EX-99.1 2 mcr_q42019.htm MATERIAL CHANGE REPORT Exhibit


FORM 51-102F3
MATERIAL CHANGE REPORT

Item 1. Name and Address of Company
SIERRA WIRELESS, INC. ("Sierra Wireless" or the "Company")
13811 Wireless Way
Richmond, B.C.
V6V 3A4

Item 2. Date of Material Change
February 13, 2020
Item 3. News Release
A press release announcing the change referred to in this report was issued on February 13, 2020. The press release was disseminated via Business Wire and subsequently filed on the Company's SEDAR profile.
Item 4. Summary of Material Change
On February 13, 2020, Sierra Wireless reports fourth quarter and full year 2019 results.
Item 5. Full Description of Material Change

Sierra Wireless Reports Fourth Quarter and Full Year 2019 Results

All results are reported in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles (GAAP), except as otherwise indicated below.

FY 2019 results:(1) 
•
Revenue: $713.5 million, lower by 10.1% year-over-year; recurring and other services revenue was 13.9% of annual revenue compared to 11.9% in 2018
•
Loss per share: GAAP loss: $1.95; Non-GAAP loss: $0.01
•
Adjusted EBITDA: $21.1 million

Q4 2019 results:(1)                         
•
Revenue: $174.3 million, lower by 13.5% year-over-year; recurring and other services revenue was 15.2% of quarterly revenue compared to 11.6% in 2018
•
Loss per share: GAAP loss: $0.30; Non-GAAP loss: $0.08
•
Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"): $2.3 million

(1) See "Non-GAAP Financial Measures" and "Reconciliation of GAAP and Non-GAAP Results by Quarter" below.






Fourth Quarter 2019
Revenue for the fourth quarter of 2019 was $174.3 million compared to $201.4 million in the fourth quarter of 2018.  Quarterly revenue for our two business segments was as follows: (i) Revenue from IoT Solutions was $90.9 million in the fourth quarter of 2019, a decrease of 5.0%, compared to $95.7 million in the fourth quarter of 2018 due primarily to lower Integrated IoT solutions module revenue, partially offset by stronger recurring and other services revenue. Within the IoT Solutions segment, excluding iTank (which was sold at the end of 2018), recurring and other services revenue was up 16.3% in the fourth quarter of 2019 compared to the same period of 2018; and (ii) Revenue from Embedded Broadband was $83.4 million in the fourth quarter of 2019, down 21.1%, compared to $105.7 million in the fourth quarter of 2018 due to weaker sales to mobile computing and networking customers, offset by a modest increase in sales to automotive customers. Recurring and other services revenue in the fourth quarter was $26.5 million, representing 15.2% of consolidated revenue and Product revenue was $147.8 million, representing 84.8% of consolidated revenue.

 GAAP RESULTS
•
Gross margin was $51.4 million, or 29.5% of revenue, in the fourth quarter of 2019 compared to $65.9 million, or 32.7% of revenue, in the fourth quarter of 2018.
•
Restructuring expense of $2.3 million in the fourth quarter of 2019 was comparable to the same period in 2018.
•
Operating expenses were $63.8 million and loss from operations was $12.4 million in the fourth quarter of 2019 compared to operating expenses of $70.1 million and loss from operations of $4.2 million in the fourth quarter of 2018.
•
Net loss was $10.9 million, or $0.30 per diluted share, in the fourth quarter of 2019 compared $3.8 million, or $0.11 per diluted share, in the fourth quarter of 2018.

NON-GAAP RESULTS(1) 
•
Gross margin was 29.5% in the fourth quarter of 2019 compared to 32.7% in the fourth quarter of 2018.
•
Operating expenses were $54.0 million and loss from operations was $2.7 million in the fourth quarter of 2019 compared to operating expenses of $55.7 million and earnings from operations of $10.2 million in the fourth quarter of 2018.
•
Net loss was $2.9 million, or $0.08 per diluted share, in the fourth quarter of 2019 compared to net earnings of $9.0 million, or $0.25 per diluted share, in the fourth quarter of 2018.
•
Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") were $2.3 million in the fourth quarter of 2019 compared to $15.3 million in the fourth quarter of 2018.

