Form 20-F | o | 40-F | ý |
Yes: | o | No: | ý |
Yes: | o | No: | ý |
Sierra Wireless, Inc. | ||
By: | /s/ Samuel Cochrane | |
Samuel Cochrane, Chief Financial Officer | ||
Date: August 13, 2020 |
• | Gross margin was $45.9 million, or 31.8% of revenue, in the second quarter of 2020 compared to $59.0 million, or 30.8% of revenue, in the second quarter of 2019. |
• | Operating expenses were $63.7 million and loss from operations was $17.8 million in the second quarter of 2020 compared to operating expenses of $82.2 million and loss from operations of $23.3 million in the second quarter of 2019. In the second quarter of 2019, we recorded restructuring expenses of $18.2 million. |
• | Net loss was $15.6 million, or loss of $0.43 per diluted share, in the second quarter of 2020 compared to $28.2 million, or loss of $0.78 per diluted share, in the second quarter of 2019. |
• | Short-term borrowings were $15.0 million as at June 30, 2020 compared to $25.0 million as at March 31, 2020. |
• | Gross margin was 31.8% in the second quarter of 2020 compared to 30.8% in the second quarter of 2019. |
• | Loss from operations was $10.0 million in the second quarter of 2020 compared to earnings from operations of $3.4 million in the second quarter of 2019. |
• | Net loss was $11.1 million, or loss of $0.30 per diluted share, in the second quarter of 2020 compared to net earnings of $2.5 million, or earnings of $0.07 per diluted share, in the second quarter of 2019. |
• | Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") loss were $5.3 million in the second quarter of 2020 compared to Adjusted EBITDA earnings of $7.9 million in the second quarter of 2019. |
• | the scope and duration of the COVID-19 pandemic and its impact on our business; |
• | our ability to return to normal operations after the COVID-19 pandemic has subsided; |
• | expected component supply constraints and manufacturing capacity; |
• | customer demand and our ability to continue to sell our products and services in the expected quantities at the expected prices and expected times; |
• | our ability to realize the anticipated benefits of the Sale Transaction; |
• | 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; |
• | our ability to renew or obtain credit facilities when required; |
• | 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; and |
• | expected tax and foreign exchange rates. |
• | 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: |
• | prolonged negative impact from COVID-19; |
• | our access to capital if required; |
• | 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; |
• | risks that the Sale Transaction may not be completed in a timely manner or at all, which may adversely affect our business and the price of our common shares; |
• | failure to satisfy the conditions to the consummation of the Sale Transaction and the receipt of certain governmental and regulatory approvals; |
• | risks that the Sale Transaction may fail to realize the expected benefits; |
