EX-99.1 2 a2013q3pressrelease_ex991.htm EXHIBIT 2013 Q3 Press Release_EX 99.1


 
News Release
 
Media Contact:
Investor Contact:
Sharlene Myers
David G. McLennan
Manager, Global Public Relations
Chief Financial Officer
+1 (604) 232-1445
+1 (604) 231-1181
smyers@sierrawireless.com
investor@sierrawireless.com


Sierra Wireless Reports Third Quarter 2013 Results


Q3 highlights from continuing operations    
•
Record revenue of $112.3 million, up 12.1% year-over-year
•
Adjusted EBITDA of $5.9 million, up 81.3% year-over-year
•
Non-GAAP earnings from operations of $2.4 million, compared to $0.3 million in Q3 2012
•
Non-GAAP diluted net earnings per share of $0.11, compared to diluted net earnings per share of $0.04 in Q3 2012

VANCOUVER, BRITISH COLUMBIA - November 7, 2013 - Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported results for its third quarter ending September 30, 2013. All results are reported in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles (GAAP), except as otherwise indicated below.

“We delivered another quarter of record M2M revenue, driven by steady growth in OEM Solutions and a strong quarter in Enterprise Solutions,” said Jason Cohenour, President and Chief Executive Officer. “In addition, our third quarter results are highlighted by continued strong increases in our key profitability metrics, demonstrating the leverage in our operating model as we execute on our profitable growth plans.”

Revenue for the third quarter of 2013 was $112.3 million, an increase of 12.1% compared to $100.2 million in the third quarter of 2012, and an increase of 2.4% compared to $109.6 million in the second quarter of 2013. Revenue from OEM Solutions was $95.9 million in the third quarter of 2013, up 8.6% compared to $88.3 million in the third quarter of 2012. Revenue from Enterprise Solutions was $16.4 million in the third quarter of 2013, up 37.8% from $11.9 million in the third quarter of 2012.










GAAP
•
Gross margin was $37.3 million, or 33.3% of revenue, in the third quarter of 2013, compared to $31.1 million, or 31.0% of revenue, in the third quarter of 2012.
•
Operating expenses were $40.6 million and loss from operations was $3.3 million in the third quarter of 2013, compared to operating expenses of $37.8 million and a loss from operations of $6.7 million in the third quarter of 2012.
•
Net earnings from continuing operations were $1.1 million, or $0.03 per diluted share, in the third quarter of 2013, compared to a net loss of $3.6 million, or $0.12 per share, in the third quarter of 2012. Reorganization initiatives as we transition our business are favorably impacting our effective tax rate. Net earnings from continuing operations for the current quarter included a year-to-date tax recovery. A portion of the recovery, amounting to $0.5 million, or $0.02 per diluted share, relates to the first half of the year.
•
Net earnings for continuing and discontinued operations(1) combined were $0.6 million, or $0.02 per diluted share, in the third quarter of 2013, compared to net earnings of $3.7 million, or $0.12 per diluted share, in the third quarter of 2012.

NON-GAAP
•
Gross margin was 33.4% in the third quarter of 2013, compared to 31.1% in the third quarter of 2012.
•
Operating expenses were $35.1 million and earnings from operations were $2.4 million in the third quarter of 2013, compared to operating expenses of $30.8 million and earnings from operations of $0.3 million in the third quarter of 2012.
•
Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") were $5.9 million in the third quarter of 2013, compared to $3.2 million in the third quarter of 2012.
•
Net earnings from continuing operations were $3.5 million, or $0.11 per diluted share, in the third quarter of 2013, compared to net earnings of $1.3 million, or $0.04 per diluted share, in the third quarter of 2012. Reorganization initiatives as we transition our business are favorably impacting our effective tax rate. Net earnings from continuing operations for the current quarter included a year-to-date tax recovery. A portion of the recovery, amounting to $0.5 million, or $0.02 per diluted share, relates to the first half of the year.

Non-GAAP results exclude the impact of stock-based compensation expense, acquisition costs, gain on sale of the AirCard business, restructuring costs, integration costs, disposition costs, acquisition amortization, impairment, foreign exchange gains or losses on foreign currency contracts and translation of balance sheet accounts, and certain tax adjustments. We disclose non-GAAP amounts as we believe that these measures provide our shareholders with better information about actual operating results and assist in comparisons from one period to another.

