Exhibit

EX-1.3 4 a2016yemda.htm 2016 MD&A Exhibit

Exhibit 1.3

SIERRA WIRELESS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the Fiscal Year Ended December 31, 2016

DATED March 10, 2017

MANAGEMENT’S DISCUSSION AND ANALYSIS

Table of Contents



MANAGEMENT’S DISCUSSION AND ANALYSIS	1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	2
OVERVIEW	4
Business Overview	4
Our Strategy	5
Annual Overview - Financial Highlights	7
Outlook	11
CONSOLIDATED ANNUAL RESULTS OF OPERATIONS	12
Fiscal Year 2016 compared to Fiscal Year 2015	13
Fiscal Year 2015 compared to Fiscal Year 2014	15
SEGMENTED INFORMATION	17
FOURTH QUARTER OVERVIEW	20
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS	22
LIQUIDITY AND CAPITAL RESOURCES	24
NON-GAAP FINANCIAL MEASURES	27
OFF-BALANCE SHEET ARRANGEMENTS	30
TRANSACTIONS BETWEEN RELATED PARTIES	30
CRITICAL ACCOUNTING POLICIES AND ESTIMATES	30
OUTSTANDING SHARE DATA	35
IMPACT OF ACCOUNTING PRONOUNCEMENTS AFFECTING CURRENT PERIOD	35
IMPACT OF ACCOUNTING PRONOUNCEMENTS AFFECTING FUTURE PERIODS	36
DISCLOSURE CONTROLS AND PROCEDURES	37
INTERNAL CONTROL OVER FINANCIAL REPORTING	38
LEGAL PROCEEDINGS	39
RISKS AND UNCERTAINTIES	40

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information for the years ended December 31, 2016, 2015 and 2014 and up to and including March 10, 2017. This MD&A should be read together with our audited consolidated financial statements and the accompanying notes for the year ended December 31, 2016 (“the consolidated financial statements”). The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Except where otherwise specifically indicated, all amounts in this MD&A are expressed in United States dollars.

We have prepared this MD&A with reference to National Instrument 51-102 “Continuous Disclosure Obligations” of the Canadian Securities Administrators. Under the U.S./Canada Multijurisdictional Disclosure System, we are permitted to prepare this MD&A in accordance with the disclosure requirements of Canada, which requirements are different than those of the United States.

Certain statements in this MD&A constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws. You should carefully read “Cautionary Note Regarding Forward-looking Statements” in this MD&A and should not place undue reliance on any such forward-looking statements.

Throughout this document, references are made to certain non-GAAP financial measures that are not measures of performance under U.S. GAAP. Management believes that these non-GAAP financial measures provide useful information to investors regarding the Company’s results of operations as they provide additional measures of its performance and assist in comparisons from one period to another. These non-GAAP financial measures do not have any standardized meaning prescribed by U.S. GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. These non-GAAP financial measures are defined and reconciled to their nearest GAAP measure in “Non-GAAP Financial Measures”.

In this MD&A, unless the context otherwise requires, references to "the Company", "Sierra Wireless", "we", "us" and "our" refer to Sierra Wireless, Inc. and its subsidiaries.

Additional information about the Company, including our most recent consolidated financial statements and our Annual Information Form, is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Cautionary Note Regarding Forward-looking Statements

This MD&A contains certain statements and information that 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 (collectively, “forward-looking statements”), including our business outlook for the short and longer term and 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.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are not promises or guarantees of future performance, they represent our current views and may change significantly. Forward-looking statements are based on a number of material assumptions, including, but not limited to, 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.

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ significantly from those expressed or implied in our forward-looking statements, including, without limitation:


•	competition from new or established cloud and connectivity service providers or from those with greater resources;


•	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;


•	difficult or uncertain global economic conditions;


•	our financial results are subject to fluctuation;


•	our ability to attract or retain key personnel;


•	risks related to infringement on intellectual property rights of others;


•	our ability to obtain necessary rights to use software or components supplied by third parties;


•	our ability to enforce our intellectual property rights;


•	our ability to respond to changing technology, industry standards and customer requirements;


•	our reliance on single source suppliers for certain components used in our products;


•	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;


•	unanticipated costs associated with litigation or settlements;


•	our dependence on wireless network operators to offer and promote acceptable wireless service programs;


•	risks related to contractual disputes with counterparties;


•	risks related to governmental regulation;


•	risks related to the transmission, use and disclosure of user data and personal information; and


•	risks inherent in foreign jurisdictions.

This list is not exhaustive of the factors that may affect any of our forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to below under "Risks and Uncertainties" and those referred to in our other regulatory filings with the U.S. Securities and Exchange Commission (the "SEC") in the United States and the provincial securities commissions in Canada.

Our forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and we do not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change, except as required by applicable law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

OVERVIEW

Business Overview

Sierra Wireless is a leading provider of device-to-cloud solutions for the Internet of Things ("IoT"). We offer the industry’s most comprehensive portfolio of cellular and short range embedded wireless modules and gateways that, combined with our cloud platform and connectivity services, create an end-to-end solution for enabling IoT applications. Original Equipment Manufacturers ("OEMs") and enterprises worldwide trust our innovative solutions to get their connected products and services to market faster.

We operate our business under three reportable segments: (i) OEM Solutions; (ii) Enterprise Solutions; and (iii) Cloud and Connectivity Services. Prior to October 1, 2015 our Enterprise Solutions segment included the business operations that now comprise our Cloud and Connectivity Services segment.

OEM Solutions

Our OEM Solutions segment includes embedded cellular modules, short range wireless modules, software and tools for OEM customers who integrate wireless connectivity into their products and solutions across a broad range of industries, including automotive, transportation, energy, enterprise networking, sales and payment, mobile computing, security, industrial monitoring, field services, residential, healthcare and others. Within our OEM Solutions segment, our embedded wireless module product portfolio spans second generation ("2G"), third generation ("3G"), and fourth generation ("4G") Long-Term Evolution ("LTE") cellular technologies and short range modules for Bluetooth and Wi-Fi technologies. This product portfolio also includes cloud-based remote device and data management capability, as well as support for on-board embedded applications using Legato, our open source, Linux-based application framework.

We completed the acquisition of all of the outstanding shares of Blue Creation on November 2, 2016 for total cash consideration of $6.4 million ($2.9 million, net of cash acquired), plus a maximum contingent consideration of $0.5 million under a performance-based earn-out formula. Blue Creation is located in the United Kingdom and is being integrated with our OEM Solutions operations. Blue Creation's financial results have been included in our results since the date of acquisition. Blue Creation specializes in Bluetooth, Bluetooth Low Energy, Wi-Fi and other embedded wireless technologies which are complementary to our cellular products. We believe that the acquisition of Blue Creation helps to strengthen our strategic position with OEMs.

Enterprise Solutions

Our Enterprise Solutions segment includes a range of intelligent routers and gateways along with management tools and applications that enable cellular connectivity for enterprise customers. Our 2G, 3G and 4G LTE intelligent cellular routers and gateways are designed for use where reliability and mission-critical connectivity is essential, and are used in transportation, public safety, field services, energy, industrial and distributed enterprise networking applications worldwide. Our routers and gateways can be easily configured for specific customer applications, and also support on-board embedded applications using our Legato and ALEOS application frameworks.

We completed the acquisition of all of the outstanding shares of GenX Mobile Incorporated ("GenX"), a provider of in-vehicle cellular devices for fleet management, asset tracking and transportation markets on August 3, 2016 for total cash consideration of $7.8 million ($5.9 million, net of cash acquired) plus contingent consideration for inventory consumption in excess of $1.0 million. GenX has been integrated with our Enterprise Solutions segment. GenX's financial results have been included in our results since the date of acquisition.

Cloud & Connectivity Services

Our Cloud and Connectivity Services segment comprises three main areas of operation: (i) our cloud services, which provide a secure and scalable cloud platform for deploying and managing IoT subscriptions, devices and applications; (ii) our global cellular connectivity services, which include our Smart SIM and core network platforms; and (iii) our managed broadband cellular services, which include a combination of hardware, connectivity services and cloud services. These cloud, connectivity and broadband services have been integrated to support our device-to-cloud strategy and enable worldwide IoT deployments by our customers. Our solution makes it simple to rapidly build and scale IoT applications while de-risking the deployment process.

Our AirVantage cloud platform is used to collect, manage and process data from any number of connected devices. It allows our customers to centrally deploy and monitor IoT devices at the edge of the network, including configuring device settings and delivering firmware and embedded application updates remotely over the air. Our connectivity services offering, which includes our flexible Smart SIM technology, utilizes global, multi-operator subscriptions with unique benefits for IoT deployments including quality of service improvements and multi-operator network coverage. Our managed broadband services provide network connectivity management solutions for distributed enterprises utilizing cellular broadband gateways, routers and advanced antennas.

We significantly advanced our device-to-cloud capabilities in 2015 by completing three acquisitions and rapidly expanding our cloud and connectivity services business. These acquisitions included: Wireless Maingate AB ("Maingate"), a Sweden-based provider of IoT connectivity and data management services; Accel Networks LLC ("Accel"), a provider of secure managed cellular broadband connectivity services for distributed enterprises in North America and MobiquiThings SAS ("MobiquiThings"), a France-based mobile virtual network operator providing intelligent global connectivity services to the IoT marketplace. These businesses have been integrated into our cloud and connectivity services segment.

Our Strategy

The global IoT market is expected to grow significantly over the next decade. Industries, enterprises, governments, and consumers are gaining a broader understanding of the benefits of collecting information from mobile and fixed assets at the edge of the network to enable detailed analysis, monitoring, and real-time decision-making. New IoT applications are helping people and organizations to increase productivity, save energy costs, create new business models, and provide value-added services to their customers. An integral factor in the growth of IoT applications is cellular connectivity, which enables the transmission of data from embedded modules and gateways, through advanced mobile networks and cloud services, to the enterprise or consumer. Cellular connectivity supports applications such as the connected car, the connected enterprise and the connected factory, as well as smart cities and the smart grid. Adoption of IoT solutions is driven by a number of factors including lower wireless connectivity costs, higher wireless connection speeds, new wireless technologies designed specifically for IoT, new tools to simplify application development and higher levels of focus on data analytics, artificial intelligence and machine learning.

We believe these factors will continue to create attractive growth opportunities for the Company going forward. Based on third-party industry research, we are the global leader in embedded cellular wireless modules with 33% global market share (source: ABI Research, June 2016) and we are widely recognized as an innovation leader in the cellular IoT sector as well. We are also a leading provider of gateway and router solutions for industrial, enterprise and mobile applications, ranking as the global leader in shipment volume in a recent industry study (source: IHS Research, June 2016). We have developed a cloud and connectivity services platform that is tightly integrated with our devices, embedded software and Smart SIM technology. Our corporate strategy is to expand our position in the IoT value chain by:


•	Strengthening our leadership position in embedded wireless modules;


•	Expanding our enterprise gateways business with new products and selective acquisitions that strengthen our position;


•	Growing our cloud and connectivity services business organically and through acquisitions; and


•	Leveraging our leading position in IoT devices to scale our device-to-cloud solution set and customer base.

We expect these initiatives will drive revenue growth and improve operating leverage in our business model, resulting in greater profitability and enhanced shareholder value.

In 2016, we continued to deliver on our corporate strategy by:


•	Securing many new customer wins with global OEMs and enterprises, which significantly expanded our customer program pipeline;


•	Launching several new market leading gateway and embedded module products, strengthening our leadership position in IoT devices and expanding our addressable market;


•	Acquiring Blue Creation, expanding our IoT technology base and strengthening our position with OEMs;


•	Acquiring GenX, bolstering our position in the fleet management and telematics markets;


•	Launching our Smart SIM technology, which enables Sierra to deliver highly differentiated connectivity services;


•	Adding eUICC OTA SIM provisioning capability to our connectivity services offering, strengthening our position with large OEMs and enterprises; and


•	Strengthening our broader organizational capability, including additional go-to-market resources to support our continued revenue growth.

We continue to seek opportunities to acquire or invest in businesses, products and technologies that accelerate our strategy and growth.

Annual Overview — Financial highlights

Our 2016 revenue was $615.6 million, up from $607.8 million in 2015. The positive impact of contributions from acquired businesses in 2016 and a full year contribution from acquisitions completed during 2015, together with higher revenues from our new gateway products in our Enterprise Solutions segment, was partially offset by lower revenues in our OEM Solutions segment due to softer demand from certain established customers and programs.

Gross margin was 35.4% in 2016 compared to 31.9% in 2015. The significant increase in gross margin was largely a result of a $14.4 million reduction in our cost of goods sold related to the change in estimate, effective October 1, 2016, for our Intellectual Property ("IP") royalty accrual ("Change in Estimate") which is explained in "Critical Accounting Policies and Estimates - Royalty Obligations" below. Other favorable gross margin drivers included product cost reductions in our OEM and Enterprise Solutions segments and the impact of two legal settlements during the first half of 2016.

The favorable impact of higher gross margin in 2016, partially offset by higher spending on targeted go-to-market investments and higher acquisition-related amortization, led to significant growth in our net earnings compared to the prior year.

Foreign exchange rate changes impacted our foreign currency denominated revenue and operating expenses. We estimate that changes in exchange rates between 2016 and 2015 reduced our revenue by approximately $0.8 million and reduced our operating expenses by approximately $1.7 million in 2016.

GAAP


•	Revenue increased by $7.8 million, or 1.3%, compared to 2015.


•	Gross margin was 35.4%, up 350 basis points from 2015.


•	Operating earnings improved by $11.2 million, or 111.1%, compared to 2015.


•	Net earnings improved by $18.1 million, or $0.56 per share, compared to 2015 primarily due to improved operating earnings and lower after-tax foreign exchange loss in 2016.


•	Cash and cash equivalents were $102.8 million at the end of the year, up $8.9 million compared to 2015. This largely reflects strong operating cash flow, partially offset by capital expenditures, acquisitions and share repurchases.