• | 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 changes 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 the M2M Group or our investments and partnerships 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. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenue | |||||||||||||||
IoT Solutions | $ | 81,836 | $ | 99,145 | $ | 160,626 | $ | 193,432 | |||||||
Embedded Broadband | 62,226 | 92,229 | 141,012 | 171,755 | |||||||||||
144,062 | 191,374 | 301,638 | 365,187 | ||||||||||||
Cost of sales | |||||||||||||||
IoT Solutions | 51,298 | 62,334 | 102,077 | 122,142 | |||||||||||
Embedded Broadband | 46,894 | 70,091 | 110,104 | 129,466 | |||||||||||
98,192 | 132,425 | 212,181 | 251,608 | ||||||||||||
Gross margin | 45,870 | 58,949 | 89,457 | 113,579 | |||||||||||
Expenses | |||||||||||||||
Sales and marketing | 22,283 | 23,755 | 47,053 | 46,261 | |||||||||||
Research and development | 22,680 | 22,111 | 44,829 | 44,908 | |||||||||||
Administration | 12,977 | 12,893 | 25,112 | 25,290 | |||||||||||
Restructuring | 245 | 18,180 | 860 | 19,577 | |||||||||||
Acquisition-related and integration | 185 | 314 | 185 | 409 | |||||||||||
Amortization | 5,330 | 4,967 | 10,729 | 10,211 | |||||||||||
63,700 | 82,220 | 128,768 | 146,656 | ||||||||||||
Loss from operations | (17,830 | ) | (23,271 | ) | (39,311 | ) | (33,077 | ) | |||||||
Foreign exchange gain | 3,534 | 854 | 565 | 2 | |||||||||||
Other expense | (280 | ) | (102 | ) | (471 | ) | (71 | ) | |||||||
Loss before income taxes | (14,576 | ) | (22,519 | ) | (39,217 | ) | (33,146 | ) | |||||||
Income tax expense (recovery) | 1,031 | 5,657 | (947 | ) | 6,253 | ||||||||||
Net loss | $ | (15,607 | ) | $ | (28,176 | ) | $ | (38,270 | ) | $ | (39,399 | ) | |||
Other comprehensive gain (loss): | |||||||||||||||
Foreign currency translation adjustments, net of taxes of $nil | 4,318 | 95 | (548 | ) | (3,520 | ) | |||||||||
Comprehensive loss | $ | (11,289 | ) | $ | (28,081 | ) | $ | (38,818 | ) | $ | (42,919 | ) | |||
Net loss per share (in dollars) | |||||||||||||||
Basic | $ | (0.43 | ) | $ | (0.78 | ) | $ | (1.05 | ) | $ | (1.09 | ) | |||
Diluted | (0.43 | ) | (0.78 | ) | (1.05 | ) | (1.09 | ) | |||||||
Weighted average number of shares outstanding (in thousands) | |||||||||||||||
Basic | 36,341 | 36,156 | 36,309 | 36,131 | |||||||||||
Diluted | 36,341 | 36,156 | 36,309 | 36,131 |
June 30, 2020 | December 31, 2019 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 60,111 | $ | 75,454 | |||
Restricted cash | 2,346 | 3,629 | |||||
Accounts receivable, net of allowance of $3,820 (December 31, 2019 - $3,170) | 105,260 | 131,432 | |||||
Inventories | 66,326 | 54,291 | |||||
Prepaids and other | 25,427 | 19,256 | |||||
259,470 | 284,062 | ||||||
Property and equipment, net | 41,195 | 39,924 | |||||
Operating lease right-of-use assets | 22,433 | 25,609 | |||||
Intangible assets, net | 78,842 | 70,072 | |||||
Goodwill | 216,231 | 207,595 | |||||
Deferred income taxes | 2,108 | 2,096 | |||||
Other assets | 9,512 | 9,982 | |||||
$ | 629,791 | $ | 639,340 | ||||
Liabilities | |||||||
Current liabilities | |||||||
Short-term borrowings | $ | 15,000 | $ | — | |||
Accounts payable and accrued liabilities | 181,855 | 173,556 | |||||
Deferred revenue | 10,310 | 10,610 | |||||