Adjusted EBITDA as defined equates to earnings (loss) from operations plus stock-based compensation expense, acquisition costs, restructuring costs, integration costs, impairment, and amortization. The reconciliation between our GAAP and non-GAAP results is provided in the accompanying schedules.











(1) On April 2, 2013, we completed the sale of substantially all of the assets and operations related to our AirCard business. The results of operations and the gain on sale of the AirCard business have been presented as discontinued operations for the three and nine months ended September 30, 2013 and September 30, 2012.





Financial Guidance
The Company provides the following guidance for continuing operations for the fourth quarter of 2013, excluding any impact from the acquired M2M module and modem assets of AnyDATA:
In the fourth quarter of 2013, revenue is expected to increase sequentially and on a year-over-year basis. Gross margin and operating expenses are expected to remain similar to third quarter levels.  
Q4 2013 Guidance
Consolidated
Non-GAAP
 
 
Revenue
$112.0 to $116.0 million
Earnings from operations
$2.4 to $3.3 million
Net earnings
$2.2 to $3.0 million
Earnings per share
$0.07 to $0.10 per share

This non-GAAP guidance for the fourth quarter of 2013 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, webcast and instant replay 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, November 7, 2013, 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 commencement of the call:
•
Toll-free (Canada and US): 1-877-201-0168
•
Alternate number: 1-647-788-4901
•
Conference ID: 7687072

For those unable to participate in the live call, a replay will be available until November 29, 2013. Dial 1-855-859-2056 or 1-800-585-8367 and enter the Conference ID number above to access the replay.
To access the webcast, please follow the link below:
Sierra Wireless Q3 2013 Financial Results Webcast
If the above link does not work, please copy and paste the following URL into your browser:
http://www.snwebcastcenter.com/webcast/sierrawireless/2013q3/
The webcast will remain available at the above link for one year following the call.
We look forward to having you participate in our 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 fourth quarter of 2013 and our fiscal year 2013, our business outlook for the short and longer term and our strategy, plans and future operating performance. Forward-looking statements are provided to help you understand our views of our short and longer term prospects. We caution you that forward-looking statements may not be appropriate for other purposes. We will not 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”, “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;
▪
Expected deployment of next generation networks by wireless network operators;
▪
Our operations are not adversely disrupted by component shortages or other development, operating or regulatory risks; and
▪
Expected tax rates and foreign exchange rates.

•
Are subject to substantial known and unknown material risks and uncertainties. Many factors could cause our actual results, achievements and developments in our business to differ significantly from those expressed or implied by our forward-looking statements, including without limitation, the following factors. These risk factors and others are discussed in our Annual Information Form and Management's Discussion and Analysis of Financial Condition and Results of Operations, which may be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov and in our other regulatory filings with the Securities and Exchange Commission in the United States and the Provincial Securities Commissions in Canada.

▪
We may experience higher than anticipated costs; disruption of, and demands on, our ongoing business; diversion of management's time and attention; adverse effects on existing business relationships with suppliers and customers and employee issues in connection with the divestiture of the AirCard assets and operations;
▪
Actual sales volumes or prices for our products and services may be lower than we expect for any reason including, without limitation, continuing uncertain economic conditions, price and product competition, different product mix, the loss of any of our significant customers, or competition from new or established wireless communication companies;
▪
The cost of products sold may be higher than planned or necessary component supplies may not be available, are delayed or are not available on commercially reasonable terms;
▪
We may be unable to enforce our intellectual property rights or may be subject to claims and litigation that had an adverse outcome;




▪
The development and timing of the introduction of our new products may be later than we expect or may be indefinitely delayed; and
▪
Transition periods associated with the migration to new technologies may be longer than we expect.

About Sierra Wireless
Sierra Wireless (NASDAQ: SWIR) (TSX: SW) offers industry-leading products and solutions for connected devices and machine-to-machine (M2M) communications over cellular networks. Wireless service providers, equipment manufacturers, enterprises and government organizations around the world depend on us for reliable wireless technology. We offer 2G, 3G and 4G wireless modems, routers and gateways as well as a comprehensive suite of software, tools, and services that ensure our customers can successfully bring wireless applications to market.  For more information about Sierra Wireless, 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 INCOME
(In thousands of U.S. dollars, except where otherwise stated)
(unaudited)
 