(1) See "Non-GAAP Financial Measures" and "Reconciliation of GAAP and Non-GAAP Results by Quarter" below.

Cash and cash equivalents at the end of the fourth quarter of 2019 were $75.5 million, representing a decrease of $11.4 million from the end of the third quarter of 2019. The decrease in cash was mainly due to working capital and capital expenditure requirements, partially offset by sale of receivables under our receivables purchase program and proceeds from sale of an investment.

Full Year 2019
Revenue for 2019 was $713.5 million compared to $793.6 million in 2018, a decrease of 10.1%. Product revenue was $614.4 million, down 12.1% year-over-year, and recurring and other services revenue was $99.1 million, up 5.0% compared to 2018. Annual revenue for the two business segments was as follows: (i) Revenue from IoT Solutions was $377.8 million in 2019, up 1.0% compared to $373.9 million in 2018 due to strong contributions from our recurring and other services revenue, as well as our Enterprise gateway products; partially offset by lower revenue from Integrated IoT solutions modules. Within the IoT Solutions segment, excluding iTank, recurring and other services revenue was up $6.8 million, or 7.4%, and (ii) Revenue from Embedded Broadband was $335.7 million in 2019, down 20.0% compared to $419.7 million in 2018 primarily due to weaker demand




from mobile computing and networking customers as we complete certain programs with these customers, partially offset by slightly higher revenue from automotive customers.

GAAP RESULTS
•
Gross margin was $220.0 million, or 30.8% of revenue, in 2019 compared to $264.6 million, or 33.3% of revenue in 2018.
•
Restructuring expenses were $28.2 million in 2019 compared to $7.1 million in 2018.
•
Operating expenses were $278.0 million and loss from operations was $58.0 million in 2019 compared to operating expenses of $282.8 million and loss from operations of $18.3 million in 2018.
•
Net loss was $70.5 million, or $1.95 per diluted share, in 2019 compared to net loss of $24.6 million, or $0.68 per diluted share, in 2018.

NON-GAAP RESULTS(1) 
•
Gross margin was 30.9% in 2019 compared to 33.4% in 2018.
•
Operating expenses were $217.7 million and earning from operations were $2.4 million in 2019 compared to operating expenses of $229.7 million and earnings from operations of $35.3 million in 2018.
•
Net loss was $0.3 million, or $0.01 per diluted share, in 2019 compared to net earnings of $32.4 million, or $0.90 per diluted share, in 2018.
•
Adjusted EBITDA was $21.1 million in 2018 compared to $55.9 million in 2018.

(1) See "Non-GAAP Financial Measures" and "Reconciliation of GAAP and Non-GAAP Results by Quarter" below.

Acquisition of M2M Group
On January 7, 2020, we completed the acquisition of M2M group of companies ("M2M Group") in Australia. Total cash consideration paid to the shareholders of M2M Group was $19.6 million for 100% of the equity plus approximately $1.1 million for the retirement of certain obligations, subject to normal working capital adjustments. The M2M Group is focused on IoT connectivity services and cellular devices in Australia, and the acquisition expands the Company's IoT Solutions business in the Asia-Pacific region. We believe that the business is an excellent strategic fit with our IoT Solutions business with slightly more than half of the M2M Group’s revenue comprised of subscription-based recurring revenue, and representing a segment of the business that has been growing rapidly over the last several years. The M2M Group’s revenue in the last twelve months was US$17.9 million, of which $9.2 million was recurring subscription-based revenue. We expect the acquisition to be accretive to earnings immediately following closing. We believe the M2M Group has a solid platform for us to increase our IoT services and solutions in Australia and Southeast Asia.

