- Published: 06 May 2016
- Written by Editor
Sierra Wireless Reports First Quarter Results
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 atwww.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 (SWIR) (SW.TO) 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, |
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
|
Acquisition |
Acquisition- |
Stock-based |
Foreign |
Tax |
|||||||||||||||||
|
(In thousands of U.S. dollars, |
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, |
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. |
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Sierra Wireless
David Climie, +1-604-231-1137
Vice President, Investor Relations
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or
Investor Contact:
David G. McLennan, +1-604-231-1181
Chief Financial Officer
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