Non-GAAP⁽¹⁾


•	Gross margin was 33.3%, up 130 basis points from 2015. Non-GAAP gross margin excludes $13.0 million of the previously mentioned $14.4 million reduction in cost of goods sold related to the Change in Estimate.


•	Operating earnings decreased by $2.2 million, or 6.9% compared to 2015, as a result of higher operating expenses driven mainly by costs added as a result of our recent acquisitions and targeted investments in sales and marketing.


•	Adjusted EBITDA increased by $1.0 million, or 2.3% compared to fiscal 2015, reflecting higher amortization partially offset by lower operating earnings.


•	Net earnings decreased by $3.8 million or 14.8% compared to 2015, mainly due to lower operating earnings and higher income tax expense.

⁽¹⁾Non-GAAP financial measures exclude the impact of stock-based compensation expense and related social taxes, acquisition-related amortization, impairment, acquisition-related costs, integration costs, restructuring costs, certain other nonrecurring costs or recoveries, foreign exchange gains or losses on translation of balance sheet accounts and certain tax adjustments. Refer to the section titled "Non-GAAP Financial Measures" for additional details and reconciliations to the applicable GAAP financial measures.

Select Annual Financial Highlights

Selected Annual Financial information:



(In thousands of U.S. dollars, except where otherwise stated)	2016			2015			2014
Statement of Operations data:
Revenue	$	615,607		$	607,798		$	548,523

Gross Margin
- GAAP	$	217,743		$	193,855		$	178,979
- Non-GAAP ⁽¹⁾	205,118			194,502			179,534

Gross Margin %
- GAAP	35.4		%	31.9		%	32.6		%
- Non-GAAP ⁽¹⁾	33.3		%	32.0		%	32.7		%

Earnings (loss) from operations
- GAAP	$	21,348		$	10,114		$	(6,594	)
- Non-GAAP ⁽¹⁾	30,127			32,361			22,794

Adjusted EBITDA	$	43,919		$	42,911		$	35,411

Net earnings (loss)
- GAAP	$	15,385		$	(2,674	)	$	(16,853	)
- Non-GAAP ⁽¹⁾	21,969			25,774			19,848

Revenue by Segment:
OEM Solutions	$	516,517		$	523,366		$	476,650
Enterprise Solutions	71,486			63,072			71,873
Cloud and Connectivity Services	27,604			21,360			—

Share and per share data:
Basic and diluted earnings (loss) per share (in dollars)
- GAAP	$	0.48		$	(0.08	)	$	(0.53	)
- Non-GAAP ⁽¹⁾	$	0.68		$	0.80		$	0.63

Common shares (in thousands)
At period-end	31,860			32,337			31,869
Weighted average - basic	32,032			32,166			31,512
Weighted average - diluted	32,335			32,166			31,512

Balance sheet data (end of period):
Cash and cash equivalents and short-term investments	$	102,772		$	93,936		$	207,062
Total assets	578,459			546,332			515,364
Total long-term obligations	32,654			44,353			26,608

See discussion under “Consolidated Annual Results of Operations” for factors that have caused period to period variations.

Key highlights for the year ended December 31, 2016:

OEM Solutions


•	Our mangOH IoT Open Hardware platform won the GSMA's Best Mobile Technology Breakthrough Award at the Asia Mobile World Congress in Shanghai.


•	Our AirPrime EM7455, the industry's first embedded module to support LTE-Advanced, was selected by Lenovo to provide fast and reliable LTE-Advanced cellular connectivity in next-generation notebooks, tablets, and 2-in-1s.


•	Our new HL7690 LTE Cat-1 embedded modules were selected by Sagemcom, a leading communications solutions provider, for its smart meters to be deployed by Enexis in the Netherlands.


•	Our AirPrime HL Series embedded modules were selected by Parkeon, a global leader in parking, transit and urban mobility solutions, to enable cellular connectivity in smart parking deployments worldwide.


•	We announced a collaboration with Movimento to provide automotive OEMs with an integrated solution to streamline vehicle software installation and updates using our device-to-cloud solution and Movimento's Over the Air ("OTA") technology.


•	We partnered with OriginGPS to deliver the industry's smallest integrated 2G to 4G cellular and GNNS module solutions.


•	Our automotive-grade AirPrime AR series modules were selected by PATEO to enable cellular connectivity for its telematics units being installed in automobiles for the China market.


•	SmartDrive selected our AirPrime HL8548-G embedded modules to enable cellular connectivity and location-based services for its DriveOn and DriveOps telematics units being used in the insurance, fleet and logistics sectors.


•	Our family of smart automotive modules and AirVantage cloud platform was selected by Itelma to enable cellular connectivity and service delivery for its emergency response ERA-GLONASS units supplied to the Russian automotive market.


•	We introduced AirPrime HL and WP Series cellular modules for Category-M1 ("Cat-M1") and Category-NB1 ("Cat-NB1") LTE networks. Our solutions support the 3GPP standard for low-power wide-area ("LPWA") technologies, which was designed specifically to enable a new generation of IoT services.


•	We recently announced Volkswagen has selected our AirPrime AR Series modules and our Legato platform for its next generation of connected cars. Our automotive solutions will deliver high-speed cellular connectivity for the Volkswagen Car-Net platform.


•	We were recently selected by Nauto as the wireless connectivity solution for the North American launch of Nauto's flagship artificial intelligence-powered auto network.

Enterprise Solutions


•	Our 4G LTE AirLink ES450 was awarded the "Best Gateway of the year for Branch Offices, Fast Food and Casual Dining" by Compass Intelligence, a global market research and consulting firm.


•	We released an advanced fleet management feature for the AirLink GX450 mobile gateway, allowing it to collect OBD-II vehicle telemetry data.


•	Transdev, a leading international operator of public transport services selected one of our solution partners, QoS Telecom, to deploy and operate on-board Wi-Fi services in buses using our AirLink LTE gateways and device management services.


•	We launched the AirLink MP70, a high performance LTE-Advanced vehicle router for mission critical applications in public safety, transit and field services.


•	We launched the AirLink MG90, a high performance LTE-Advanced, multi-network vehicle router platform that provides secure, always-on mobile connectivity.


•	We launched the FX30, the industry's smallest, most flexible and programmable cellular gateway. The FX30 provides a pre-certified integrated embedded platform to connect any machine to any IoT application, enabling fast, scalable deployment of IoT solutions.


•	We launched the high-performance AirLink RV50X LTE-Advanced industrial gateway, designed to connect critical infrastructure in utility, energy and smart city applications. The gateway supports 21 LTE bands worldwide, providing high-speed connectivity across North America, Europe and Asia Pacific, while delivering the industry's lowest power consumption.

Cloud and Connectivity Services


•	We introduced an Embedded Universal Integrated Circuit Card ("eUICC") solution for our global Smart SIM and connectivity services. Our eUICC solution enables SIM provisioning OTA and is one of the first in the market that conforms to the latest GSMA specification, ensuring global interoperability across hardware vendors, SIM vendors and mobile network operators.


•	We introduced our Smart SIM technology and connectivity service that provides customers with superior coverage and service quality to maximize the reliability of global IoT applications.

Outlook

In the first quarter of 2017, we expect revenue to be in the range of $152 million to $161 million and non-GAAP earnings per share to be in the range of $0.13 to $0.20.

We believe that the market for wireless IoT solutions has strong long-term growth prospects. We anticipate strong long-term growth in the number of devices being wirelessly connected, driven by key enablers, such as lower wireless connectivity costs, faster wireless connection speeds, new wireless technologies designed specifically for the IoT, new devices and tools to simplify the development of IoT applications, and increased focus and investment from large ecosystem players. More importantly, we see emerging customer demand in many of our target verticals driven by increasing recognition of the value created by deploying IoT solutions, such as new revenue streams, improved customer experience and cost efficiencies.

Key factors that we expect will affect our results in the near term are:


•	the strength of our competitive position in the market;


•	the timely ramp up of sales of our new products recently launched or currently under development;


•	the level of success our customers achieve with sales of connected solutions;


•	fluctuations in customer demand and inventory levels;


•	the timely launch and ramp up of new customer programs;


•	our ability to secure future design wins with both existing and new customers;


•	the end-of-life of existing customer programs;


•	the availability of components from key suppliers;


•	manufacturing capacity at our various manufacturing sites;


•	our ability to manage component and product quality compliance;


•	contributions to our operating results from the acquisitions we completed in 2015 and 2016;


•	fluctuations in foreign exchange rates;


•	general economic conditions in the markets we serve; and


•	seasonality in demand.

We expect that product and price competition from other wireless device manufacturers and solution providers will continue to play a role in the IoT market. As a result of these factors, we may experience volatility in our results on a quarter-to-quarter basis. Gross margin percentage may fluctuate from quarter-to-quarter depending on product and customer mix, average selling prices and product costs.

See "Cautionary Note Regarding Forward-Looking Statements".

CONSOLIDATED ANNUAL RESULTS OF OPERATIONS



(In thousands of U.S. dollars, except where otherwise stated)	2016				2015				2014
	$		% of Revenue		$		% of Revenue		$		% of Revenue
Revenue	615,607		100.0	%	607,798		100.0	%	548,523		100.0	%
Cost of goods sold	397,864		64.6	%	413,943		68.1	%	369,544		67.4	%
Gross margin	217,743		35.4	%	193,855		31.9	%	178,979		32.6	%
Expenses
Sales and marketing	64,242		10.4	%	54,144		8.9	%	50,476		9.2	%
Research and development	73,077		11.9	%	74,020		12.2	%	80,937		14.8	%
Administration	40,956		6.7	%	40,321		6.6	%	37,027		6.7	%
Restructuring	—		—	%	951		0.2	%	1,598		0.3	%
Acquisition-related and integration	843		0.1	%	1,945		0.3	%	2,670		0.5	%
Impairment	—		—	%	—		—	%	3,756		0.7	%
Amortization	17,277		2.8	%	12,360		2.0	%	9,109		1.6	%
	196,395		31.9	%	183,741		30.2	%	185,573		33.8	%
Earnings (loss) from operations	21,348		3.5	%	10,114		1.7	%	(6,594	)	(1.2	)%
Foreign exchange loss	(1,736	)			(11,843	)			(12,390	)
Other income	83				115				854
Earnings (loss) before income taxes	19,695				(1,614	)			(18,130	)
Income tax expense (recovery)	4,310				1,060				(1,277	)
Net earnings (loss)	15,385				(2,674	)			(16,853	)

Net earnings (loss) per share - basic and diluted (in dollars)	0.48				(0.08	)			(0.53	)

Fiscal Year 2016 Compared to Fiscal Year 2015

Revenue

Revenue increased by $7.8 million, or 1.3%, in 2016 compared to 2015. The increase was mainly driven by contributions from businesses acquired in 2016 and 2015 and higher revenues from our new Enterprise gateway products, partially offset by weaker revenues in our OEM Solutions segment.

Our geographic revenue mix for the years ended December 31, 2016 and 2015 was as follows:

During the years ended December 31, 2016, 2015 and 2014, no customer accounted for more than 10% of our aggregated revenue.

Gross margin

Gross margin was 35.4% of revenue in 2016, compared to 31.9% in 2015. The significant increase in gross margin was due to the favorable impact on cost of goods sold of the Change in Estimate, product cost reductions in our OEM Solutions segment, improved margins in our Enterprise Solutions segment and the favorable impact of cost recoveries as a result of two legal settlements received in the first half of 2016. Gross margin included stock-based compensation expense and related social taxes of $0.4 million and $0.6 million in 2016 and 2015, respectively.

Sales and marketing

Sales and marketing expenses increased $10.1 million, or 18.7%, in 2016, compared to 2015, primarily as a result of targeted investments to strengthen our go-to-market capability and costs added as a result of the acquisitions undertaken in 2015 and 2016. Sales and marketing expenses included stock-based compensation and related social taxes of $1.7 million in 2016, compared to $2.2 million in 2015.

Research and development

Research and development (“R&D”) expenses decreased by $0.9 million, or 1.3%, in 2016, compared to 2015. The decrease in R&D expenses was primarily due to lower costs related to development parts and certification fees, lower acquisition-related amortization costs and the favorable impact of foreign exchange. This was partially offset by higher compensation costs and additional expenses associated with acquired businesses.

R&D expenses included stock-based compensation and related social taxes of $1.4 million in 2016, compared to $1.5 million in 2015. R&D expenses also included acquisition-related amortization of $0.5 million in 2016, compared to $1.3 million in 2015.

Administration

Administration expenses increased by $0.6 million, or 1.6%, in 2016, compared to 2015, primarily due to higher compensation costs, including certain termination expenses, partially offset by lower professional fees, stock-based compensation expense and the favorable impact of foreign exchange. Administration expenses included stock-based compensation expense and related social taxes of $4.1 million in 2016, compared to $5.3 million in 2015.

Restructuring

Restructuring costs were $nil in 2016. Restructuring costs in 2015 were related to the implementation of a plan to realign responsibilities within our Enterprise Solutions segment to reflect the evolution of our business and to provide dedicated focus on our enterprise gateways and recently acquired cloud and connectivity services businesses.

Acquisition-related and integration

Acquisition-related and integration costs decreased by $1.1 million in 2016, compared to 2015. The decrease was primarily due to the lower level of acquisition and integration activities and a decrease in the fair value of acquisition-related contingent consideration.

Amortization

Amortization expense increased by $4.9 million, or 39.8%, in 2016, compared to 2015 primarily due to higher acquisition-related amortization driven by the acquisitions undertaken in 2015 and reflects a change in the estimate of the useful life of some of our assets, including assets related to our office relocation in France. Amortization expense in 2016 included $11.6 million of acquisition-related amortization compared to $8.4 million in 2015.

Foreign exchange gain (loss)

Foreign exchange loss was $1.7 million in 2016, compared to a loss of $11.8 million in 2015. The foreign exchange loss in 2015 included the impact of an unrealized loss of $6.2 million on revaluation of a Euro denominated loan ("Intercompany Loan") to a self-sustaining subsidiary. We classified the Intercompany Loan as a net investment in a foreign subsidiary in the second quarter of 2015 when we determined the loan was permanent. As a result, the foreign exchange gain or loss from revaluation of the Intercompany Loan, since that time, is being recognized in other comprehensive income.