Accounting Standard Adoption
We adopted the new accounting standard for lease accounting (ASC 842) effective January 1, 2019. Our fourth quarter and full year 2019 financial results reflect the adoption of this new standard.

Financial Guidance - Full Year
In 2020, we expect annual revenue to be between $690 million to $710 million and Adjusted EBITDA to be between $10 million and $15 million. On a reporting segment basis, our expectation is that IoT Solutions revenue will grow 7% to 10% year-over-year and Embedded Broadband revenue will decline by 12% to 15% year-over-year. See "Non-GAAP Financial Measures" below.

This non-GAAP guidance constitutes "forward-looking statements" within the meaning of applicable securities laws and reflects current business indicators and expectations. These statements are based on management's current beliefs and assumptions, which could prove to be significantly incorrect. Forward-looking statements, particularly those that relate to longer periods of time, are subject to substantial known and unknown risks and uncertainties that could cause actual events or results to differ significantly from those expressed or implied by our




forward-looking statements, including those described in our regulatory filings. See "Cautionary Note Regarding Forward-Looking Statements" below.

Non-GAAP Financial Measures
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.

Our non-GAAP financial measures include non-GAAP gross margin, non-GAAP earnings (loss) from operations, non-GAAP net earnings (loss), non-GAAP basic and diluted net 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 includes allocation of realized gains or losses on forward contracts and 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.

Non-GAAP income tax expense includes certain tax adjustments and taxes on acquisition-related amortization, acquisition-related and integration costs, restructuring costs, other non-recurring costs and foreign exchange.

In addition to the above, non-GAAP net earnings (loss) and non-GAAP net earnings (loss) per share exclude the impact of foreign exchange gains or losses on translation of certain balance sheet accounts, foreign exchange gains or losses on forward contracts 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 cost, impairment, certain other non-recurring costs or recoveries, amortization, foreign exchange gains or losses on translation of certain balance sheet accounts, unrealized foreign exchange gains or losses on forward contracts, 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 fund future capital expenditures.





Cautionary Note Regarding Forward-Looking Statements
Certain statements and information in this material change report are not based on historical facts and constitute forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities laws (“forward-looking statements”) and may include statements and information relating to our Q4 2019 corporate update; financial guidance for our fiscal year 2020; expectations regarding the expected earnings of the M2M Group and ability to expand our market presence in Australia and Southeast Asia; our business outlook for the short and long term; statements regarding our strategy, plans, goals, objectives, expectations and future operating performance; the Company's liquidity and capital resources; the Company's financial and operating objectives and strategies to achieve them; general economic conditions; estimates of our expenses, future revenues, non-GAAP earnings per share and capital requirements; our expectations regarding the legal proceedings we are involved in; statements with respect to the Company's estimated working capital; expectations with respect to the adoption of Internet of Things ("IoT") solutions; expectations regarding trends in the IoT market and wireless module market; expectations regarding product and price competition from other wireless device manufacturers and solution providers; our ability to implement effective control procedures; and expectations regarding the launch of fifth generation cellular embedded modules. Forward-looking statements are provided to help you understand our views of our short and long term plans, expectations and prospects. We caution you that forward-looking statements may not be appropriate for other purposes.

Forward-looking statements:

•
Typically include words and phrases about the future such as "outlook", "will", "may", “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible”, or variations thereof.

•
Are not promises or guarantees of future performance. They represent our current views and may change significantly.

•
Are based on a number of material assumptions, including, but not limited to, those listed below, which could prove to be significantly incorrect:

•
expected component supply constraints and manufacturing capacity;
•
our ability to continue to sell our products and services in the expected quantities at the expected prices and expected times;
•
our ability to effect and to realize the anticipated benefits of our business transformation initiatives, and the timing thereof;
•
our ability to develop, manufacture and sell new products and services that meet the needs of our customers and gain commercial acceptance;
•
expected macro-economic business conditions;
•
expected cost of sales;
•
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 other developments, operating, cyber security, litigation, or regulatory risks;
•
expected tax and foreign exchange rates; and
•
our ability to recruit a new Chief Financial Officer.