207,165 | 184,166 | ||||||
Long-term obligations | 44,361 | 43,774 | |||||
Operating lease liabilities | 21,193 | 25,154 | |||||
Deferred income taxes | 9,731 | 4,921 | |||||
282,450 | 258,015 | ||||||
Equity | |||||||
Shareholders’ equity | |||||||
Common stock: no par value; unlimited shares authorized; issued and outstanding: 36,345,691 shares (December 31, 2019 - 36,233,361 shares) | 437,608 | 435,532 | |||||
Preferred stock: no par value; unlimited shares authorized; issued and outstanding: nil shares | — | — | |||||
Treasury stock: at cost; 10,274 shares (December 31, 2019 – 44,487 shares) | (86 | ) | (370 | ) | |||
Additional paid-in capital | 41,465 | 38,212 | |||||
Retained deficit | (117,882 | ) | (78,833 | ) | |||
Accumulated other comprehensive loss | (13,764 | ) | (13,216 | ) | |||
347,341 | 381,325 | ||||||
$ | 629,791 | $ | 639,340 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Cash flows provided by (used in): | |||||||||||||||
Operating activities | |||||||||||||||
Net loss | $ | (15,607 | ) | $ | (28,176 | ) | $ | (38,270 | ) | $ | (39,399 | ) | |||
Items not requiring (providing) cash | |||||||||||||||
Amortization | 8,538 | 8,118 | 17,023 | 16,489 | |||||||||||
Stock-based compensation | 3,276 | 4,102 | 6,458 | 7,260 | |||||||||||
Deferred income taxes | (16 | ) | 4,961 | (9 | ) | 5,038 | |||||||||
Unrealized foreign exchange (gain) loss | (4,772 | ) | (2,230 | ) | 361 | (1,976 | ) | ||||||||
Other | (59 | ) | 478 | (207 | ) | 586 | |||||||||
Changes in non-cash working capital | |||||||||||||||
Accounts receivable | 18,730 | 1,184 | 26,288 | 17,998 | |||||||||||
Inventories | (2,881 | ) | 1,116 | (11,555 | ) | (5,619 | ) | ||||||||
Prepaids and other | (4,858 | ) | 2,129 | (5,659 | ) | (5,518 | ) | ||||||||
Accounts payable and accrued liabilities | 3,256 | 22,765 | 6,033 | 7,599 | |||||||||||
Deferred revenue | 82 | 1,347 | (1,216 | ) | 2,718 | ||||||||||
Cash flows provided by (used in) operating activities | 5,689 | 15,794 | (753 | ) | 5,176 | ||||||||||
Investing activities | |||||||||||||||
Additions to property and equipment | (5,728 | ) | (4,273 | ) | (9,727 | ) | (8,131 | ) | |||||||
Additions to intangible assets | (743 | ) | (905 | ) | (1,471 | ) | (1,393 | ) | |||||||
Proceeds from sale of property and equipment | 204 | 27 | 224 | 84 | |||||||||||
Proceeds from sale of iTank business | — | — | — | 500 | |||||||||||
Acquisition of M2M Group, net of cash acquired | (172 | ) | — | (18,391 | ) | — | |||||||||
Cash flows used in investing activities | (6,439 | ) | (5,151 | ) | (29,365 | ) | (8,940 | ) | |||||||
Financing activities | |||||||||||||||
Issuance of common shares | — | 73 | — | 167 | |||||||||||
Purchase of treasury shares for RSU distribution | (194 | ) | (267 | ) | (220 | ) | (267 | ) | |||||||
Taxes paid related to net settlement of equity awards | (50 | ) | (75 | ) | (626 | ) | (745 | ) | |||||||
Decrease in other long-term obligations | (83 | ) | (73 | ) | (187 | ) | (214 | ) | |||||||
Proceeds from (repayment of) credit facility | (10,000 | ) | — | 15,000 | — | ||||||||||