Income tax expense (recovery)

Income tax expense was $4.3 million in 2016, compared to $1.1 million in 2015. The additional expense was due to higher earnings and the impact of a shift of earnings between jurisdictions.

Net earnings (loss)

Net earnings were $15.4 million in 2016, compared to a net loss of $2.7 million in 2015. The increase in net earnings reflects improved earnings from operations as a result of the Change in Estimate and lower foreign exchange losses partially offset by higher income tax expenses.

Net earnings in 2016 included stock-based compensation expense and related social taxes of $7.6 million and acquisition-related amortization of $12.1 million. Net loss in 2015 included stock-based compensation expense and related social taxes of $9.7 million and acquisition-related amortization of $9.7 million.

Weighted average number of shares

The weighted average basic and diluted shares outstanding were 32.0 million and 32.3 million, respectively, for the year ended December 31, 2016 and 32.2 million for the year ended December 31, 2015.

The number of shares outstanding was 31.9 million at December 31, 2016, compared to 32.3 million at December 31, 2015. The decrease in the number of shares outstanding was primarily due to the impact of share repurchases made under our Normal Course Issuer Bid program (refer to "Liquidity and Capital Resources" section below), partially offset by issuance of common shares as a result of stock option exercises and restricted share unit releases.

Fiscal Year 2015 Compared to Fiscal Year 2014

Revenue

Revenue increased by $59.3 million, or 10.8%, in 2015 compared to 2014. The increase was mainly driven by growth in OEM Solutions, with solid contributions from automotive, energy, and enterprise networking customers as well as contributions of $20.1 million from the acquired Maingate, Accel and MobiquiThings businesses in 2015. This increase was partially offset by the unfavorable foreign exchange impact on Euro denominated revenue and weaker year-over-year gateway revenue.

Our geographic revenue mix for the years ended December 31, 2015 and 2014 was as follows:

During the years ended December 31, 2015 and 2014, no customer accounted for more than 10% of our aggregated revenue, from continuing and discontinued operations.

Gross margin

Gross margin was 31.9% of revenue in 2015, compared to 32.6% in 2014. The decrease in gross margin percentage was primarily driven by an increase in sales to high volume but lower margin Automotive OEM customers, combined with lower revenue from our higher margin Enterprise Solutions segment and unfavorable foreign exchange rates. This was partially offset by product cost reductions and the addition of newly acquired, higher margin connectivity services revenue. Gross margin included stock-based compensation expense and related social taxes of $0.6 million in both 2015 and 2014.

Sales and marketing

Sales and marketing expenses increased $3.7 million, or 7.3%, in 2015, compared to 2014, primarily as a result of the additional costs from recent acquisitions and targeted investments to strengthen our go-to-market capability, partially offset by the favorable impact of foreign exchange. Sales and marketing expenses included stock-based compensation and related social taxes of $2.2 million in both 2015 and 2014.

Research and development

R&D expenses decreased by $6.9 million, or 8.5%, in 2015, compared to 2014. The decrease in R&D expenses was primarily due to lower amortization related to businesses acquired and the favorable impact of foreign exchange, partially offset by higher certification costs and investment in R&D resources.

R&D expenses included stock-based compensation and related social taxes of $1.5 million in 2015, compared to $2.1 million in 2014. R&D expenses also included acquisition-related amortization of $1.3 million in 2015, compared to $5.7 million in 2014.

Administration

Administration expenses increased by $3.3 million, or 8.9%, in 2015, compared to 2014, primarily due to additional expenses associated with the acquired Maingate, Accel and MobiquiThings businesses, as well as higher corporate development costs, partially offset by the favorable impact of foreign exchange. Administration expenses included stock-based compensation expense and related social taxes of $5.3 million in 2015, compared to $5.6 million in 2014.

Restructuring

Restructuring costs were lower by $0.6 million in 2015, compared to 2014. Restructuring costs in 2015 were related to implementation of a plan to realign responsibilities within our Enterprise Solutions segment to reflect the evolution of our business and to provide dedicated focus on our enterprise gateways and recently acquired cloud and connectivity services businesses. Restructuring costs in 2014 were related to our decision to reduce the scope of 2G chipset development activities.

Acquisition-related and integration

Acquisition-related and integration costs decreased by $0.7 million in 2015, compared to 2014. The decrease was primarily due to a $0.8 million change in the fair value of acquisition-related contingent consideration.

Impairment

In the second quarter of 2014, we made a decision to reduce the scope of our 2G chipset development activities, which resulted in a $3.8 million impairment. Management evaluated the recoverability of costs and determined that the expected future cash flows were lower than the carrying value of the assets associated with this project. No such impairment was recorded in 2015.

Amortization

Amortization expense increased by $3.3 million, or 35.7%, in 2015, compared to 2014 primarily due to higher acquisition-related amortization. Amortization expense in 2015 included $8.4 million of acquisition-related amortization compared to $5.2 million in 2014.

Foreign exchange gain (loss)

Foreign exchange loss was $11.8 million in 2015, compared to a loss of $12.4 million in 2014. Commencing in the second quarter of 2015, we classified an intercompany Euro denominated loan ("Intercompany Loan") as part of a net investment in a foreign subsidiary which resulted in the foreign exchange gain or loss from revaluation of the Intercompany Loan being recognized in other comprehensive income on a prospective basis. Prior to the second quarter of 2015, we had the intention to have the foreign subsidiary repay the Intercompany Loan and, as such, the foreign exchange fluctuations from the revaluation of the Intercompany Loan were recognized through foreign exchange gain or loss as part of net earnings.

Income tax expense (recovery)

Income tax expense was $1.1 million in 2015, compared to an income tax recovery of $1.3 million in 2014. The additional expense was due to higher earnings and the impact of a shift of earnings between jurisdictions. The recovery in 2014 was related to a combination of changes in deferred income tax assets and the release of a FASB Interpretation No. 48 provision which had become statute barred.

Net earnings (loss)

Net loss was $2.7 million in 2015, compared to net loss of $16.9 million in 2014. The decrease in the net loss reflects improved earnings from operations partially offset by higher income tax expenses.

Net loss in 2015 included stock-based compensation expense and related social taxes of $9.7 million and acquisition-related amortization of $9.7 million. Net loss in 2014 included stock-based compensation expense and related social taxes of $10.5 million and acquisition-related amortization of $10.9 million.

Weighted average number of shares

The weighted average basic and diluted shares outstanding were 32.2 million for the year ended December 31, 2015 and 31.5 million for the year ended December 31, 2014.

The number of shares outstanding was 32.3 million at December 31, 2015, compared to 31.9 million at December 31, 2014. The increase in the number of shares outstanding was primarily due to the issuance of common shares as a result of stock option exercises.

SEGMENTED INFORMATION

OEM Solutions



										% change
(In thousands of U.S. dollars, except where otherwise stated)	2016			2015			2014			2016 vs 2015		2015 vs 2014
Revenue	$	516,517		$	523,366		$	476,650		(1.3	)%	9.8	%
Cost of goods sold	349,921			371,559			336,132			(5.8	)%	10.5	%
Gross margin	$	166,596		$	151,807		$	140,518		9.7	%	8.0	%
Gross margin %	32.3		%	29.0		%	29.5		%

Non-GAAP ⁽¹⁾
Gross Margin	$	154,988		$	152,368		$	141,001		1.7	%	8.1	%
Gross Margin %	30.0		%	29.1		%	29.6		%

⁽¹⁾See section titled "Non-GAAP Financial Measures" for additional details and a reconciliation to the applicable GAAP financial measure.

Fiscal Year 2016 compared to 2015

Revenue decreased by $6.8 million, or 1.3%, in 2016, compared to 2015. This decrease was primarily due to demand softness from certain established customers and programs, partially offset by contribution from new programs.

Higher gross margin percentage in 2016 compared to the prior year reflects a $12.9 million reduction of cost of goods sold, representing the portion of the Change in Estimate that is attributable to our OEM Solutions segment. In addition, our cost reduction initiatives during the year, together with the reimbursement of $1.9 million in certain legal costs pursuant to a favorable arbitration decision on a contract dispute with an IP licensor, of which $1.7 million was attributable to our OEM Solutions segment, also had a positive impact on the gross margin.

Our non-GAAP gross margin percentage of 30.0% excludes $11.7 million of the Change in Estimate attributable to OEM Solutions related to the one-time reduction in our Accrued Royalties obligations effective October 1, 2016. The $1.2 million balance of the Change in Estimate attributable to the OEM Solutions segment is included in non-GAAP gross margin as it relates to products sold during the fourth quarter of 2016.

Fiscal Year 2015 compared to 2014

Revenue increased by $46.7 million, or 9.8%, in 2015, compared to 2014. This increase was primarily due to continued growth in sales of 3G and 4G products and solid contributions from automotive, energy and enterprise networking customers. Gross margin percentage modestly decreased in 2015 primarily due to an increase in sales to high volume but lower margin Automotive OEM customers and unfavorable foreign exchange rates, partially offset by product cost reductions on certain components.

Enterprise Solutions



										% change
(In thousands of U.S. dollars, except where otherwise stated)	2016			2015			2014			2016 vs 2015		2015 vs 2014
Revenue	$	71,486		$	63,072		$	71,873		13.3	%	(12.2	)%
Cost of goods sold	31,537			29,945			33,412			5.3	%	(10.4	)%
Gross margin	$	39,949		$	33,127		$	38,461		20.6	%	(13.9	)%
Gross margin %	55.9		%	52.5		%	53.5		%

Non-GAAP ⁽¹⁾
Gross Margin	$	38,913		$	33,192		$	38,533		17.2	%	(13.9	)%
Gross Margin %	54.4		%	52.6		%	53.6		%

⁽¹⁾See section titled "Non-GAAP Financial Measures" for additional details and a reconciliation to the applicable GAAP financial measure.

Fiscal Year 2016 compared to 2015

Revenue increased by $8.4 million, or 13.3%, in 2016, compared to 2015 mainly driven by revenue from the acquisition of GenX and the impact of new AirLink gateway product introductions in 2016.

Gross margin increased in 2016, reflecting a $1.5 million reduction of cost of goods sold, representing the portion of the Change in Estimate that is attributable to our Enterprise Solutions segment. In addition, a $1.9 million recovery from a legal settlement with a supplier related to a component quality issue received in the first quarter of 2016 and improved product mix resulting from increased sales of higher margin gateway products, also had a positive impact on our Enterprise Solutions segment gross margin.

Our non-GAAP gross margin percentage of 54.4% excludes $1.3 million of the Change in Estimate attributable to Enterprise Solutions related to the one-time reduction in our Accrued Royalties obligations effective October 1, 2016. The $0.2 million balance of the Change in Estimate attributable to the Enterprise Solutions segment is included in non-GAAP gross margin as it relates to products sold during the fourth quarter of 2016.

Fiscal Year 2015 compared to 2014

Revenue decreased by $8.8 million, or 12.2%, in 2015, compared to 2014. The decrease was driven by lower sales of AirLink gateway products due to heightened competition and the impact on sales of a new product pipeline that had not yet been fully launched into the market. Gross margin percentage decreased in 2015, driven primarily by unfavorable product mix resulting from lower sales of higher margin gateway products and overall lower sales volume.

Cloud and Connectivity Services



										% change
(In thousands of U.S. dollars, except where otherwise stated)	2016			2015			2014			2016 vs 2015		2015 vs 2014
Revenue	$	27,604		$	21,360		$	—		29.2	%	—	%
Cost of goods sold	16,406			12,439			—			31.9	%	—	%
Gross margin	$	11,198		$	8,921		$	—		25.5	%	—	%
Gross margin %	40.6		%	41.8		%	—		%

Non-GAAP ⁽¹⁾
Gross Margin	$	11,217		$	8,942		$	—		25.4	%	—	%
Gross Margin %	40.6		%	41.9		%	—		%

⁽¹⁾ See section titled "Non-GAAP Financial Measures" for additional details and a reconciliation to the applicable GAAP financial measure.

Fiscal Year 2016 compared to 2015

Revenue increased by $6.2 million, or 29.2%, in 2016, compared to 2015 mainly as a result of the inclusion of a full year of revenue resulting from the acquisitions of Maingate, MobiquiThings and Accel in 2015. Gross margin percentage was slightly lower in 2016 due to the increased revenue impact of Accel's broadband services which have gross margins that are lower than the average gross margin for Cloud and Connectivity Services.

Fiscal Year 2015 compared to 2014

The Cloud and Connectivity Services reportable segment was created following the implementation of a new organizational structure during 2015. The 2015 segment information reflects its operations for the entire year. We have not disclosed 2014 comparative information for this new segment as the operations related to Cloud and Connectivity Services that were formerly included in the Enterprise Solutions segment were not material prior to 2015. The segment comprises revenues derived from our cloud-based platform, our connectivity services and our managed wireless broadband services and includes the acquisitions of Maingate, Accel and MobiquiThings and our existing AirVantage cloud-based platform.

FOURTH QUARTER OVERVIEW

Consolidated Results of Operations:



	Three months ended December 31,
(in thousands of U.S. dollars, except where otherwise stated)	2016				2015
			% of				% of
	$		Revenue		$		Revenue
Revenue	163,021		100.0	%	144,846		100.0	%
Cost of goods sold	94,225		57.8	%	99,783		68.9	%
Gross margin	68,796		42.2	%	45,063		31.1	%
Expenses
Sales and marketing	17,048		10.4	%	14,315		9.9	%
Research and development	18,047		11.1	%	18,539		12.8	%
Administration	9,708		6.0	%	9,393		6.5	%
Restructuring	—		—	%	201		0.1	%
Acquisition-related and integration	376		0.2	%	(616	)	(0.4	)%
Amortization	4,372		2.7	%	3,905		2.7	%
	49,551		30.4	%	45,737		31.6	%
Earnings (loss) from operations	19,245		11.8	%	(674	)	(0.5	)%
Foreign exchange loss	(3,547	)			(1,398	)
Other income (expense)	2				(16	)
Earnings (loss) before income taxes	15,700				(2,088	)
Income tax expense (recovery)	(18	)			(1,705	)
Net earnings (loss)	15,718				(383	)

Net earnings (loss) per share - Basic and diluted (in dollars)	0.49				(0.01	)

GAAP:


•	In the fourth quarter of 2016, revenue increased by $18.2 million, or 12.5%, compared to the same period of 2015 primarily as a result of higher revenues from our OEM Solutions segment driven by increased demand in the energy, mobile computing and networking markets and from our Enterprise Solutions segment driven by the acquisition of GenX.