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

•
competition from new or established competitors or from those with greater resources;
•
natural catastrophes or public health epidemics could impact customer demand, result in production disruption and impact our ability to meet customer demand or capacity to continue critical operations;
•
the loss of, or significant demand fluctuations from, any of our significant customers;
•
our financial results being subject to fluctuation;
•
our business transformation initiatives may result in disruptions to our business and may not achieve the anticipated benefits;
•
our ability to respond to changing technology, industry standards and customer requirements;
•
failures of our products or services due to design flaws and errors, component quality issues, manufacturing defects, network service interruptions, cyber-security vulnerabilities or other quality issues;
•
deterioration in macro-economic conditions could adversely affect our operating results and financial conditions;
•
our ability to attract or retain key personnel and the impact of organizational change on our business;
•
cyber-attacks or other breaches of our information technology security;
•
risks related to the transmission, use and disclosure of user data and personal information;
•
disruption of, and demands on, our ongoing business and diversion of management's time and attention in connection with acquisitions or divestitures;
•
risks that the acquisition of M2M Group may fail to realize the expected benefits.
•
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 reliance on single source suppliers for certain components used in our products;
•
our dependence on a limited number of third party manufacturers;
•
unanticipated costs associated with litigation or settlements;
•
our dependence on mobile network operators to promote and offer acceptable wireless data services;
•
risks related to contractual disputes with counterparties;
•
risks related to governmental regulation;
•
risks inherent in foreign jurisdictions; and
•
risks related to tariffs or other trade restrictions.

About Sierra Wireless
Sierra Wireless (NASDAQ: SWIR) (TSX: SW) is is the leading IoT solutions provider that combines devices, network and software to unlock value in the connected economy. Companies globally are adopting IoT to improve operational efficiency, create better customer experiences, improve their business models and create new revenue streams. Whether it is a solution to help a business securely connect edge devices to the cloud, or a software/API solution to help manage processes associated with billions of connected assets, or a platform to extract real-time data to make the best business decisions, Sierra Wireless will work with you to create the right industry-specific solution for your next IoT endeavor. Sierra Wireless has more than 1,300 employees globally and operates R&D centers in North America, Europe and Asia. For more information, visit www.sierrawireless.com.

AirPrime, AirLink, AirVantage, mangOH and Legato are trademarks of Sierra Wireless. Other product or service names mentioned herein may be the trademarks of their respective owners.





SIERRA WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS (LOSS)
(In thousands of U.S. dollars, except where otherwise stated)
 
Three months ended December 31,
 
Twelve months ended December 31,
 
2019

 
2018

 
2019

 
2018

Revenue
 
 
 
 
 
 
 
loT Solutions
$
90,937

 
$
95,728

 
$
377,808

 
$
373,937

Embedded Broadband
83,364

 
105,667

 
335,705

 
419,665

 
174,301

 
201,395

 
713,513

 
793,602

Cost of sales
 
 
 
 
 
 
 
loT Solutions
57,272

 
59,077

 
237,650

 
234,335

Embedded Broadband
65,661

 
76,423

 
255,873

 
294,696

 
122,933

 
135,500

 
493,523

 
529,031

Gross margin
51,368

 
65,895

 
219,990

 
264,571

Expenses
 
 
 
 
 
 
 
Sales and marketing
22,309

 
22,353

 
92,093

 
88,587

Research and development
21,015

 
22,230

 
86,473

 
93,707

Administration
11,600

 
14,516

 
48,827

 
61,582

Restructuring
2,309

 
2,345

 
28,160

 
7,115

Acquisition-related and integration
274

 
613

 
974

 
3,962

Impairment
877

 
—

 
877

 
—

Loss on disposal of iTank business
—

 
2,064

 
—

 
2,064

Amortization
5,369

 
5,971

 
20,607

 
25,829

 
63,753

 
70,092

 
278,011

 
282,846

Loss from operations
(12,385
)
 