Three months ended September 30,
 
 Nine months ended September 30,
 
2013

 
2012

 
2013

 
2012

Revenue
$
112,262

 
$
100,183

 
$
323,252

 
$
287,916

Cost of goods sold
74,916

 
69,097

 
216,054

 
198,875

Gross margin
37,346

 
31,086

 
107,198

 
89,041

 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
Sales and marketing
10,452

 
8,572

 
31,489

 
26,891

Research and development
17,806

 
15,886

 
54,038

 
45,491

Administration
9,297

 
8,013

 
26,323

 
25,034

Restructuring
14

 
498

 
157

 
2,209

Integration
—

 
—

 
27

 
—

Acquisition
139

 
2,196

 
139

 
2,795

Amortization
2,939

 
2,649

 
9,142

 
7,311

 
40,647

 
37,814

 
121,315

 
109,731

Loss from operations
(3,301
)
 
(6,728
)
 
(14,117
)
 
(20,690
)
Foreign exchange gain
2,563

 
1,176

 
1,902

 
1,718

Other income (expense)
(26
)
 
(70
)
 
(124
)
 
(231
)
Loss before income taxes
(764
)
 
(5,622
)
 
(12,339
)
 
(19,203
)
Income tax expense (recovery)
(1,839
)
 
(2,010
)
 
1,266

 
522

Net earnings (loss) from continuing operations
1,075

 
(3,612
)
 
(13,605
)
 
(19,725
)
Net earnings (loss) from discontinued operations
(505
)
 
7,279

 
69,510

 
27,318

Net earnings
$
570

 
$
3,667

 
$
55,905

 
$
7,593

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of taxes of $nil
693

 
1,203

 
425

 
(138
)
Comprehensive income
$
1,263

 
$
4,870

 
$
56,330

 
$
7,455

Basic and diluted net earnings (loss) per share attributable to the Company’s common shareholders (in dollars)
 
 
 
 
 
 
 
Continuing operations
$
0.03

 
$
(0.12
)
 
$
(0.44
)
 
$
(0.64
)
Discontinued operations
(0.01
)
 
0.24

 
2.26

 
0.89

 
$
0.02

 
$
0.12

 
$
1.82

 
$
0.25

Weighted average number of shares outstanding (in thousands)
 
 
 
 
 
 
 
Basic
30,688

 
30,573

 
30,717

 
30,854

Diluted
31,176

 
30,573

 
30,717

 
30,854






SIERRA WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
(unaudited)


 
September 30, 2013

 
December 31, 2012

Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
183,220

 
$
63,646

Short-term investments
5,221

 
—

Accounts receivable, net of allowance for doubtful accounts of $2,531 (December 31, 2012 - $2,435)
94,090

 
108,624

Inventories
6,221

 
12,675

Deferred income taxes
4,200

 
22,199

Prepaids and other
37,235

 
24,252

Assets held for sale
—

 
54,340

 
330,187

 
285,736

Property and equipment
22,588

 
20,039

Intangible assets
45,107

 
56,357

Goodwill
99,365

 
97,961

Deferred income taxes
4,685

 
3,880

Other assets
811

 
790

 
$
502,743

 
$
464,763

 
 
 
 
Liabilities
 
 
 
Current liabilities
 
 
 
Accounts payable and accrued liabilities
$
121,606

 
$
128,216

Deferred revenue and credits
1,807

 
1,312

Liabilities held for sale
—

 
10,353

 
123,413

 
139,881

Long-term obligations
22,074

 
26,526

Deferred income taxes
300

 
300

 
145,787

 
166,707

Equity
 
 
 
Shareholders’ equity
 
 
 
Common stock: no par value; unlimited shares authorized; issued and
outstanding 30,761,517 shares (December 31, 2012 - 30,592,423 shares)
324,975

 
322,770

Preferred stock: no par value; unlimited shares authorized;
issued and outstanding: nil shares
—

 
—

Treasury stock: at cost 538,439 shares (December 31, 2012 – 716,313 shares)
(5,399
)
 
(5,172
)
Additional paid-in capital
24,183

 
23,203

Retained earnings (deficit)
20,234

 
(35,283
)
Accumulated other comprehensive loss
(7,037
)
 
(7,462
)
 
356,956

 
298,056

 
$
502,743

 
$
464,763






SIERRA WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
 
   Three months ended September 30,
 
   Nine months ended September 30,
 
2013

 
2012

 
2013

 
2012

Cash flows provided by (used in):
 
 
 
 
 
 
 
Operating activities
 
 
 
 
 
 
 