•

Gross margin was 42.2% in the fourth quarter of 2016 and included a $14.4 million reduction of cost of goods sold as a result of the Change in Estimate, of which $13.0 million relates to a one-time adjustment in our Accrued Royalties obligations effective October 1, 2016 and $1.4 million relates to a lower royalty accrual amount for products sold during the three months ended December 31, 2016. In addition, gross margin benefited from product cost reductions in our OEM and Enterprise Solutions segments.


•	Earnings from operations increased by $19.9 million in the fourth quarter of 2016 compared to the fourth quarter of 2015 as a result of higher revenue and associated gross margin.


•	Net earnings improved by $16.1 million in the fourth quarter of 2016, compared to the fourth quarter of 2015. Higher operating income in the fourth quarter of 2016 was partially offset by higher foreign exchange losses and lower income tax recoveries.


•	Cash and cash equivalents at the end of the fourth quarter of 2016 were $102.8 million, a decrease of $9.3 million compared to $112.1 million at the end of the third quarter of 2016. The decrease in cash was

mainly due to capital expenditures, the repurchase of shares under our Normal Course Issuer Bid ("NCIB") program and the acquisition of Blue Creation.

NON-GAAP⁽¹⁾:

•

Gross margin was 34.3% in the fourth quarter of 2016, compared to 31.2% in the fourth quarter of 2015. The increase in gross margin was primarily attributable to product cost reductions in our OEM Solutions segment and the impact of favorable volume and mix variances in our Enterprise Solutions segment driven by sales of newly introduced cellular gateways. Gross margin in the fourth quarter of 2016 also reflects the impact of a $1.4 million reduction in our royalty accrual for products sold during the quarter as a result of the Change in Estimate.


•	Earnings from operations increased by $8.4 million compared to the fourth quarter of 2015 due to higher revenue and gross margin, partially offset by increased operating expenses .


•	Adjusted EBITDA increased by $9.1 million compared to the fourth quarter of 2015. This increase mainly reflects increased earnings from operations and higher amortization expense in the fourth quarter of 2016.


•	Net earnings increased by $6.3 million, compared to the fourth quarter of 2015 as a result of higher operating profit partially offset by higher income tax expenses.

SUMMARY OF QUARTERLY RESULTS OF OPERATIONS

The following tables highlight selected financial information for each of the eight most recent quarters that, in management’s opinion, have been prepared on a basis consistent with the audited consolidated financial statements for the year ended December 31, 2016. The selected financial information presented below reflects all adjustments, consisting primarily of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of results for the interim periods. These results are not necessarily indicative of results for any future period. You should not rely on these results to predict future performance.



(In thousands of U.S. dollars, except where otherwise stated)	2016												2015
	Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Revenue	$	163,021		$	153,560		$	156,229		$	142,797		$	144,846		$	154,581		$	157,965		$	150,406
Cost of goods sold	94,225			104,192			103,465			95,982			99,783			105,572			107,018			101,570
Gross margin	68,796			49,368			52,764			46,815			45,063			49,009			50,947			48,836
Gross margin %	42.2		%	32.1		%	33.8		%	32.8		%	31.1		%	31.7		%	32.3		%	32.5		%
Expenses
Sales and marketing	17,048			15,519			16,046			15,629			14,315			13,856			12,828			13,145
Research and development	18,047			18,015			18,237			18,778			18,539			17,987			18,402			19,092
Administration	9,708			11,435			10,286			9,527			9,393			9,416			11,092			10,420
Restructuring	—			—			—			—			201			39			711			—
Acquisition-related and integration	376			34			59			374			(616		)	443			1,015			1,103
Amortization	4,372			4,418			4,725			3,762			3,905			3,066			2,787			2,602
	49,551			49,421			49,353			48,070			45,737			44,807			46,835			46,362
Earnings (loss) from operations	19,245			(53		)	3,411			(1,255		)	(674		)	4,202			4,112			2,474
Foreign exchange gain (loss)	(3,547		)	590			(1,071		)	2,292			(1,398		)	(102		)	1,550			(11,893		)
Other income (expense)	2			23			32			26			(16		)	13			13			105
Earnings (loss) before income taxes	15,700			560			2,372			1,063			(2,088		)	4,113			5,675			(9,314		)
Income tax expense (recovery)	(18		)	2,329			1,654			345			(1,705		)	827			1,599			339
Net earnings (loss)	$	15,718		$	(1,769	)	$	718		$	718		$	(383	)	$	3,286		$	4,076		$	(9,653	)
Earnings (loss) per share - GAAP in dollars
Basic	$	0.49		$	(0.06	)	$	0.02		$	0.02		$	(0.01	)	$	0.10		$	0.13		$	(0.30	)
Diluted	$	0.49		$	(0.06	)	$	0.02		$	0.02		$	(0.01	)	$	0.10		$	0.12		$	(0.30	)
Weighted average number of shares (in thousands)
Basic	31,962			32,043			31,966			32,156			32,282			32,231			32,166			31,983
Diluted	32,367			32,043			32,430			32,500			32,282			32,823			32,915			31,983

Our quarterly results may fluctuate from quarter-to-quarter, driven by variation in sales volume, product mix and the combination of variable and fixed operating expenses. The impact of significant items incurred during the first three interim periods of the year ended December 31, 2016 are discussed in more detail and disclosed in our quarterly reports and management’s discussion and analysis. Certain of the factors that affected our quarterly results in 2016 are listed below.


•	In the first quarter of 2016, net earnings increased $1.1 million, or $0.03 per common share, to $0.7 million, compared to the fourth quarter of 2015. The increase in the net earnings was largely related to a foreign exchange gain in Q1, 2016 compared to Q4, 2015 partially offset by lower operating earnings and higher income tax expenses.


•	In the second quarter of 2016, net earnings were comparable to the first quarter of 2016. The second quarter higher revenue and associated gross margin was offset by higher operating expenses, foreign exchange losses and higher income tax expenses compared to the first quarter.


•	In the third quarter of 2016, net earnings decreased by $2.5 million, or $0.08 per common share, compared to $0.7 million, in the second quarter of 2016, driven by a combination of lower revenue and gross margin, and higher income tax expenses partially offset by foreign exchange gains.


•	In the fourth quarter of 2016, net earnings increased by $17.5 million, or $0.54 per common share, to $15.7 million, compared to the third quarter of 2016, primarily due to higher revenue and gross margin partially offset by higher foreign exchange loss.

LIQUIDITY AND CAPITAL RESOURCES

Selected Financial Information:



(in thousands of U.S. dollars)	2016			2015			2014
Cash flows provided before changes in non-cash working capital:	$	32,853		$	29,089		$	27,380
Changes in non-cash working capital
Accounts receivable	(26,475		)	(8,437		)	(5,180		)
Inventories	(5,785		)	(16,262		)	(8,949		)
Prepaids and other	6,970			(5,748		)	25,421
Accounts payable and accrued liabilities ⁽²⁾	38,601			18,612			11,914
Deferred revenue and credits	1,203			(451		)	(510		)
	14,514			(12,286		)	22,696
Cash flows provided by (used in):
Operating activities	$	47,367		$	16,803		$	50,076

Investing activities	$	(26,636	)	$	(127,969	)	$	(22,336	)
Acquisitions	(8,782		)	(112,895		)	(23,853		)
Net proceeds from sale of AirCard business	—			—			13,800
Capital expenditures and increase in intangible assets	(17,857		)	(15,079		)	(10,829		)
Net change in short-term investments and other assets	—			—			(1,584		)

Financing activities⁽²⁾	$	(13,689	)	$	(5,317	)	$	(1,354	)
Issue of common shares	2,048			3,837			6,404
Repurchase of common shares for cancellation	(10,203		)	—			—
Purchase of treasury shares for RSU distribution	(4,214		)	(6,584		)	(5,955		)

Free Cash Flow⁽¹⁾	$	29,510		$	1,724		$	39,247

⁽¹⁾See section titled "Non-GAAP Financial Measures" for additional details and a reconciliation to the applicable GAAP financial measure.

⁽²⁾In Q3 2016, we early adopted ASU 2016-09. We elected to apply on a retrospective basis the classification of excess tax benefits from financing activities to operating activities in the Consolidated Statement of Cash Flows.

Operating Activities

Cash provided by operating activities increased by $30.6 million in 2016, primarily due to lower working capital requirements largely driven by lower end-of-life component purchases compared to 2015.

Investing Activities

Cash used for investing activities decreased by $101.3 million in 2016 compared to 2015. Higher cash requirements in 2015 were driven by more business acquisition activity than we had in 2016.

Capital expenditures of $17.9 million in 2016 were utilized primarily for production and tooling equipment, R&D equipment, leasehold improvements, computer equipment and software, while cash used for intangible assets was driven primarily by patent registration costs.

Financing Activities

Cash used for financing activities increased $8.4 million in 2016 compared to 2015, primarily due to repurchase of common shares under our NCIB program.

Free Cash Flow

Our free cash flow in 2016 was $29.5 million compared to $1.7 million in 2015. This increase was a result of higher operating cash flow compared to 2015. See "Non-GAAP Financial Measures".

Cash Requirements

Our near-term cash requirements are primarily related to funding our operations, including inventory and other working capital items, capital expenditures, and other obligations discussed below. Cash may also be used to finance acquisitions of businesses in line with our long-term strategy. We continue to believe that our cash and cash equivalents of $102.8 million at December 31, 2016 and cash generated from operations will be sufficient to fund our expected working capital requirements for at least the next twelve months. Our capital expenditures during the first quarter of 2017 are expected to be primarily for factory test equipment, R&D equipment, production and tooling equipment and patents. However, we cannot be certain that our actual cash requirements will not be greater than we currently expect.

The following table presents the aggregate amount of future cash outflows for contractual obligations as of December 31, 2016.



Payments due by period (In thousands of dollars)	Total		2017		2018		2019		2020		2021		Thereafter
Operating lease obligations	$	23,368	$	4,209	$	4,030	$	3,676	$	3,474	$	3,388	$	4,591
Capital lease obligations	668		255		214		146		42		11		—
Purchase obligations ⁽¹⁾	111,853		110,653		1,200		—		—		—		—
Acquisition contingent considerations ⁽²⁾	1,806		1,439		367		—		—		—		—
Other long-term liabilities	785		122		372		50		15		12		214
Total	$	138,480	$	116,678	$	6,183	$	3,872	$	3,531	$	3,411	$	4,805

⁽¹⁾ Purchase obligations represent obligations with certain contract manufacturers to buy a minimum amount of designated products between January 2017 and May 2017. In certain of these arrangements, we may be required to acquire and pay for such products up to the prescribed minimum or forecasted purchases.

⁽²⁾ Acquisition contingent considerations relate to expected payments to be made under the performance-based earnout formulas for the MobiquiThings acquisition and the anticipated consumption of inventory for the GenX acquisition.

Normal Course Issuer Bid

On February 4, 2016, we received approval from the TSX of our Notice of Intention to make a Normal Course Issuer Bid. Pursuant to the NCIB, we may purchase for cancellation up to 3,149,199 of our common shares, or approximately 9.7% of the common shares outstanding as of the date of the announcement. The NCIB commenced on February 9, 2016 and expired on February 8, 2017. As of February 8, 2017, we had purchased 980,089 common shares at an average price of $13.25 per share.

Capital Resources

The source of funds for our future capital expenditures and commitments includes cash, accounts receivables, cash from operations and borrowings under our credit facilities.



	2016								2015
(In thousands of dollars)	Dec 31		Sept 30		June 30		Mar 31		Dec 31		Sept 30		June 30		Mar 31
Cash and cash equivalents	$	102,772	$	112,054	$	98,433	$	86,120	$	93,936	$	88,369	$	96,474	$	99,555
Unused credit facilities	10,000		10,000		10,000		10,000		10,000		10,000		10,000		10,000
Total	$	112,772	$	122,054	$	108,433	$	96,120	$	103,936	$	98,369	$	106,474	$	109,555

Credit Facilities

We have a $10 million revolving term credit facility ("Revolving Facility") with Toronto Dominion Bank and the Canadian Imperial Bank of Commerce. The expiry date on this Revolving Facility has been extended to April 28, 2017. The Revolving Facility is for working capital requirements, is secured by a pledge against all of our assets and is subject to borrowing base limitations. As at December 31, 2016, there were no borrowings under the Revolving Facility.

Letters of Credit

We have access to a revolving standby letter of credit facility of $10 million from Toronto Dominion Bank. The credit facility is used for the issuance of letters of credit for project-related performance guarantees and is guaranteed by Export Development Canada. As at December 31, 2016, letters of credit issued against the revolving standby letter of credit facility was nominal.

NON-GAAP FINANCIAL MEASURES

Our consolidated financial statements are prepared in accordance with U.S. GAAP on a basis consistent for all periods presented. In addition to results reported in accordance with U.S. GAAP, we use non-GAAP financial measures as supplemental indicators of our operating performance. The term “non-GAAP financial measure” is used to refer to a numerical measure of a company’s historical or future financial performance, financial position or cash flows that: (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP in a company’s statement of earnings, balance sheet or statement of cash flows; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.

Our non-GAAP financial measures include non-GAAP gross margin, non-GAAP earnings (loss) from operations, non-GAAP net earnings (loss), non-GAAP earnings (loss) per share, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and free cash flow.

Non-GAAP gross margin excludes the impact of stock-based compensation expense and related social taxes and certain other nonrecurring costs or recoveries.