(4,197
)
 
(58,021
)
 
(18,275
)
Foreign exchange gain (loss)
1,666

 
(2,378
)
 
(1,296
)
 
(5,470
)
Other income (expense)
(109
)
 
(19
)
 
(301
)
 
51

Loss before income taxes
(10,828
)
 
(6,594
)
 
(59,618
)
 
(23,694
)
Income tax expense (recovery)
90

 
(2,768
)
 
10,920

 
916

Net loss
$
(10,918
)
 
$
(3,826
)
 
$
(70,538
)
 
$
(24,610
)
Other comprehensive earnings (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of taxes of $nil
3,177

 
249

 
(4,070
)
 
(6,670
)
Comprehensive loss
$
(7,741
)
 
$
(3,577
)
 
$
(74,608
)
 
$
(31,280
)
 
 
 
 
 
 
 
 
Net loss per share (in dollars)
 
 
 
 
 
 
 
Basic
$
(0.30
)
 
$
(0.11
)
 
$
(1.95
)
 
$
(0.68
)
Diluted
(0.30
)
 
(0.11
)
 
(1.95
)
 
(0.68
)
Weighted average number of shares outstanding (in thousands)
 
 
 
 
 
 
 
Basic
36,222

 
36,057

 
36,166

 
36,019

Diluted
36,222

 
36,057

 
36,166

 
36,019






SIERRA WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except where otherwise stated)
 
December 31, 2019

 
December 31, 2018

Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
75,454

 
$
89,076

Restricted cash
3,629

 
221

Accounts receivable
131,432

 
171,725

Inventories
54,291

 
50,779

Prepaids and other
19,256

 
11,703

 
284,062

 
323,504

Property and equipment, net
39,924

 
39,842

Operating lease right-of-use assets
25,609

 
—

Intangible assets, net
70,072

 
84,890

Goodwill
207,595

 
211,074

Deferred income taxes
2,096

 
11,751

Other assets
9,982

 
12,855

 
$
639,340

 
$
683,916

 
 
 
 
Liabilities
 
 
 
Current liabilities
 
 
 
  Accounts payable and accrued liabilities
$
173,556

 
$
184,220

  Deferred revenue
10,610

 
6,213

 
184,166

 
190,433

Long-term obligations
43,774

 
43,250

Operating lease liabilities
25,154

 
—

Deferred income taxes
4,921

 
6,103

 
258,015

 
239,786

Equity
 
 
 
Shareholders’ equity
 
 
 
Common stock: no par value; unlimited shares authorized; issued and
outstanding: 36,233,361 shares (December 31, 2018 – 36,067,415 shares)
435,532

 
432,552

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

 
—

Treasury stock: at cost; 44,487 shares (December 31, 2018 – 119,584 shares)
(370
)
 
(1,965
)
Additional paid-in capital
38,212

 
30,984

Retained deficit
(78,833
)
 
(8,295
)
Accumulated other comprehensive loss
(13,216
)
 
(9,146
)
 
381,325

 
444,130

 
$
639,340

 
$
683,916








SIERRA WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
 
Three months ended
December 31,
 
Twelve months ended
December 31,
 
2019

 
2018

 
2019

 
2018

Cash flows provided by (used in):
 
 
 
 
 
 
 
Operating activities
 
 
 
 
 
 
 
Net loss
$
(10,918
)
 
$
(3,826
)
 
$
(70,538
)
 
$
(24,610
)
Items not requiring (providing) cash
 
 
 
 
 
 
 
Amortization
8,573

 
9,308

 
33,177

 
39,150

Stock-based compensation
1,801

 
2,743

 
12,930

 
13,060

Deferred income taxes
(93
)
 
(4,145
)
 
8,711

 
(1,685
)
Impairment
877

 
—

 
877

 
—

Loss on disposal of iTank business
—

 
2,064

 
—

 
2,064

Unrealized foreign exchange loss (gain)
(958
)
 