Cash flows provided by (used in) financing activities | (10,327 | ) | (342 | ) | 13,967 | (1,059 | ) | ||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | 766 | 325 | (475 | ) | 516 | ||||||||||
Cash, cash equivalents and restricted cash, increase (decrease) in the period | (10,311 | ) | 10,626 | (16,626 | ) | (4,307 | ) | ||||||||
Cash, cash equivalents and restricted cash, beginning of period | 72,768 | 74,364 | 79,083 | 89,297 | |||||||||||
Cash, cash equivalents and restricted cash, end of period | $ | 62,457 | $ | 84,990 | $ | 62,457 | $ | 84,990 |
(In thousands of U.S. dollars, except where otherwise stated) | 2020 | 2019 | |||||||||||||||||||||
Q2 | Q1 | Total | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||
Gross margin - GAAP | $ | 45,870 | $ | 43,587 | $ | 219,990 | $ | 51,368 | $ | 55,043 | $ | 58,949 | $ | 54,630 | |||||||||
Stock-based compensation and related social taxes | 65 | 49 | 167 | 20 | 44 | 44 | 59 | ||||||||||||||||
Realized losses on hedge contracts | (74 | ) | (1 | ) | (4 | ) | 1 | — | (2 | ) | (3 | ) | |||||||||||
Gross margin - Non-GAAP | $ | 45,861 | $ | 43,635 | $ | 220,153 | $ | 51,389 | $ | 55,087 | $ | 58,991 | $ | 54,686 | |||||||||
Earnings (loss) from operations - GAAP | $ | (17,830 | ) | $ | (21,481 | ) | $ | (58,021 | ) | $ | (12,385 | ) | $ | (12,559 | ) | $ | (23,271 | ) | $ | (9,806 | ) | ||
Stock-based compensation and related social taxes | 3,276 | 3,224 | 13,194 | 1,802 | 3,876 | 4,102 | 3,414 | ||||||||||||||||
Acquisition-related and integration | 185 | — | 974 | 274 | 291 | 314 | 95 | ||||||||||||||||
Restructuring | 245 | 615 | 28,160 | 2,309 | 6,274 | 18,180 | 1,397 | ||||||||||||||||
Other non-recurring costs | 687 | 87 | 2,903 | 795 | 279 | 662 | 1,167 | ||||||||||||||||
Impairment | — | — | 877 | 877 | — | — | — | ||||||||||||||||
Realized gains (losses) on hedge contracts | (411 | ) | (98 | ) | (187 | ) | 81 | 24 | (183 | ) | (109 | ) | |||||||||||
Acquisition-related amortization | 3,886 | 3,889 | 14,514 | 3,593 | 3,610 | 3,624 | 3,687 | ||||||||||||||||
Earnings (loss) from operations - Non-GAAP | $ | (9,962 | ) | $ | (13,764 | ) | $ | 2,414 | $ | (2,654 | ) | $ | 1,795 | $ | 3,428 | $ | (155 | ) | |||||
Net loss - GAAP | $ | (15,607 | ) | $ | (22,663 | ) | $ | (70,538 | ) | $ | (10,918 | ) | $ | (20,221 | ) | $ | (28,176 | ) | $ | (11,223 | ) | ||
Stock-based compensation and related social taxes, restructuring, impairment, acquisition-related, integration and other non-recurring costs (recoveries) | 4,393 | 3,926 | 46,108 | 6,057 | 10,720 | 23,258 | 6,073 | ||||||||||||||||
Amortization | 8,538 | 8,485 | 33,177 | 8,573 | 8,115 | 8,118 | 8,371 | ||||||||||||||||
Interest and other, net | 280 | 191 | 301 | 109 | 121 | 102 | (31 | ) | |||||||||||||||
Foreign exchange loss (gain) | (3,945 | ) | 2,871 | 1,109 | (1,585 | ) | 2,988 | (1,037 | ) | 743 | |||||||||||||
Income tax expense (recovery) | 1,031 | (1,978 | ) | 10,920 | 90 | 4,577 | 5,657 | 596 | |||||||||||||||
Adjusted EBITDA | (5,310 | ) | (9,168 | ) | 21,077 | 2,326 | 6,300 | 7,922 | 4,529 | ||||||||||||||
Amortization (exclude acquisition-related amortization) | (4,652 | ) | (4,596 | ) | (18,663 | ) | (4,980 | ) | (4,505 | ) | (4,494 | ) | (4,684 | ) | |||||||||