Non-GAAP earnings (loss) from operations excludes the impact of stock-based compensation expense and related social taxes, acquisition-related amortization, acquisition-related and integration costs, restructuring costs, impairment and certain other nonrecurring costs or recoveries.

In addition to the above, Non-GAAP net earnings (loss) and non-GAAP earnings (loss) per share exclude the impact of foreign exchange gains or losses on translation of certain balance sheet accounts and certain tax adjustments.

We use the above-noted non-GAAP financial measures for planning purposes and to allow us to assess the performance of our business before including the impacts of the items noted above as they affect the comparability of our financial results. These non-GAAP measures are reviewed regularly by management and the Board of Directors as part of the ongoing internal assessment of our operating performance. We also use non-GAAP earnings from operations as one component in determining short-term incentive compensation for management employees.

Adjusted EBITDA is defined as net earnings (loss) plus stock-based compensation expense and related social taxes, acquisition-related and integration costs, restructuring costs, impairment, certain other nonrecurring costs or recoveries, amortization, foreign exchange gains or losses on translation of certain balance sheet accounts, interest and income tax expense. Adjusted EBITDA is a metric used by investors and analysts for valuation purposes and is an important indicator of our operating performance and our ability to generate liquidity through operating cash flow that will fund future working capital needs and capital expenditures.

Free cash flow is defined as cash flow from operating activities less capital expenditures and increases in intangibles. We believe that disclosure of free cash flow provides a good measure of our ability to internally generate cash that can be used for investment in the business and is an important indicator of our financial strength and performance. We also believe that certain investors and analysts use free cash flow to assess our business.

We disclose these non-GAAP financial measures as we believe they provide useful information to investors and analysts to assist them in their evaluation of our operating results and to assist in comparisons from one period to another. Readers are cautioned that non-GAAP financial measures do not have any standardized meaning prescribed by U.S. GAAP and therefore may not be comparable to similar measures presented by other companies. We strongly encourage investors to review our financial information in its entirety and not to rely on a single

financial measure. We therefore believe that despite these limitations, it is appropriate to supplement the U.S. GAAP measures with certain non-GAAP measures defined in this section of our MD&A.

The following table provides a reconciliation of the non-GAAP financial measures to our most directly comparable U.S. GAAP results for years ended December 31:



(In thousands of U.S. dollars, except where otherwise stated)	2016			2015			2014

Gross margin - GAAP	$	217,743		$	193,855		$	178,979
Stock-based compensation and related social taxes	420			647			555
Other nonrecurring costs (recoveries)	$	(13,045	)	$	—		$	—
Gross margin - Non-GAAP	$	205,118		$	194,502		$	179,534

Earnings (loss) from operations - GAAP	$	21,348		$	10,114		$	(6,594	)
Stock-based compensation and related social taxes	7,596			9,685			10,464
Acquisition-related and integration	843			1,945			2,670
Restructuring	—			951			1,598
Impairment	—			—			3,756
Other nonrecurring costs (recoveries)	(11,762		)	—			—
Acquisition-related amortization	12,102			9,666			10,900
Earnings from operations - Non-GAAP	$	30,127		$	32,361		$	22,794

Net earnings (loss)- GAAP	$	15,385		$	(2,674	)	$	(16,853	)
Stock-based compensation and related social taxes, restructuring, impairment, acquisition-related, integration and other nonrecurring costs (recoveries)	(3,323		)	12,581			18,488
Amortization	25,894			20,216			23,517
Interest and other, net	(83		)	(115		)	(854		)
Unrealized foreign exchange loss (gain)	1,736			11,843			12,390
Income tax expense (recovery)	4,310			1,060			(1,277		)
Adjusted EBITDA	$	43,919		$	42,911		$	35,411
Amortization (exclude acquisition-related amortization)	(13,792		)	(10,550		)	(12,617		)
Interest and other, net	83			115			854
Income tax expense - Non-GAAP	(8,241		)	(6,702		)	(3,800		)
Net earnings - Non-GAAP	$	21,969		$	25,774		$	19,848

Net earnings (loss) - GAAP	$	15,385		$	(2,674	)	$	(16,853	)
Net earnings (loss) - Non-GAAP	43,919			25,774			19,848

Diluted earnings (loss) per share
GAAP - (in dollars)	$	0.48		$	(0.08	)	$	(0.53	)
Non-GAAP - (in dollars)	$	0.68		$	0.80		$	0.63

The following table provides a quarterly reconciliation of the non-GAAP financial measures to our most directly comparable U.S. GAAP results:



	2016												2015
(In thousands of U.S. dollars, except where otherwise stated)	Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1

Gross margin - GAAP	$	68,796		$	49,368		$	52,764		$	46,815		$	45,063		$	49,009		$	50,947		$	48,836
Stock-based compensation and related social taxes	99			108			107			106			106			146			147			248
Other nonrecurring costs (recoveries)	(13,045		)	—			—			—			—			—			—			—
Gross margin - Non-GAAP	$	55,850		$	49,476		$	52,871		$	46,921		$	45,169		$	49,155		$	51,094		$	49,084

Earnings (loss) from operations - GAAP	$	19,245		$	(53	)	$	3,411		$	(1,255	)	$	(674	)	$	4,202		$	4,112		$	2,474
Stock-based compensation and related social taxes	1,845			1,856			1,902			1,993			1,670			2,557			2,858			2,600
Acquisition-related and integration	376			34			59			374			(616		)	443			1,015			1,103
Restructuring	—			—			—			—			201			39			711			—
Other nonrecurring costs (recoveries)	(13,045		)	1,283			—			—			—			—			—			—
Acquisition-related amortization	3,308			3,206			3,058			2,530			2,734			2,234			2,029			2,669
Earnings (loss) from operations - Non-GAAP	$	11,729		$	6,326		$	8,430		$	3,642		$	3,315		$	9,475		$	10,725		$	8,846

Net earnings (loss) - GAAP	$	15,718		$	(1,769	)	$	718		$	718		$	(383	)	$	3,286		$	4,076		$	(9,653	)
Stock-based compensation and related social taxes, restructuring, acquisition-related, integration and other nonrecurring costs (recoveries)	(10,824		)	3,173			1,961			2,367			1,255			3,039			4,584			3,703
Amortization	7,043			6,577			6,706			5,568			5,764			4,869			4,452			5,131
Interest and other, net	(2		)	(23		)	(32		)	(26		)	16			(13		)	(13		)	(105		)
Foreign exchange loss (gain)	3,547			(590		)	1,071			(2,292		)	1,398			102			(1,550		)	11,893
Income tax expense (recovery)	(18		)	2,329			1,654			345			(1,705		)	827			1,599			339
Adjusted EBITDA	$	15,464		$	9,697		$	12,078		$	6,680		$	6,345		$	12,110		$	13,148		$	11,308
Amortization (exclude acquisition-related amortization)	(3,735		)	(3,371		)	(3,648		)	(3,038		)	(3,030		)	(2,635		)	(2,423		)	(2,462		)
Interest and other, net	2			23			32			26			(16		)	13			13			105
Income tax expense - Non-GAAP	(2,900		)	(2,208		)	(2,086		)	(1,047		)	(763		)	(2,069		)	(2,101		)	(1,769		)
Net earnings - Non-GAAP	$	8,831		$	4,141		$	6,376		$	2,621		$	2,536		$	7,419		$	8,637		$	7,182

Diluted earnings (loss) per share
GAAP - (in dollars)	$	0.49		$	(0.06	)	$	0.02		$	0.02		$	(0.01	)	$	0.10		$	0.12		$	(0.30	)
Non-GAAP - (in dollars)	$	0.27		$	0.13		$	0.20		$	0.08		$	0.08		$	0.23		$	0.26		$	0.22

The following table provides a reconciliation of segmented gross margin:



(In thousands of U.S. dollars)	2016			2015		2014

OEM Solutions:
Gross margin - GAAP	$	166,596		$	151,807	$	140,518
Stock-based compensation and related social taxes	352			561		483
Other nonrecurring costs (recoveries)	(11,960		)	—		—
Gross margin - Non-GAAP	$	154,988		$	152,368	$	141,001

Enterprise Solutions:
Gross margin - GAAP	$	39,949		$	33,127	$	38,461
Stock-based compensation and related social taxes	49			65		72
Other nonrecurring costs (recoveries)	(1,085		)	—		—
Gross margin - Non-GAAP	$	38,913		$	33,192	$	38,533

Cloud and Connectivity Services:
Gross margin - GAAP	$	11,198		$	8,921	$	—
Stock-based compensation and related social taxes	19			21		—
Other nonrecurring costs (recoveries)	—			—		—
Gross margin - Non-GAAP	$	11,217		$	8,942	$	—

The following table provides a reconciliation of free cash flow:



(In thousands of U.S. dollars)	2016			2015			2014
Cash flows from operating activities	$	47,367		$	16,803		$	50,076
Capital expenditures and increase in intangible assets	(17,857		)	(15,079		)	(10,829		)
Free Cash Flow	$	29,510		$	1,724		$	39,247

OFF-BALANCE SHEET ARRANGEMENTS

We did not have any off-balance sheet arrangements during the years ended December 31, 2016 and 2015.

TRANSACTIONS BETWEEN RELATED PARTIES

We did not undertake any transactions with related parties during the years ended December 31, 2016 and 2015.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our consolidated financial statements in accordance with U.S. GAAP and we make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosure of contingent liabilities. Note 2, Summary of significant accounting policies, in the December 31, 2016 consolidated financial statements includes a summary of the significant accounting policies used in the preparation of our consolidated financial statements. While all of the significant accounting policies are important to the

annual consolidated financial statements, some of these policies may be viewed as involving a high degree of judgment.

On an ongoing basis, we evaluate our estimates and judgments, including those related to business combinations, revenue recognition, adequacy of allowance for doubtful accounts, adequacy of inventory reserve, valuation of goodwill and intangible assets, income taxes, useful lives of long-lived assets, adequacy of warranty reserve, royalty obligations, contingencies, stock-based compensation, and fair value measurement. We base our estimates on historical experience, anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ materially from our estimates.

The following critical accounting policies require management’s most difficult, subjective and complex judgments, and are subject to measurement uncertainty.

Business combinations

We account for our business combinations using the acquisition method. Under this method, estimates we make to determine the fair values of acquired assets and liabilities assumed include judgments in our determinations of acquired intangible assets and assessment of the fair value of existing property and equipment. Assumed liabilities can include litigation and other contingency reserves existing at the time of the acquisition. Goodwill is recognized as of the acquisition date as the excess of the fair value of consideration transferred over the estimated fair values of net identifiable assets acquired and liabilities assumed at their acquisition date. Acquisition related expenses are separately recognized from business combination and are expensed as incurred.

When establishing fair values, we make significant estimates and assumptions, especially with respect to intangible assets. Intangible assets acquired and recorded by us may include patents, intellectual property, customer relationships, brand, backlog and in-process research and development. Estimates include but are not limited to the forecasting of future cash flows and discount rates. From time to time, we may engage third-party firms to assist us in determining the fair value of assets and liabilities assumed. Our estimates of fair values are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. As a result, actual results may differ from estimates impacting our earnings.

Revenue recognition

We recognize revenue from sales of products and services upon the later of transfer of title or upon shipment of the product to the customer or rendering of the service, so long as persuasive evidence of an arrangement exists, delivery has occurred, price is fixed or determinable, and collection is reasonably assured. Customers include resellers and distributors, OEMs, mobile network operators, other enterprises and public sector entities. We record deferred revenue when we receive cash in advance of the revenue recognition criteria being met. A significant portion of our revenue is generated from sales to resellers. We recognize revenue on sales to resellers based on the sell-in model. Where certain products are subject to contract provisions allowing various rights of return and stock rotation, a portion of the revenues may be deferred based on historical return rates. Where certain resellers are subject to provisions allowing for a future discount based on the final sales channel under which the products have been reported as sold by the resellers, a reduction of revenue is recorded upon invoicing for the expected discounts to be earned. Such rates are based on historical trends. Adjustments to the expected discounts are booked to revenues as the expected rates fluctuate or upon issuance of the final discount.

Revenues from contracts with multiple-element arrangements, such as those including technical support services, are recognized as each element is earned based on the relative fair value of each element and only when there are no undelivered elements that are essential to the functionality of the delivered elements. Revenue from licensed software is recognized at the inception of the license term. Revenue from software maintenance, unspecified upgrades and technical support contracts is recognized over the period such items are delivered or services are

provided. Technical support contracts extending beyond the current period are recorded as deferred revenue and amortized into income over the applicable earning period.

Revenue from activation or set up fees charged in advance of contracted monthly recurring revenue is deferred and recognized over the estimated customer life on a straight line basis. Revenue from cloud and connectivity subscription services are billed monthly and recognized when earned.

Funding from certain research and development agreements is recognized as revenue when certain criteria stipulated under the terms of those funding agreements have been met and when there is reasonable assurance the funding will be received. Government research and development arrangements are recognized as a reduction of the related expense when the criteria stipulated under the terms of the agreements have been met and when there is reasonable assurance the funding will be received.

Allowance for doubtful accounts

We maintain an allowance for doubtful accounts for estimated losses that may arise if any of our customers are unable to make required payments. We consider the following factors when determining whether collection is reasonably assured: customer credit-worthiness, past transaction history with the customer, insured amounts, if any, current economic industry trends and changes in customer payment terms. If we have no previous experience with the customer, we typically obtain reports from credit organizations to ensure that the customer has a history of paying its creditors. We may also request financial information, including financial statements, to ensure that the customer has the means of making payment. If these factors indicate collection is not reasonably assured, revenue is deferred until collection becomes reasonably assured, which is generally upon receipt of cash. If the financial condition of any of our customers deteriorates, we may increase our allowance.

As at December 31, 2016, accounts receivable comprised 24.9% of total assets. Included in this balance was a provision of $2.5 million for doubtful accounts, or 1.7% of accounts receivable compared to $2.1 million for doubtful accounts, or 1.8% of accounts receivable as at December 31, 2015. We believe our allowance for doubtful accounts as at December 31, 2016 is adequate to provide for probable losses existing in accounts receivable.