995

 
1,122

 
5,973

Other
570

 
58

 
1,218

 
279

Changes in non-cash working capital
 
 
 
 
 
 
 
Accounts receivable
156

 
1,236

 
37,965

 
(5,526
)
Inventories
6,264

 
183

 
(3,712
)
 
1,508

Prepaids and other
(1,111
)
 
797

 
(8,611
)
 
(3,525
)
Accounts payable and accrued liabilities
(12,566
)
 
12,919

 
(12,069
)
 
21,944

Deferred revenue
1,113

 
94

 
5,792

 
(1,402
)
Cash flows provided by (used in) operating activities
(6,292
)
 
22,426

 
6,862

 
47,230

Investing activities
 
 
 
 
 
 
 
Additions to property and equipment
(4,691
)
 
(4,378
)
 
(16,494
)
 
(18,166
)
Additions to intangible assets
(801
)
 
(1,140
)
 
(3,779
)
 
(2,933
)
Proceeds from sale of property and equipment
11

 
17

 
98

 
93

Proceeds from sale of investment
3,303

 
—

 
3,303

 
—

Proceeds from sale of iTank business
—

 
5,000

 
500

 
5,000

Cash flows used in investing activities
(2,178
)
 
(501
)
 
(16,372
)
 
(16,006
)
Financing activities
 
 
 
 
 
 
 
Issuance of common shares, net of issuance cost
161

 
101

 
488

 
2,636

Repurchase of common shares for cancellation
—

 
—

 
—

 
(3,120
)
Purchase of treasury shares for RSU distribution
(348
)
 
(1,723
)
 
(674
)
 
(2,808
)
Taxes paid related to net settlement of equity awards
(86
)
 
(90
)
 
(941
)
 
(1,878
)
Payment for contingent consideration
—

 
—

 
—

 
(130
)
Decrease in other long-term obligations
(130
)
 
(116
)
 
(535
)
 
(627
)
Cash flows used in financing activities
(403
)
 
(1,828
)
 
(1,662
)
 
(5,927
)
Effect of foreign exchange rate changes on cash and cash equivalents
835

 
1,519

 
958

 
(1,224
)
Cash, cash equivalents and restricted cash, increase (decrease) in the period
(8,038
)
 
21,616

 
(10,214
)
 
24,073

Cash, cash equivalents and restricted cash, beginning of period
87,121

 
67,681

 
89,297

 
65,224

Cash, cash equivalents and restricted cash, end of period
$
79,083

 
$
89,297

 
$
79,083

 
$
89,297








SIERRA WIRELESS, INC. 

RECONCILIATION OF GAAP AND NON-GAAP RESULTS BY QUARTER
(in thousands of U.S. dollars, except where otherwise stated)
 
2019
 
2018
 
Total
Q4
Q3
Q2
Q1
 
Total
Q4
Q3
Q2
Q1
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross margin - GAAP
 
$
219,990

$
51,368

$
55,043

$
58,949

$
54,630

 
$
264,571

$
65,895

$
67,267

$
69,309

$
62,100

Stock-based compensation and related social taxes
 
167

20

44

44

59

 
479

58

57

57

307

Realized gains (losses) on hedge contracts
 
(4
)
1

—

(2
)
(3
)
 
(30
)
(13
)
(11
)
—

(6
)
Other nonrecurring costs
 
—

—

—

—

—

 
5

5

—

—

—

Gross margin - Non-GAAP
 
$
220,153

$
51,389

$
55,087

$
58,991

$
54,686

 
$
265,025

$
65,945

$
67,313

$
69,366

$
62,401

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) from operations - GAAP
 
$
(58,021
)
$
(12,385
)
$
(12,559
)
$
(23,271
)
$
(9,806
)
 