Net earnings
$
570

 
$
3,667

 
55,905

 
$
7,593

Items not requiring (providing) cash
 
 
 
 
 
 
 
Amortization
6,873

 
7,082

 
21,150

 
20,795

Stock-based compensation
2,481

 
1,695

 
7,170

 
5,010

Gain on sale of AirCard business
17

 
—

 
(94,078
)
 
—

Deferred income taxes
(770
)
 
(2,032
)
 
17,194

 
(3,905
)
Loss (gain) on disposal of property, equipment, and intangibles
10

 
57

 
(10
)
 
183

Impairment of assets related to discontinued operations
—

 
—

 
1,012

 
—

Other
(1,912
)
 
(1,226
)
 
(1,399
)
 
(1,226
)
Taxes paid related to net settlement of equity awards
(14
)
 
(4
)
 
(342
)
 
(4
)
Changes in non-cash working capital
 
 
 
 
 
 
 
Accounts receivable
15,877

 
(6,970
)
 
28,862

 
(11,384
)
Inventories
51

 
(6,044
)
 
12,604

 
(5,127
)
Prepaid expenses and other
(2,767
)
 
(17,596
)
 
(11,870
)
 
(20,557
)
Accounts payable and accrued liabilities
(824
)
 
16,065

 
(15,079
)
 
37,537

Deferred revenue and credits
(512
)
 
513

 
485

 
(145
)
Cash flows provided by (used in) operating activities
19,080

 
(4,793
)
 
21,604

 
28,770

Investing activities
 
 
 
 
 
 
 
Additions to property and equipment
(3,835
)
 
(3,290
)
 
(9,730
)
 
(11,850
)
Proceeds from sale of property, equipment, and intangibles
—

 
(8
)
 
32

 
56

Increase in intangible assets
(555
)
 
(596
)
 
(1,669
)
 
(1,934
)
Net proceeds from sale of AirCard business
(17
)
 
—

 
119,978

 
—

Purchase of M2M business of Sagemcom
—

 
(55,218
)
 
—

 
(55,218
)
Net change in short-term investments
4,779

 
2,153

 
(5,221
)
 
9,347

Cash flows provided by (used in) investing activities
372

 
(56,959
)
 
103,390

 
(59,599
)
Financing activities
 
 
 
 
 
 
 
Issuance of common shares
1,186

 
158

 
4,947

 
427

Repurchase of common shares for cancellation
—

 
—

 
(5,772
)
 
(6,312
)
Purchase of treasury shares for RSU distribution
(3,433
)
 
—

 
(3,433
)
 
(2,489
)
Decrease in other long-term obligations
(108
)
 
(176
)
 
(827
)
 
(831
)
Cash flows used in financing activities
(2,355
)
 
(18
)
 
(5,085
)
 
(9,205
)
Effect of foreign exchange rate changes on cash and cash equivalents
(450
)
 
(1,861
)
 
(335
)
 
(1,813
)
Cash and cash equivalents, increase (decrease) in the period
16,647

 
(63,631
)
 
119,574

 
(41,847
)
Cash and cash equivalents, beginning of period
166,573

 
123,159

 
63,646

 
101,375

Cash and cash equivalents, end of period
$
183,220

 
$
59,528

 
$
183,220

 
$
59,528






SIERRA WIRELESS, INC. 
RECONCILIATION OF GAAP AND NON-GAAP RESULTS 
(Unaudited)
(in thousands of U.S. dollars, except where otherwise stated)
 
 
2013
 
2012 (1)
 
 
 
Q3
Q2
Q1
 
Total
Q4
Q3
Q2
Q1
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross margin - GAAP
 
$
37,346

$
36,474

$
33,378

 
$
125,274

$
36,233

$
31,086

$
30,081

$
27,874

 
Stock-based compensation
 
117

95

75

 
304

61

82

78

83

 
Gross margin - Non-GAAP
 
$
37,463

$
36,569

$
33,453

 
$
125,578

$
36,294

$
31,168

$
30,159

$
27,957

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from operations - GAAP
 
$
(3,301
)
$
(3,932
)
$
(6,884
)
 
$
(22,206
)
$
(1,516
)
$
(6,728
)
$
(6,558
)
$
(7,404
)
 