Inventory

We value our inventory at the lower of cost, determined on a first-in-first-out basis, and estimated net realizable value. We assess the need for an inventory write-down and/or an accrual for estimated losses on inventory purchase commitments based on our assessment of estimated market value using assumptions about future demand and market conditions. Our reserve requirements generally increase as our projected demand requirements decrease, due to market conditions, technological and product life cycle changes and longer than previously expected usage periods. If market conditions are worse than our projections, we may further write-down the value of our inventory or increase the accrual for estimated losses on inventory purchase commitments.

Goodwill and intangible assets

Goodwill and intangible assets are assessed for impairment on an annual basis and between annual tests whenever circumstances indicate that the carrying value of the goodwill and intangible assets might be impaired. We performed our annual test on October 1, 2016. Circumstances may include an adverse change in business climate or a more likely than not expectation that a reporting unit will be sold or disposed. On at least a quarterly basis, we assess whether such circumstances exist. An evaluation of recoverability of goodwill requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the estimated fair value of each reporting unit. Significant judgments that are required on our part to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates, consideration of appropriate control premium, market conditions, and other

assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit and may result in impairment charges in future periods.

At December 31, 2016, our goodwill balance was $154.1 million. We determined that there was no impairment as the fair values of each of our reporting units exceeded their respective carrying values as at October 1, 2016. Our analysis took into consideration an income valuation approach using the expected discounted cash flows for each reporting unit. The principal factors used in the discounted cash flow analysis were the projected results of operations, the discount rate based on our estimated weighted average cost of capital, and terminal value assumptions for each reporting unit. The discounted cash flow model used was based on our business plan, as approved by our Board of Directors. For years subsequent to those contained in our business plan, we analyzed third party forecasts and other macro-economic indicators that impact our reporting units to provide a reasonable estimate of revenue growth in future periods. Our gross margins and operating expense estimates were consistent with those generated in recent historical periods. We also developed assumptions for the amount of working capital and capital expenditures needed to support each reporting unit.

In addition to the income valuation approach noted above, we also considered our current market capitalization, which was approximately $500.2 million at December 31, 2016 and exceeds our book value of $361.6 million.

Income taxes

We recognize and measure each tax position related to income tax positions taken or expected to be taken in a tax return. We have reviewed our tax positions to determine which should be recognized and measured according to the more likely than not threshold requirement. The tax benefits recognized in the financial statements are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. If the realization of a tax position is not considered more likely than not, we provide for a valuation allowance. The ultimate realization of our deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. We consider projected future taxable income from operations, tax planning strategies and transactions in making our assessment. If our assessment of our ability to realize our deferred tax assets changes, we may make an adjustment to our deferred tax assets that would be charged to income (loss).

We do not provide for taxes on foreign earnings as it is our intention to indefinitely reinvest undistributed earnings of our foreign subsidiaries. It is not practical to estimate the income tax liability that might be incurred if there is a change in management’s intention in the event that a remittance of such earnings occurs in the future.

The ultimate amount of future income taxes and income tax provision could be materially different from those recorded, as it is influenced by our future operating results and our tax interpretations.

Amortization

Amortization of property and equipment and intangible assets incorporates estimates of useful lives and residual values. These estimates may change as more experience is obtained or as general market conditions change impacting the operation of property and equipment and intangible assets.

Warranty costs

We accrue product warranty costs in accrued liabilities to provide for the repair or replacement of defective products. Our accrual is based on an assessment of historical experience, product quality and management’s estimates. If there is a change in these factors, we adjust our accrual accordingly.

Royalty obligations

Under certain license agreements we are committed to royalty payments based on the sales of products using certain technologies. We recognize royalty obligations as determinable in accordance with agreement terms. Where agreements are not finalized, we have recognized our current best estimate of the obligation in accrued liabilities and other long-term liabilities. When the agreements are finalized, the estimates are revised accordingly.

Early in the fourth quarter of 2016, we reviewed the cumulative recent developments in the IP licensing landscape and concluded that these should be reflected in the estimate of our royalty obligations. As a result of this Change in Estimate, we reduced our Accrued Royalties obligation by $13.0 million effective October 1, 2016 and recorded a one-time recovery in our cost of goods sold. The Change in Estimate will also result in a reduction of our royalty accrual for future products sold. As a result, during the three months ended December 31, 2016, this Change in Estimate had a favorable impact of $1.4 million on cost of goods sold, related to products sold during the quarter. For the year ended December 31, 2016, this Change in Estimate increased our net earnings by $14.4 million and each of basic and diluted net earnings per share by $0.45.

Contingencies

We are from time to time involved in litigation, certain other claims and arbitration matters arising in the ordinary course of our business. We accrue for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether an amount of a loss is reasonably estimable. These accruals are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and technical experts and other information and events pertaining to the particular matter. To the extent there is a reasonable possibility (within the meaning of ASC 450, Contingencies) that the losses could exceed the amounts already accrued, management believes that the amount of any such additional loss would not be material to our results of operations or financial condition.

In some instances, we are unable to reasonably estimate any potential loss or range of loss. The nature and progression of litigation can make it difficult to predict the impact a particular lawsuit will have on the company. There are many reasons why we cannot make these assessments, including, among others, one or more of the following: in the early stage of a proceeding, the claimant is not required to specifically identify the patent that has allegedly been infringed; damages sought that are unspecified, unsupportable, unexplained or uncertain; discovery not having been started or being incomplete; the complexity of the facts that are in dispute (e.g., once a patent is identified, the analysis of the patent and a comparison to our activities is a labour-intensive and highly technical process); the difficulty of assessing novel claims; the parties not having engaged in any meaningful settlement discussions; the possibility that other parties may share in any ultimate liability; and the often slow pace of patent litigation.

We are required to apply judgment with respect to any potential loss or range of loss in connection with litigation. While we believe we have meritorious defenses to the claims asserted against us in our currently outstanding litigation, and intend to defend ourselves vigorously in all cases, in light of the inherent uncertainties in litigation there can be no assurance that the ultimate resolution of these matters will not significantly exceed the reserves currently accrued by us for those cases for which an estimate can be made. Losses in connection with any litigation for which we are not presently able to reasonable estimate any potential loss or range of loss could be material to our results of operations and financial condition.

Stock-based compensation

We recognize stock-based compensation expense for all stock-based compensation awards based on the fair value at grant date. We recognize stock-based compensation expense on a straight-line basis over the requisite service period of the award and account for forfeitures as they occur.

Determining the appropriate fair value model and calculating the fair value of share-based payment awards requires subjective assumptions. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

Fair value measurement

We measure our short-term investments at fair value, defined as the price that would be received from selling an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements, we consider the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of non-performance.

An established fair value hierarchy requires the company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is both available and significant to the fair value measurement. Three levels of inputs may be used to measure fair value as detailed below.


•	Level 1 - Quoted prices in active markets for identical assets or liabilities.


•	Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.


•	Level 3 - Inputs that are generally unobservable and are supported by little or no market activity and that are significant to the fair value determination of the assets or liabilities.

The determination of fair value requires judgments, assumptions and estimates and may change over time.

OUTSTANDING SHARE DATA

As of March 9, 2017, we had 32,146,900 common shares issued and outstanding, stock options exercisable into 1,565,034 common shares at a weighted average exercise price of $19.58 and 516,518 restricted treasury share units outstanding.

IMPACT OF ACCOUNTING PRONOUNCEMENTS AFFECTING CURRENT PERIOD

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This update affects several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The standard is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted. In the third quarter of 2016, we early adopted ASU 2016-09 which requires us to reflect any adjustments as of January 1, 2016. The primary impact of ASU 2016-09 is the requirement to recognize all excess tax benefits and deficiencies on share-based payments in income tax expense. Upon the adoption of this requirement on a modified-retrospective basis, the previously unrecognized excess tax benefits on share-based

compensation of $1.1 million was recorded as a cumulative-effect adjustment to retained earnings. The deferred tax asset that was recognized as a result of the update was fully offset by a valuation allowance.

ASU 2016-09 allows an entity-wide election to estimate the number of awards that are expected to vest or account for forfeitures when they occur. We elected to make an entity-wide election to account for forfeitures in compensation cost when they occur. The application of this election did not have a material impact on our financial statements.

We elected to apply on a retrospective basis, the classification of excess tax benefits from financing to operating activities within the statements of cash flow.

The retrospective classification of employee taxes paid when shares are withheld for tax-withholding purposes to financing activities within the statements of cash flow did not have an impact as such cash flows were previously presented in financing activities.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes. The update simplifies the presentation of deferred income taxes by eliminating the separate classification of deferred income tax assets and liabilities into current and non-current amounts in the consolidated balance sheets. The amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods therein and may be applied either prospectively or retrospectively to all periods presented. Early adoption is permitted. We have early adopted this standard in the first quarter of 2016 on a retrospective basis. As a result of the adoption, we reclassified $4.7 million current deferred income tax assets to non-current deferred income tax assets on the balance sheet at December 31, 2015. Our adoption of the standard had no impact on our statements of operations and comprehensive earnings (loss) or statements of cash flows.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. The update provides that an entity should measure inventory within the scope of the standard at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standard is effective for interim and annual periods ending after December 15, 2016 and applied prospectively. Early application is permitted. We early adopted this standard in the first quarter of 2016 and there was no material impact to our financial statements and business.

In April 2015, the FASB issued ASU 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. The update provides accounting guidance for customers with cloud computing arrangements. The standard is effective for interim and annual periods ending after December 15, 2015. We adopted this standard as of January 1, 2016 on a prospective basis and there was no material impact to our financial statements and business.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. The update provides guidance about management's responsibility in evaluating whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. We early adopted this standard in the first quarter of 2016 and there was no impact to our disclosures.

IMPACT OF ACCOUNTING PRONOUNCEMENTS AFFECTING FUTURE PERIODS

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606). The update is intended to clarify the principles of recognizing revenue, and to develop a common revenue standard for U.S. GAAP and IFRS that would remove inconsistencies in revenue requirements, leading to improved comparability of revenue recognition practices across entities and industries. ASC 606 contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model

features a contract-based five-step analysis of transactions to determine whether, how much, and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The new standard is effective for annual and interim financial statements for fiscal years beginning after December 15, 2017. Early application is permitted in fiscal years beginning after December 15, 2016. We are in the process of evaluating the impact of this update and cannot reasonably estimate the effect on our financial statements and business at this time. We do not intend to adopt the new standard early. We are continuing to evaluate the impact of this standard on our financial statements and business as well as in the process of determining the adoption method.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update is to improve transparency and comparability among organizations by requiring lessees to recognize right-of-use assets and lease liabilities on the balance sheet and requiring additional disclosure about leasing arrangements. The standard is effective for fiscal years beginning after December 15, 2018. Early application is permitted. We are in the process of evaluating the impact of this update and cannot reasonably estimate the effect on our financial statements and business at this time.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This update will replace the incurred loss impairment methodology for credit losses on financial instruments with a methodology that requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are in the process of evaluating the impact of this update and cannot reasonably estimate the effect on our financial statements and business at this time.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The update addresses eight specific cash flow issues with the objective of reducing diversity in practice. The standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal periods. Early application is permitted. We are in the process of evaluating the impact of this update and cannot reasonably estimate the effect on our financial statements and business at this time.

DISCLOSURE CONTROLS AND PROCEDURES

Our management is responsible for establishing and maintaining adequate disclosure controls and procedures for the Company. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed with securities regulatory authorities is recorded, processed, summarized and reported within time periods specified in applicable securities regulations, and is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We conducted an evaluation of the effectiveness of our disclosure controls and procedures, which was carried out under the supervision of, and with the participation of, our management, including our Chief Executive Officer and our Chief Financial Officer, as of December 31, 2016. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2016 to ensure that information required to be disclosed by us in the reports we file or submit under applicable securities laws and regulations is recorded, processed, summarized, and reported within the time periods specified thereby.

We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. Control procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance

that the objectives of the control procedures are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. We considered these limitations during the development of our disclosure controls and procedures and will periodically re-evaluate them to ensure they provide reasonable assurance that such controls and procedures are effective.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the U.S. Securities Exchange Act of 1934 and has designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. Also, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of December 31, 2016, based on the framework set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was effective as of that date.

Ernst & Young LLP ("EY"), an independent registered public accounting firm, who audited and reported on our consolidated financial statements as at and for the year ended December 31, 2016, has issued an attestation report on our internal control over financial reporting as of December 31, 2016. Their attestation report is included with our consolidated financial statements.

There were no changes in our internal control over financial reporting during the year ended December 31, 2016 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of certain events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

LEGAL PROCEEDINGS

In January 2017, Koninklijke KPN N.V. filed a patent infringement lawsuit in the United States District Court for the District of Delaware asserting patent infringement by us and our US subsidiary. The lawsuit makes certain allegations concerning data transmission error checking technology, specifically referencing one of our EM Series modules. The lawsuit is in the initial pleadings stage.

In December 2016, a patent holding company, Magnacross LLC, filed a patent infringement lawsuit in the United States District Court of the Eastern District of Texas asserting patent infringement by our US subsidiary. The lawsuit makes certain allegations concerning our AirLink wireless routers. The lawsuit is in the initial pleading stage.

In January 2012, a patent holding company, M2M Solutions LLC ("M2M"), filed a patent infringement lawsuit in the United States District Court for the District of Delaware asserting patent infringement by us and our competitors. The lawsuit makes certain allegations concerning the AirPrime embedded wireless module products, related AirLink products and related services sold by us for use in M2M communication applications. The claim construction order has determined one of the two patents-in-suit to be indefinite and therefore invalid. The lawsuit was dismissed with prejudice in April 2016. In August 2014, M2M filed a second patent infringement lawsuit against us in the same court with respect to a recently issued patent held by M2M, which patent is a continuation of one of the patents-in-suit in the original lawsuit filed against us by M2M. The lawsuit has been administratively closed pending the result of several Inter Partes Review proceedings filed by us and the other defendants with the United States Patent and Trial Appeal Board ("PTAB") in August and October of 2015, as well as April 2016. The PTAB has instituted proceedings in respect of our filing and we have joined in another instituted proceeding brought by a defendant in a related case. In March 2017, the PTAB issued its decisions in both proceedings, invalidating all independent claims and several dependent claims in the single patent-in-suit. M2M has 60 days in which to appeal these decisions.