Interest and other, net | (280 | ) | (191 | ) | (301 | ) | (109 | ) | (121 | ) | (102 | ) | 31 | ||||||||||
Income tax expense - Non-GAAP | (838 | ) | (739 | ) | (2,418 | ) | (176 | ) | (653 | ) | (859 | ) | (730 | ) | |||||||||
Net earnings (loss) - Non-GAAP | $ | (11,080 | ) | $ | (14,694 | ) | $ | (305 | ) | $ | (2,939 | ) | $ | 1,021 | $ | 2,467 | $ | (854 | ) | ||||
Diluted net earnings (loss) per share | |||||||||||||||||||||||
GAAP - (in dollars per share) | $ | (0.43 | ) | $ | (0.62 | ) | $ | (1.95 | ) | $ | (0.30 | ) | $ | (0.56 | ) | $ | (0.78 | ) | $ | (0.31 | ) | ||
Non-GAAP - (in dollars per share) | $ | (0.30 | ) | $ | (0.41 | ) | $ | (0.01 | ) | $ | (0.08 | ) | $ | 0.03 | $ | 0.07 | $ | (0.02 | ) | ||||
(In thousands of U.S. dollars, except where otherwise stated) | 2020 | 2019 | ||||||||||||||||||||
Q2 | Q1 | Total | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||
IoT Solutions | ||||||||||||||||||||||
Revenue | $ | 81,836 | $ | 78,790 | $ | 377,808 | $ | 90,937 | $ | 93,439 | $ | 99,145 | $ | 94,287 | ||||||||
Gross margin | ||||||||||||||||||||||
- GAAP | $ | 30,538 | $ | 28,011 | $ | 140,158 | $ | 33,665 | $ | 35,203 | $ | 36,811 | $ | 34,479 | ||||||||
- Non-GAAP | $ | 30,533 | $ | 28,035 | $ | 140,222 | $ | 33,676 | $ | 35,203 | $ | 36,833 | $ | 34,510 | ||||||||
Gross margin % | ||||||||||||||||||||||
- GAAP | 37.3 | % | 35.6 | % | 37.1 | % | 37.0 | % | 37.7 | % | 37.1 | % | 36.6 | % | ||||||||
- Non-GAAP | 37.3 | % | 35.6 | % | 37.1 | % | 37.0 | % | 37.7 | % | 37.2 | % | 36.6 | % | ||||||||
Embedded Broadband | ||||||||||||||||||||||
Revenue | $ | 62,226 | $ | 78,786 | $ | 335,705 | $ | 83,364 | $ | 80,586 | $ | 92,229 | $ | 79,526 | ||||||||
Gross margin | ||||||||||||||||||||||
- GAAP | $ | 15,332 | $ | 15,576 | $ | 79,832 | $ | 17,703 | $ | 19,840 | $ | 22,138 | $ | 20,151 | ||||||||
- Non-GAAP | $ | 15,328 | $ | 15,600 | $ | 79,931 | $ | 17,713 | $ | 19,884 | $ | 22,158 | $ | 20,176 | ||||||||
Gross margin % | ||||||||||||||||||||||
- GAAP | 24.6 | % | 19.8 | % | 23.8 | % | 21.2 | % | 24.6 | % | 24.0 | % | 25.3 | % | ||||||||
- Non-GAAP | 24.6 | % | 19.8 | % | 23.8 | % | 21.2 | % | 24.7 | % | 24.0 | % | 25.4 | % | ||||||||
Total | ||||||||||||||||||||||
Revenue | $ | 144,062 | $ | 157,576 | $ | 713,513 | $ | 174,301 | $ | 174,025 | $ | 191,374 | $ | 173,813 | ||||||||
Gross margin | ||||||||||||||||||||||
- GAAP | $ | 45,870 | $ | 43,587 | $ | 219,990 | $ | 51,368 | $ | 55,043 | $ | 58,949 | $ | 54,630 | ||||||||
- Non-GAAP | $ | 45,861 | $ | 43,635 | $ | 220,153 | $ | 51,389 | $ | 55,087 | $ | 58,991 | $ | 54,686 | ||||||||
Gross margin % | ||||||||||||||||||||||
- GAAP | 31.8 | % | 27.7 | % | 30.8 | % | 29.5 | % | 31.6 | % | 30.8 | % | 31.4 | % | ||||||||
- Non-GAAP | 31.8 | % | 27.7 | % | 30.9 | % | 29.5 | % | 31.7 | % | 30.8 | % | 31.5 | % | ||||||||
Revenue by Type | ||||||||||||||||||||||
Product | $ | 115,975 | $ | 130,743 | $ | 614,384 | $ | 147,760 | $ | 149,396 | $ | 166,348 | $ | 150,880 | ||||||||
Recurring and other services | $ | 28,087 | $ | 26,833 | $ | 99,129 | $ | 26,541 | $ | 24,629 | $ | 25,026 | $ | 22,933 |