (5,139)
Prepaid expenses and other assets............ 6,276 1,381
Accounts payable............................. (9,080) 17,402
Accrued liabilities.......................... (8,239) 7,230
Deferred revenue and credits................. 295 (156)
----------- -----------
Net cash provided by operating activities........ 10,454 17,018
Cash flows from investing activities:
Business acquisition, net of cash
acquired of $139,785.......................... (6,918) -
Acquisition of OCEANE convertible bonds.......... (104,767) -
Decrease in restricted cash.................... 146,277 -
Deferred acquisition costs..................... - (529)
Purchase of fixed assets....................... (2,476) (4,909)
Increase in intangible assets.................. (1,027) (289)
Purchase of short-term investments............. (21,950) (37,572)
Proceeds on maturity of short-term
investments................................... 469 46,197
----------- -----------
Net cash provided by investing activities........ 9,608 2,898
Cash flows from financing activities:
Proceeds on issuance of term loan.............. 102,716 -
Repayment of term loan......................... (103,931) -
Financing costs................................ (3,921) -
Issuance of common shares, net of share
issue costs................................... - 77
Purchase of treasury shares for RSU
distribution.................................. (2,518) -
Proceeds on exercise of Wavecom options........ 4,148 -
Principal payment on obligations under
capital leases................................ (31) -
Repayment of long-term liabilities............. (501) (93)
----------- -----------
Net cash used in financing activities............ (4,038) (16)
----------- -----------
Effect of foreign exchange changes on cash
and cash equivalents............................ (3,241) -
----------- -----------
Net increase in cash and cash equivalents...... 12,783 19,900
Cash and cash equivalents, beginning of period... 63,258 83,624
----------- -----------
Cash and cash equivalents, end of period......... $ 76,041 $ 103,524
----------- -----------
----------- -----------