Although there can be no assurance that an unfavorable outcome would not have a material adverse effect on our operating results, liquidity or financial position, we believe the claims made in the foregoing legal proceedings are without merit and intend to defend ourselves and our products vigorously in all cases.

IP Indemnification Claims

We have been notified by one or more of our customers in each of the following matters that we may have an obligation to indemnify them in respect of the products we supply to them:

In June 2015, Adaptix filed amended complaints in the Eastern District of Texas against two carriers asserting patent infringement against them in relation to certain cellular communication devices sold by the carriers for use on their 4G LTE wireless networks, which include certain products which may utilize modules sold to the original equipment manufacturer by us and certain AirCard products sold to the carriers by us prior to the transfer of the AirCard business to Netgear. The two cases have been dismissed with prejudice in July 2016.

In February 2012, a patent holding company, Intellectual Ventures (comprised of Intellectual Ventures I LLC and Intellectual Ventures II LLC), filed a patent infringement lawsuit in the United States District Court for the District of Delaware against two of our customers asserting patent infringement in relation to several of our customer's products and services, including the mobile hotspots sold to them by us prior to the transfer of the AirCard business to Netgear. The lawsuit was split into several separate lawsuits and amended complaints were filed in October 2013. In Q2 2016, the plaintiff stipulated that it was no longer accusing our products in the two cases in which we were intervening in defense of our products, and our intervention was subsequently terminated.

We are engaged in certain other claims, legal actions and arbitration matters, all in the ordinary course of business, and believe that the ultimate outcome of these claims, legal actions and arbitration matters will not have a material adverse effect on our operating results, liquidity or financial position.

RISKS AND UNCERTAINTIES

Our business is subject to significant risks and uncertainties and past performance is no guarantee of future performance. The risks and uncertainties described below are those which we currently believe to be material, and do not represent all of the risks that we face. Additional risks and uncertainties, not presently known to us, may become material in the future or those risks that we currently believe to be immaterial may become material in the future. If any of the following risks actually occur, alone or in combination, our business, financial condition and results of operations, as well as the market price of our common shares, could be materially adversely affected.

Competition from new or established IoT, cloud services and wireless services companies or from those with greater resources may prevent us from increasing or maintaining our market share and could result in price reductions and/or loss of business with resulting reduced revenues and gross margins.

The market for IoT products and services is highly competitive and rapidly evolving. We have experienced and expect to continue to experience intense competition. More established and larger companies with strong brands and greater financial, technical and marketing resources or companies with different business models sell products and services that compete with ours and we expect this competition to intensify. Business combinations or strategic alliances by our competitors could weaken our competitive position. We may also introduce new products or services that will put us in direct competition with major new competitors. Existing or future competitors may be able to respond more quickly to technological developments and changes and introduce new products before we do or may independently develop and patent technologies and products that are superior to ours or achieve greater acceptance due to factors such as more favorable pricing, more desired or better quality features or more efficient sales channels. If we are unable to compete effectively with our competitors' pricing strategies, technological advances and other initiatives, we may lose customer orders and market share and we may need to reduce the price of our products, resulting in reduced revenue and reduced gross margins. In addition, new market entrants or alliances between customers and suppliers could emerge to disrupt the markets in which we operate through disintermediation of our modules business or other means. There can be no assurance that we will be able to compete successfully and withstand competitive pressures.

Acquisitions and divestitures of businesses or technologies may result in disruptions to our business or may not achieve the anticipated benefits.

The growth of our Company through the successful acquisition and integration of complementary businesses is an important component of our business strategy and we have completed several acquisitions in recent years, as described above. We continue to seek opportunities to acquire or invest in businesses, products and technologies that expand, complement or otherwise relate to our business. Any acquisitions, investments or business combinations by us may be accompanied by risks commonly encountered including, but not limited to, the following:


•	exposure to unknown liabilities or risks of acquired companies, including unknown litigation related to acts or omissions of an acquired company and/or its directors and officers prior to the acquisition, deficiencies in disclosure controls and procedures of the acquired company and deficiencies in internal controls over financial reporting of the acquired company;


•	higher than anticipated acquisition and integration costs and expenses;


•	the difficulty and expense of integrating the operations and personnel of the acquired companies;


•	use of cash to support the operations of an acquired business;


•	increased foreign exchange translation risk depending on the currency denomination of the revenue and expenses of the acquired business;


•	disruption of, and demands on, our ongoing business as a result of integration activities including diversion of management's time and attention from the ongoing business;


•	failure to maximize our financial and strategic position by the successful incorporation of acquired technology;


•	the inability to implement uniform standards, disclosure controls and procedures, internal controls over financial reporting and other procedures and policies in a timely manner;


•	the potential loss of key employees and customers;


•	decrease in our share price if the market perceives that an acquisition does not fit our strategy, the price paid is excessive in light of other similar transactions or that the terms of the acquisition are not favorable to our earnings growth;


•	litigation and settlement costs if shareholders bring lawsuits triggered by acquisition or divestiture activities;


•	decrease in our share price, if, as a result of our acquisition strategy or growth, we decide to raise additional capital through an offering of securities; and


•	dilution to our shareholders if the purchase price is paid in common shares or securities convertible into common shares.

In addition, geographic distances and cultural differences may make integration of businesses more difficult. We may not be successful in overcoming these risks or any other problems encountered in connection with any acquisitions. If realized, these risks could reduce shareholder value.

As business circumstances dictate, we may also decide to divest assets, technologies or businesses. In a divestiture, we may not be successful in identifying or managing the risks commonly encountered, including: 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. We may not be successful in overcoming these risks or any other problems encountered in connection with a divestiture of assets, technologies or businesses which, if realized, could reduce shareholder value.

In addition, we may be unsuccessful at bringing to conclusion proposed transactions. Negotiations and closing activities of transactions are complex functions subject to numerous unforeseen events that may impede the speed at which a transaction is closed or even prevent a transaction from closing. Failure to conclude transactions in an efficient manner may prevent us from advancing other opportunities or introduce unanticipated transition costs.

The loss of any of our significant customers could adversely affect our revenue and profitability, and therefore shareholder value.

We sell our products to OEM's, enterprises, distributors, resellers and network operators, and we are occasionally party to sales agreements with customers comprising a significant portion of our revenue. Accordingly, our business and future success depends on our ability to maintain and build on existing relationships and develop new relationships with OEMs, enterprises, distributors, resellers and network operators. If certain of our significant customers, for any reason, discontinues their relationship with us or reduces or postpones current or expected purchase orders for products, or suffers from business loss, our revenues and profitability could decline materially.

In addition, our current customers purchase our products under purchase orders. Our customers have no contractual obligation to continue to purchase our products following our fulfillment of current purchase orders and if they do not continue to make purchases, our revenue and our profitability could decline materially.

Cyber attacks or other breaches of information technology security could have an adverse impact on our business.

We rely on certain internal processes, infrastructure and information technology systems to efficiently operate our business in a secure manner, including infrastructure and systems operated by third parties. The inability to continue to enhance or prevent a failure of these internal processes, infrastructure or information technology systems could negatively impact our ability to operate our business. In particular, our cloud and connectivity services depend on very high levels of network reliability and availability in order to provide our customers with the ability to continuously monitor and receive data from their devices.

Cyber attacks or other breaches of network or IT systems security may cause disruptions to our operations including the ability to provide device management and other cloud-based services to our customers. A major security breach could result in the loss of critical data, theft of intellectual property, disclosure of confidential information, customer claims and litigation, reduced revenues due to business interruption, costs associated with remediation of infrastructure and systems, class action and derivative action lawsuits and damage to our reputation. Furthermore, the prevalence and sophistication of these types of threats are increasing and our security measures may not be sufficient to prevent the damage that such threats can inflict on our assets and information. Our insurance may not be adequate to fully reimburse us for these costs and losses.

Our financial results are subject to fluctuations that could have a material adverse effect on our business and that could affect the market price of our common shares.

Our revenue, gross margin, operating earnings and net earnings may vary from quarter-to-quarter and could be significantly impacted by a number of factors, including but not limited to the following:


•	price and product competition which may result in lower selling prices for some of our products or lost market share;


•	price and demand pressure on our products from our customers as they experience pressure in their businesses;


•	demand fluctuation based on the success of our customers in selling their products and solutions which incorporate our wireless products and software;


•	development and timing of the introduction of our new products including the timing of sales orders, OEM and distributor customer sell through and design win cycles in our embedded wireless module business;


•	transition periods associated with the migration to new technologies;


•	potential commoditization and saturation in certain markets;


•	our ability to accurately forecast demand in order to properly align the purchase of components and the appropriate level of manufacturing capability;


•	product mix of our sales (our products have different gross margins — for example the embedded wireless module product line has lower gross margins than the higher margin rugged mobile product line);


•	possible delays or shortages in component supplies;


•	possible delays in the manufacture or shipment of current or new products;


•	possible product quality or factory yield issues that may increase our cost of goods sold;


•	concentration in our customer base;


•	seasonality in demand;


•	amount of inventory held by our channel partners;


•	possible fluctuations in certain foreign currencies relative to the U.S. dollar that may affect foreign denominated revenue, cost of goods sold and operating expenses;


•	impairment of our goodwill or intangible assets which may result in a significant charge to earnings in the period in which an impairment is determined;


•	achievement of milestones related to our professional services contracts; and


•	operating expenses that are generally fixed in the short-term and therefore difficult to rapidly adjust to different levels of business.

Any of the factors listed above could cause significant variations in our revenues, gross margin and earnings in any given quarter. Therefore, our quarterly results are not necessarily indicative of our overall business, results of operations, and financial condition.

Quarterly variations in operating results or any of the other factors listed above, changes in financial estimates by securities analysts, or other events or factors may result in wide fluctuations in the market price of our common shares. Broad market fluctuations or any failure of our operating results in a particular quarter to meet market expectations may adversely affect the market price of our common shares.

We may be unable to attract or retain key personnel which may harm our ability to compete effectively.

Our success depends in large part on the abilities and experience of our executive officers and other key employees. The loss of key employees or deterioration in overall employee morale and engagement as a result of organizational change could have an adverse impact on our growth, operations and profitability.

Competition for highly skilled management, technical, research and development and other key employees is intense in the wireless communications industry. We may not be able to retain our current executive officers or key employees and may not be able to hire and transition in a timely manner experienced and highly qualified additional executive officers and key employees as needed to achieve our business objectives. We do not have fixed-term employment agreements with our key personnel. The loss of executive officers and key employees could disrupt our operations and our ability to compete effectively could be adversely affected.

Continued difficult or uncertain global economic conditions could adversely affect our operating results and financial condition.

A significant portion of our business is in the United States, Europe and the Asia-Pacific region and we are particularly exposed to the downturns and current uncertainties that impact the wireless communications industry in those economies. Economic uncertainty may cause an increased level of commercial and consumer delinquencies, lack of consumer confidence resulting in delayed purchases or reduced volumes by our customers, credit tightening by lenders, increased market volatility and widespread reduction of business activity generally. To the extent that we experience further economic uncertainty, or deterioration in one of our large markets in the United States, Europe or the Asia-Pacific region, the resulting economic pressure on our customers may cause them to end their relationship with us, reduce or postpone current or expected orders for our products or services, or suffer from business failure, resulting in a material adverse impact to our revenues, profitability, cash flow and bad debt expense.

It is difficult to estimate or project the level of economic activity, including economic growth, in the markets we serve. As our budgeting and forecasting is based on the demand for our products and services, these economic uncertainties result in it being difficult for us to estimate future revenue and expenses.

We may be found to infringe on the intellectual property rights of others.

The industry has many participants that own, or claim to own, proprietary intellectual property. We license technology, intellectual property and software from third parties for use in our products and may be required to license additional technology, intellectual property and software in the future. In some cases, these licenses provide us with certain pass-through rights for the use of other third party intellectual property. There is no assurance that we will be able to maintain our third party licenses or obtain new licenses when required and this inability could materially adversely affect our business and operating results and the quality and functionality of our products.

In the past we have received, and in the future we are likely to continue to receive, assertions or claims from third parties alleging that our products violate or infringe their intellectual property rights. We may be subject to these

claims directly or through indemnities against these claims which we have provided to certain customers and other third parties. Our component suppliers and technology licensors do not typically indemnify us against these claims and therefore we do not have recourse against them in the event a claim is asserted against us or a customer we have indemnified. This potential liability, if realized, could materially adversely affect our operating results and financial condition.

Activity in this area by third parties, particularly those with tenuous claims, is increasing, resulting in us taking a more aggressive defensive approach, which may result in increased litigation. In the last few years, patent claims have been brought against us by third parties whose primary (or sole) business purpose is to acquire patents and other intellectual property rights, and not to manufacture and sell products and services. These entities aggressively pursue patent litigation, resulting in increased litigation costs for us. We expect that this recent development will continue for the foreseeable future. Infringement of intellectual property can be difficult to verify and litigation may be necessary to establish whether or not we have infringed the intellectual property rights of others. In many cases, these third parties are companies with substantially greater resources than us, and they may choose to pursue complex litigation to a greater degree than we could. Regardless of whether these infringement claims have merit or not, we may be subject to the following:


•	we may be found to be liable for potentially substantial damages, liabilities and litigation costs, including attorneys' fees;


•	we may be prohibited from further use of intellectual property as a result of an injunction and may be required to cease selling our products that are subject to the claim;


•	we may have to license third party intellectual property, incurring royalty fees that may or may not be on commercially reasonable terms; in addition, there is no assurance that we will be able to successfully negotiate and obtain such a license from the third party;


•	we may have to develop a non-infringing alternative, which could be costly and delay or result in the loss of sales; in addition, there is no assurance that we will be able to develop such a non-infringing alternative;


•	management attention and resources may be diverted;


•	our relationships with customers may be adversely affected; and


•	we may be required to indemnify our customers for certain costs and damages they incur in such a claim.