$
(18,275
)
$
(4,197
)
$
853

$
(5,055
)
$
(9,876
)
Stock-based compensation and related social taxes
 
13,194

1,802

3,876

4,102

3,414

 
13,006

2,743

3,473

3,950

2,840

Acquisition-related and integration
 
974

274

291

314

95

 
3,962

613

570

1,014

1,765

Restructuring
 
28,160

2,309

6,274

18,180

1,397

 
7,115

2,345

227

952

3,591

Impairment
 
877

877

—

—

—

 
—

—

—

—

—

Realized gains (losses) on hedge contracts
 
(187
)
81

24

(183
)
(109
)
 
(562
)
(296
)
(201
)
(14
)
(51
)
Other nonrecurring costs
 
2,903

795

279

662

1,167

 
11,485

4,761

1,583

5,141

—

Acquisition-related amortization
 
14,514

3,593

3,610

3,624

3,687

 
18,575

4,261

4,354

4,426

5,534

Earnings (loss) from operations - Non-GAAP
 
$
2,414

$
(2,654
)
$
1,795

$
3,428

$
(155
)
 
$
35,306

$
10,230

$
10,859

$
10,414

$
3,803

 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss - GAAP
 
$
(70,538
)
$
(10,918
)
$
(20,221
)
$
(28,176
)
$
(11,223
)
 
$
(24,610
)
$
(3,826
)
$
(1,037
)
$
(11,384
)
$
(8,363
)
Stock-based compensation and related social taxes, restructuring, impairment, acquisition-related, integration and other nonrecurring costs (recoveries)
 
46,108

6,057

10,720

23,258

6,073

 
35,568

10,462

5,853

11,057

8,196

Amortization
 
33,177

8,573

8,115

8,118

8,371

 
39,150

9,308

9,483

9,651

10,708

Interest and other, net
 
301

109

121

102

(31
)
 
(51
)
19

(7
)
(8
)
(55
)
Foreign exchange losses (gains)
 
1,109

(1,585
)
2,988

(1,037
)
743

 
4,908

2,082

(42
)
4,034

(1,166
)
Income tax expense (recovery)
 
10,920

90

4,577

5,657

596

 
916

(2,768
)
1,738

2,289

(343
)
Adjusted EBITDA
 
21,077

2,326

6,300

7,922

4,529

 
55,881

15,277

15,988

15,639

8,977

Amortization (exclude acquisition-related amortization)
 
(18,663
)
(4,980
)
(4,505
)
(4,494
)
(4,684
)
 
(20,575
)
(5,047
)
(5,129
)
(5,225
)
(5,174
)
Interest and other, net
 
(301
)
(109
)
(121
)
(102
)
31

 
51

(19
)
7

8

55

Income tax expense - Non-GAAP
 
(2,418
)
(176
)
(653
)
(859
)
(730
)
 
(2,930
)
(1,245
)
(352
)
(769
)
(564
)
Net earnings (loss) - Non-GAAP
 
$
(305
)
$
(2,939
)
$
1,021

$
2,467

$
(854
)
 
$
32,427

$
8,966

$
10,514

$
9,653

$
3,294

 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted net earnings (loss) per share
 
 
 
 
 
 
 
 
 
 
 
 
GAAP - (in dollars per share)
 
$
(1.95
)
$
(0.30
)
$
(0.56
)
$
(0.78
)
$
(0.31
)
 
$
(0.68
)
$
(0.11
)
$
(0.03
)
$
(0.32
)
$
(0.23
)
Non-GAAP - (in dollars per share)
 
$
(0.01
)
$
(0.08
)
$
0.03

$
0.07

$
(0.02
)
 
$
0.90

$
0.25

$
0.29

$
0.27

$
0.09

 
 
 
 
 
 
 
 
 
 
 
 
 





SIERRA WIRELESS, INC. 