Stock-based compensation
 
2,145

2,013

1,655

 
5,781

1,470

1,462

1,403

1,446

 
Acquisition
 
139

—

—

 
3,182

387

2,196

599

—

 
Restructuring
 
14

26

117

 
2,251

42

498

1,531

180

 
Integration
 
—

—

27

 
—

—

—

—

—

 
Impairment of an asset in R&D
 
—

—

280

 
—

—

—

—

—

 
Acquisition related amortization
 
3,405

3,363

3,393

 
11,890

3,338

2,906

2,665

2,981

 
Earnings (loss) from operations - Non-GAAP
 
$
2,402

$
1,470

$
(1,412
)
 
$
898

$
3,721

$
334

$
(360
)
$
(2,797
)
 
Amortization (excluding acquisition related amortization)
 
3,468

3,403

3,212

 
11,747

3,293

2,904

2,717

2,833

 
Adjusted EBITDA
 
$
5,870

$
4,873

$
1,800

 
$
12,645

$
7,014

$
3,238

$
2,357

$
36

 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings (loss) from continuing operations - GAAP
 
$
1,075

$
(6,742
)
$
(7,938
)
 
$
(4,202
)
$
15,523

$
(3,612
)
$
(8,868
)
$
(7,245
)
 
Stock-based compensation, restructuring and other, integration, and acquisition related amortization, net of tax
 
5,760

5,393

5,355

 
22,241

5,162

6,885

5,658

4,536

 
Unrealized foreign exchange loss (gain)
 
(2,457
)
(1,359
)
1,874

 
(3,139
)
(1,655
)
(1,218
)
(165
)
(101
)
 
Income tax adjustments
 
(895
)
3,754

—

 
(15,344
)
(14,540
)
(804
)
—

—

 
Net earnings (loss) from continuing operations - Non-GAAP
 
$
3,483

$
1,046

$
(709
)
 
$
(444
)
$
4,490

$
1,251

$
(3,375
)
$
(2,810
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings (loss) from discontinued operations - GAAP
 
$
(505
)
$
68,152

$
1,863

 
$
31,401

$
4,083

$
7,279

$
12,449

$
7,590

 
Stock-based compensation and disposition costs
 
1,402

876

1,733

 
2,395

1,696

233

233

233

 
Gain on sale of AirCard business
 
(49
)
(69,077
)
—

 
—

—

—

—

—

 
Net earnings (loss) from discontinued operations - Non-GAAP
 
$
848

$
(49
)
$
3,596

 
$
33,796

$
5,779

$
7,512

$
12,682

$
7,823

 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings (loss) - GAAP
 
$
570

$
61,410

$
(6,075
)
 
$
27,199

$
19,606

$
3,667

$
3,581

$
345

 
Net earnings (loss) - Non-GAAP
 
4,331

997

2,887

 
33,352

10,269

8,763

9,307

5,013

 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings (loss) from continuing operations per share
 
 
 
 
 
 
 
 
 
 
 
GAAP - (in dollars)
 
$
0.03

$
(0.22
)
$
(0.26
)
 
$
(0.14
)
$
0.50

$
(0.12
)
$
(0.29
)
$
(0.23
)
 
Non-GAAP - (in dollars)
 
$
0.11

$
0.03

$
(0.02
)
 
$
(0.01
)
$
0.15

$
0.04

$
(0.11
)
$
(0.09
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings (loss) per share - diluted
 
 
 
 
 
 
 
 
 
 
 
GAAP - (in dollars)
 
$
0.02

$
2.00

$
(0.20
)
 
$
0.88

$
0.64

$
0.12

$
0.12

$
0.01

 
Non-GAAP - (in dollars)
 
$
0.14

$
0.03

$
0.09

 
$
1.08

$
0.33

$
0.29

$
0.30

$
0.16

 
(1) Financial information has been retrospectively adjusted to reflect the presentation of the AirCard business as discontinued operations.




SIERRA WIRELESS, INC. 

REVENUE BY PRODUCT LINES
 
(In thousands of U.S. dollars)
 
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
 
Nine months ended September 30,
 
 
 
2013
 
2012(1)
 
 
2013
 
2012(1)
 
 
 
 
 
 
 
 
 
 
 
 
OEM Solutions
 
$
95,850

 
$
88,270

 
 
$
280,158

 
$
251,669

 
Enterprise Solutions
 
16,412

 
11,913

 
 
43,094

 
36,247

 
 
 
$
112,262

 
$
100,183

 
 
$
323,252

 
$
287,916

 
 
 
 
 
 
 
 
 
 
 
 
(1) Comparative information has been reclassified to conform to current period presentation.