In addition to potentially being found to be liable for substantial damages in the event of an unfavorable outcome in such a claim and our inability to either obtain a license from the third party on commercial terms or develop a non-infringing alternative, our business, operating results and financial condition may be materially adversely affected and we may have to cease the sale of certain products and restructure our business.

Misappropriation of our intellectual property could place us at a competitive disadvantage.

Our intellectual property is important to our success. We rely on a combination of patent protection, copyrights, trademarks, trade secrets, licenses, non-disclosure agreements and other contractual agreements to protect our intellectual property. Third parties may attempt to copy aspects of our products and technology or obtain information we regard as proprietary without our authorization. If we are unable to protect our intellectual property against unauthorized use by others it could have an adverse effect on our competitive position. Our strategies to deter misappropriation could be inadequate due to the following risks:


•	non-recognition of the proprietary nature or inadequate protection of our methodologies in the United States, Canada, France or other foreign countries;


•	undetected misappropriation of our intellectual property;


•	the substantial legal and other costs of protecting and enforcing our rights in our intellectual property; and


•	development of similar technologies by our competitors.

In addition, we could be required to spend significant funds and management resources could be diverted in order to defend our rights, which could disrupt our operations.

Failures or interruption of our products or services due to design flaws and errors, component quality issues, manufacturing defects, technological malfunctions or deficiencies, cyber attack or other quality issues may result in unanticipated costs or otherwise harm our business.

Our products are comprised of hardware and software that is technologically complex and we are reliant on third parties to provide important components for our products and support for our cloud and connectivity services. It is possible that our products may contain undetected errors, defects or vulnerabilities to hacking attempts, especially when introduced or when new versions are released. As a result, our products may be rejected by our customers leading to loss of business, loss of revenue, additional development and customer service costs, unanticipated warranty claims, payment of monetary damages under contractual provisions and damage to our reputation.

In addition, our cloud and connectivity services, including information systems and telecommunications infrastructure, could be disrupted by technological failures or cyber-attacks which could result in the inability of our customers to receive our services for an indeterminate period of time. Any disruption to our services, such as failure of our network operations centers to function as required, or extended periods of reduced levels of service could cause us to lose customers or revenue, result in delays or cancellations of future implementations of our products and services, result in failure to attract customers, require customer service or repair work that would involve substantial costs, result in loss of customer data, result in litigation, payment of monetary damages under contractual provisions and distract management from operating our business.

We may have difficulty responding to changing technology, industry standards and customer requirements, and therefore be unable to develop new products or services in a timely manner which meet the needs of our customers.

The wireless communications industry is subject to rapid technological change, including evolving industry standards, frequent new product inventions, constant improvements in performance characteristics and short product life cycles. Our business and future success will depend, in part, on our ability to accurately predict and anticipate evolving wireless technology standards and develop products that keep pace with the continuing changes in technology, evolving industry standards and changing customer and end-user preferences and requirements. Our products embody complex technology that may not meet those standards, preferences and requirements. Our ability to design, develop and commercially launch new products depends on a number of factors including, but not limited to, the following:


•	our ability to design and manufacture products or implement solutions and services at an acceptable cost and quality;


•	our ability to attract and retain skilled technical employees;


•	the availability of critical components from third parties;


•	our ability to successfully complete the development of products in a timely manner; and


•	the ability of third parties to complete and deliver on outsourced product development engagements.

A failure by us, or our suppliers, in any of these areas or a failure of new products or services to obtain commercial acceptance, could mean we receive less revenue than we anticipate and we may be unable to recover our research and development expenses.

We develop products to meet our customers' requirements. OEM customers award design wins for the integration of wide area embedded wireless modules on a platform by platform basis. Current design wins do not guarantee future design wins. If we are unable or choose not to meet our customers' needs, we may not win their future business and our revenue and profitability may decrease.

In addition, wireless communications service providers require that wireless data systems deployed on their networks comply with their own standards, which may differ from the standards of other providers. We may be unable to successfully address these developments on a timely basis or at all. Our failure to respond quickly and cost-effectively to new developments through the development of new products or enhancements to existing products could cause us to be unable to recover significant research and development expenses and reduce our revenues.

We depend on single source suppliers for some components used in our products and if these suppliers are unable to meet our demand, the delivery of our products to our customers may be interrupted.

From time to time, certain components used in our products have been, and may continue to be, in short supply. Such shortages in allocation of components may result in a delay in filling orders from our customers, which may adversely affect our business. In addition, our products are comprised of components some of which are procured from single source suppliers, including where we have licensed certain software embedded in a component. Our single source suppliers may experience damage or interruption in their operations due to unforeseen events, become insolvent or bankrupt, or experience claims of infringement, all of which could delay or stop their shipment of components to us, which may adversely affect our business, operating results and financial condition. If there is a shortage of any such components and we cannot obtain an appropriate substitute from an alternate supplier of components, we may not be able to deliver sufficient quantities of our products to our customers. If such shortages occur, we may lose business or customers and our operating results and financial condition may be materially adversely affected.

We depend on a limited number of third parties to manufacture our products. If they do not manufacture our products properly or cannot meet our needs in a timely manner, we may be unable to fulfill our product delivery obligations and our costs may increase, and our revenue and margins could decrease.

We outsource the manufacturing of our products to several contract manufacturers and depend on these manufacturers to meet our needs in a timely and satisfactory manner at a reasonable cost. Third party manufacturers, or other third parties to which such third party manufacturers in turn outsource our manufacturing requirements, may not be able to satisfy our manufacturing requirements on a timely basis, including by failing to meet scheduled production and delivery deadlines or to meet our product quality requirements or the product quality requirements of our customers. Insufficient supply or an interruption or stoppage of supply from such third party manufacturers or our inability to obtain additional or substitute manufacturers when and if needed, and on a cost-effective basis, could have a material adverse effect on our business, results of operations and financial condition. Our reliance on third party manufacturers subjects us to a number of risks, including but not limited to the following:


•	potential business interruption due to unexpected events such as natural disasters, labor unrest or geopolitical events;


•	the absence of guaranteed or adequate manufacturing capacity;


•	potential violations of laws and regulations by our manufacturers that may subject us to additional costs for duties, monetary penalties, seizure and loss of our products or loss of our import privileges, and damage to our reputation;


•	reduced control over delivery schedules, production levels, manufacturing yields, costs and product quality;


•	the inability of our contract manufacturers to secure adequate volumes of components in a timely manner at a reasonable cost; and


•	unexpected increases in manufacturing costs.

If we are unable to successfully manage any of these risks or to locate alternative or additional manufacturers or suppliers in a timely and cost-effective manner, we may not be able to deliver products in a timely manner. In addition, our results of operations could be harmed by increased costs, reduced revenues and reduced margins.

Under our manufacturing agreements, in many cases we are required to place binding purchase orders with our manufacturers well in advance of our receipt of binding purchase orders from our customers. In this situation, we consider our customers' good faith, non-binding forecasts of demand for our products. As a result, if the number of actual products ordered by our customers is materially different from the number of products we have instructed our manufacturer to build (and to purchase components in respect of), then, if too many components have been purchased by our manufacturer, we may be required to purchase such excess component inventory, or, if an insufficient number of components have been purchased by our manufacturer, we may not be in a position to meet all of our customers' requirements. If we are unable to successfully manage our inventory levels and respond to our customers' purchase orders based on their forecasted quantities, our business, operating results and financial condition could be adversely affected.

We have been subject to certain class action lawsuits, and may in the future be subject to class action or derivative action lawsuits, which if decided against us, could require us to pay substantial judgments, settlements or other penalties.

In addition to being subject to litigation in the ordinary course of business, in the future, we may be subject to class actions, derivative actions and other securities litigation and investigations. We expect that this type of litigation will be time consuming, expensive and will distract us from the conduct of our daily business. It is possible that we will be required to pay substantial judgments, settlements or other penalties and incur expenses that could have a material adverse effect on our operating results, liquidity or financial position. Expenses incurred in connection with these lawsuits, which include substantial fees of lawyers and other professional advisors and our obligations to indemnify officers and directors who may be parties to such actions, could materially adversely affect our reputation, operating results, liquidity or financial position. Furthermore, we do not know with certainty if any of this type of litigation and resulting expenses will be fully or even partially covered by our insurance. In addition, these lawsuits may cause our insurance premiums to increase in future periods.

We depend on wireless network carriers to promote and offer acceptable wireless data services.

Our products and our wireless connectivity services can only be used over wireless data networks operated by third parties. Our business and future growth depends, in part, on the successful deployment by network carriers of next generation wireless data and networks and appropriate pricing of wireless data services. We also depend on successful strategic relationships with our network carrier partners and our operating results and financial condition could be harmed if they increase the price of their services or experience operational issues with their networks.

Contractual disputes could have a material adverse effect on our business.

Our business is exposed to the risk of contractual disputes with counterparties and as a result we may be involved in complaints, claims and litigation. We cannot predict the outcome of any complaint, claim or litigation. If a dispute cannot be resolved favorably, it may delay or interrupt our operations and may have a material adverse effect on our operating results, liquidity or financial position.

Government regulations could result in increased costs and inability to sell our products.

Our products are subject to certain mandatory regulatory approvals in the United States, Canada, the European Union, the Asia-Pacific region and other regions in which we operate. For example, in the United States the Federal Communications Commission regulates many aspects of communications devices. In Canada, similar regulations are administered by the Ministry of Industry, through Industry Canada. European Union directives provide comparable regulatory guidance in Europe. Although we have obtained all the necessary Federal Communications Commission, Industry Canada and other required approvals for the products we currently sell, we may not receive approvals for future products on a timely basis, or at all. In addition, regulatory requirements may change or we may not be able to receive regulatory approvals from countries in which we may desire to sell

products in the future. If we fail to comply with the applicable regulatory requirements, we may be subject to regulatory and civil liability, additional costs (including fines), reputational harm, and in severe cases, prevented from selling our products in certain jurisdictions.

We may also incur additional expenses or experience difficulties selling our products associated with complying with the SEC rules and reporting requirements related to conflict minerals. In August 2012, the SEC adopted new disclosure requirements implementing Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 for manufacturers of products containing certain minerals that may originate from the Democratic Republic of Congo and adjoining countries. As a result, since 2013 we have been required to conduct certain country of origin and due diligence procedures in order to meet the SEC reporting requirements. The impact of the regulations may limit the sourcing and availability, or may increase the costs, of some of the metals used in the manufacture of our products. Also, since our supply chain is complex, we may be unable to sufficiently verify the origins for all metals used in our products through our supplier due diligence procedures. As governments change in any of the markets in which we operate, there could be further uncertainties with respect to certain of our regulatory obligations in the near term, including with respect to fiscal and trade-related matters.

The transmission, use and disclosure of user data and personal information could give rise to liabilities or additional costs as a result of laws, governmental regulations and carrier and other customer requirements or differing views of personal privacy rights.

Our products are used to transmit a large volume of data, including personal information. This information is increasingly subject to legislation and regulations in numerous jurisdictions around the world that is intended to protect the privacy and security of personal information as well as the collection, storage, transmission, use and disclosure of such information.

The interpretation of privacy and data protection laws in a number of jurisdictions is unclear and in a state of flux. There is a risk that these laws may be interpreted and applied in conflicting ways from country to country. Complying with these varying international requirements could cause us to incur additional costs and change our business practices. In addition, because our products are sold and used worldwide, certain foreign jurisdictions may claim that we are required to comply with their laws, even where we have no local entity, employees, or infrastructure.

We could be adversely affected if legislation or regulations are expanded to require changes in our products or business practices, if governmental authorities in the jurisdictions in which we do business interpret or implement their legislation or regulations in ways that negatively affect our business or if end users allege that their personal information was misappropriated as a result of a defect or vulnerability in our products. If we are required to allocate significant resources to modify our products or our existing security procedures for the personal information that our products transmit, our business, results of operations and financial condition may be adversely affected.

We are subject to risks inherent in foreign operations.

Sales outside North America represented approximately 70% of our revenue in 2016 and approximately 69% and 73% of our revenue in fiscal 2015 and 2014, respectively. We maintain offices in a number of foreign jurisdictions. We have limited experience conducting business in some of the jurisdictions outside North America and we may not be aware of all the factors that may affect our business in foreign jurisdictions. We are subject to a number of risks associated with our international business operations that may increase liabilities, costs, lengthen sales cycles and require significant management attention. These risks include:


•	compliance with the laws of the United States, Canada and other countries that apply to our international operations, including import and export legislation, lawful access and privacy laws;


•	compliance with existing and emerging anti-corruption laws, including the Foreign Corrupt Practices Act of the United States, the Corruption of Foreign Public Officials Act of Canada and the UK Bribery Act;


•	increased reliance on third parties to establish and maintain foreign operations;


•	the complexities and expense of administering a business abroad;


•	complications in compliance with, and unexpected changes in, foreign regulatory requirements, including requirements relating to content filtering and requests from law enforcement authorities;


•	trading and investment policies;


•	consumer protection laws that impose additional obligations on us or restrict our ability to provide limited warranty protection;


•	instability in economic or political conditions, including inflation, recession and actual or anticipated military conflicts, social upheaval or political uncertainty;


•	foreign currency fluctuations;


•	foreign exchange controls and cash repatriation restrictions;


•	tariffs and other trade barriers;


•	difficulties in collecting accounts receivable;


•	potential adverse tax consequences;


•	uncertainties of laws and enforcement relating to the protection of intellectual property or secured technology;


•	litigation in foreign court systems;


•	cultural and language differences;


•	difficulty in managing a geographically dispersed workforce in compliance with local laws and customs that vary from country to country; and


•	other factors, depending upon the country involved.

There can be no assurance the policies and procedures implemented by us to address or mitigate these risks will be successful, that our personnel will comply with them or that we will not experience these factors in the future or that they will not have a material adverse effect on our business, results of operations and financial condition.