SEGMENTED RESULTS 

(In thousands of U.S. dollars, except where otherwise stated)
2019
 
2018
Total
Q4
Q3
Q2
Q1
 
Total
Q4
Q3
Q2
Q1
 
 
 
 
 
 
 
 
 
 
 
 
IoT Solutions
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
377,808

$
90,937

$
93,439

$
99,145

$
94,287

 
$
373,937

$
95,728

$
95,487

$
93,274

$
89,448

Gross margin
 
 
 
 
 
 
 
 
 
 
 
- GAAP
$
140,158

$
33,665

$
35,203

$
36,811

$
34,479

 
$
139,602

$
36,651

$
36,059

$
34,282

$
32,610

- Non-GAAP
$
140,222

$
33,676

$
35,203

$
36,833

$
34,510

 
$
139,818

$
36,675

$
36,081

$
34,308

$
32,754

Gross margin %
 
 
 
 
 
 
 
 
 
 
 
- GAAP
37.1
%
37.0
%
37.7
%
37.1
%
36.6
%
 
37.3
%
38.3
%
37.8
%
36.8
%
36.5
%
- Non-GAAP
37.1
%
37.0
%
37.7
%
37.2
%
36.6
%
 
37.4
%
38.3
%
37.8
%
36.8
%
36.6
%
 
 
 
 
 
 
 
 
 
 
 
 
Embedded Broadband
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
335,705

$
83,364

$
80,586

$
92,229

$
79,526

 
$
419,665

$
105,667

$
107,939

$
108,629

$
97,430

Gross margin
 
 
 
 
 
 
 
 
 
 
 
- GAAP
$
79,832

$
17,703

$
19,840

$
22,138

$
20,151

 
$
124,969

$
29,244

$
31,208

$
35,027

$
29,490

- Non-GAAP
$
79,931

$
17,713

$
19,884

$
22,158

$
20,176

 
$
125,207

$
29,270

$
31,232

$
35,058

$
29,647

Gross margin %
 
 
 
 
 
 
 
 
 
 
 
- GAAP
23.8
%
21.2
%
24.6
%
24.0
%
25.3
%
 
29.8
%
27.7
%
28.9
%
32.2
%
30.3
%
- Non-GAAP
23.8
%
21.2
%
24.7
%
24.0
%
25.4
%
 
29.8
%
27.7
%
28.9
%
32.3
%
30.4
%
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
713,513

$
174,301

$
174,025

$
191,374

$
173,813

 
$
793,602

$
201,395

$
203,426

$
201,903

$
186,878

Gross margin
 
 
 
 
 
 
 
 
 
 
 
- GAAP
$
219,990

$
51,368

$
55,043

$
58,949

$
54,630

 
$
264,571

$
65,895

$
67,267

$
69,309

$
62,100

- Non-GAAP
$
220,153

$
51,389

$
55,087

$
58,991

$
54,686

 
$
265,025

$
65,945

$
67,313

$
69,366

$
62,401

Gross margin %
 
 
 
 
 
 
 
 
 
 
 
- GAAP
30.8
%
29.5
%
31.6
%
30.8
%
31.4
%
 
33.3
%
32.7
%
33.1
%
34.3
%
33.2
%
- Non-GAAP
30.9
%
29.5
%
31.7
%
30.8
%
31.5
%
 
33.4
%
32.7
%
33.1
%
34.4
%
33.4
%
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by Type
 
 
 
 
 
 
 
 
 
 
 
Product
$
614,384

$
147,760

$
149,396

$
166,348

$
150,880

 
$
699,158

$
178,031

$
179,390

$
178,806

$
162,931

Recurring and other services
$
99,129

$
26,541

$
24,629

$
25,026

$
22,933

 
$
94,444

$
23,364

$
24,036

$
23,097

$
23,947










Item 6. Reliance on Subsection 7.1(2) or (3) of National Instrument 51-102
Not applicable
Item 7. Omitted Information
Not applicable
Item 8. Executive Officer
For further information, please contact
David McLennan, Chief Financial Officer at Sierra Wireless, Inc., 13811 Wireless Way, Richmond, B.C., V6V 3A4, Telephone: (604) 231-1185.
Item 9. Date of Report
This material change report is dated as of February 18, 2020.