Sierra Wireless Reports First Quarter 2013 Results

  Sierra Wireless Reports First Quarter 2013 Results

Business Wire

VANCOUVER, BRITISH COLUMBIA -- May 2, 2013

Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW):

  *First quarter 2013 revenue of $101.4 million, up 9.8%, year-over-year
  *Non-GAAP loss from operations of $1.4 million, compared to a loss of $2.8
    million a year ago
  *Non-GAAP net loss from continuing operations of $0.7 million and loss per
    share of $0.02, compared to non-GAAP net loss of $2.8 million a year ago
    and loss per share of $0.09

Sierra Wireless, Inc. today reported first quarter 2013 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.

“We experienced solid year-over-year revenue growth in the quarter, powered by
a strong contribution from the acquired Sagemcom M2M business,” said Jason
Cohenour, President and Chief Executive Officer. “A major focus in the quarter
was completing the sale of our AirCard® assets and operations to Netgear,
which was accomplished in early April. We are now an M2M pure play, with
leading global market share, the industry's broadest product line, and
blue-chip customers. Moreover, we now have significant financial capacity to
accelerate growth and value creation through acquisitions, as we capitalize on
the secular growth opportunity in M2M.”

In accordance with U.S. GAAP, assets and liabilities associated with the sale
of our AirCard business on April 2, 2013, have been recorded as “held for
sale” in our consolidated balance sheet as at March 31, 2013, and the results
of operations of the AirCard business as discontinued operations in our
consolidated statements of operations for the three months ended March 31,
2013. The historical consolidated statements of operations and related
selected financial information have been retrospectively adjusted to
distinguish between continuing operations and discontinued operations.

Our segments and product lines have changed from those reported at December
31, 2012. Effective January 1, 2013, we have one reportable M2M segment with
two product lines. The OEM Solutions product line includes embedded wireless
modules and tools for OEM customers, and the Enterprise Solutions product line
includes intelligent gateways, routers and tools for enterprise customers,
including a cloud offering for building, deploying, and managing M2M
applications.

Revenue for the first quarter of 2013 was $101.4 million, an increase of 9.8%
compared to $92.3 million in the first quarter of 2012, and a decrease of 7.3%
compared to $109.4 million in the fourth quarter of 2012. The year-over-year
revenue increase was driven by contribution from the M2M business of Sagemcom
which was acquired in August 2012. Revenue from OEM solutions was $89.2
million in the first quarter of 2013, up 11.4%, compared to $80.1 million in
the first quarter of 2012. Revenue from enterprise solutions was $12.2 million
in the first quarter of 2013, in line with the first quarter of 2012.

On a GAAP basis, gross margin was $33.4 million, or 32.9% in the first quarter
of 2013, compared to $27.9 million, or 30.2% in the first quarter of 2012.
Operating expenses were $40.3 million and loss from operations was $6.9
million in the first quarter of 2013, compared to operating expenses of $35.3
million and a loss from operations of $7.4 million in the first quarter of
2012. Net loss from continuing operations was $7.9 million, or $0.26 per
diluted share, in the first quarter of 2013, compared to net loss of $7.2
million, or $0.23 per diluted share, in the first quarter of 2012. Net loss
for continuing and discontinued operations was $6.1 million, or $0.20 per
diluted share, compared to net earnings of $0.3 million, or $0.01 per diluted
share, in the first quarter of 2012.

On a non-GAAP basis, gross margin was 33.0% in the first quarter of 2013,
compared to 30.3% in the first quarter of 2012. Operating expenses were $34.9
million and loss from operations was $1.4 million in the first quarter of
2013, compared to operating expenses of $30.8 million and loss from operations
of $2.8 million in the first quarter of 2012. Net loss from continuing
operations was $0.7 million, or $0.02 per diluted share, in the first quarter
of 2013, compared to a net loss of $2.8 million, or $0.09 per diluted share,
in the first quarter of 2012. Net earnings for continuing and discontinued
operations were $2.9 million, or $0.09 per diluted share, in the first quarter
of 2013 compared to net earnings of $5.0 million, or $0.16 per diluted share,
in the first quarter of 2012.

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

Financial Guidance

The Company provides the following guidance for the second quarter of 2013 for
its continuing operations:

In the second quarter of 2013, we expect solid sequential and year-over-year
revenue growth. We expect gross margin percentage and operating expenses to be
similar to the first quarter of 2013 levels.

                                                Consolidated
Q2 2013 Guidance                              
                                                Non-GAAP
                                                
Revenue                                         $107.0 to $111.0 million
Earnings from operations                        $0.5 to $1.8 million
Net earnings from continuing operations         $0.4 to $1.2 million
Earnings per share from continuing operations   $0.01 to $0.04 per share

This Non-GAAP guidance for the second quarter of 2013 reflects current
business indicators and expectations. Inherent in this guidance are risk
factors that are described in greater detail in our regulatory filings. Our
actual results could differ materially from those presented above. All figures
are approximations based on management's current beliefs and assumptions.

Conference call, webcast and instant replay details

Sierra Wireless President and CEO, Jason Cohenour, and CFO, David McLennan,
will host a conference call and webcast with analysts and investors to review
the results on Thursday, May 2, 2013, at 5:30 PM Eastern Time (2:30 PM PT). A
live slide presentation will be available for viewing during the call from the
link provided below.

To participate in this conference call, please dial the following number
approximately ten minutes prior to the commencement of the call:

  *Toll-free (Canada and US): 1-877-201-0168
  *Alternate number: 1-647-788-4901
  *Conference ID: 15999405

For those unable to participate in the live call, a replay will be available
until May 23, 2013. Dial 1-855-859-2056 or 1-800-585-8367 and enter the
Conference ID number above to access the replay.

To access the webcast, please follow the link below:

Sierra Wireless Q1 Financial Results Webcast

If the above link does not work, please copy and paste the following URL into
your browser:

http://www.snwebcastcenter.com/webcast/sierrawireless-20130502/

The webcast will remain available at the above link for one year following the
call.

We look forward to having you participate in our call.

Cautionary Note Regarding Forward-Looking Statements

Certain statements and information in this press release are not based on
historical facts and constitute forward-looking statements or forward-looking
information within the meaning of the U.S. Private Securities Litigation
Reform Act of 1995 and Canadian securities laws (“forward-looking statements”)
including statements and information relating to our financial guidance for
the second quarter of 2013 and our fiscal year 2013, our business outlook for
the short and longer term and our strategy, plans and future operating
performance. Forward-looking statements are provided to help you understand
our views of our short and longer term prospects. We caution you that
forward-looking statements may not be appropriate for other purposes. We will
not update or revise our forward-looking statements unless we are required to
do so by securities laws.

Forward-looking statements:

  *Typically include words and phrases about the future such as “outlook”,
    “may”, “estimates”, “intends”, “believes”, “plans”, “anticipates” and
    “expects”.
  *Are not promises or guarantees of future performance. They represent our
    current views and may change significantly.
  *Are based on a number of material assumptions, including those listed
    below, which could prove to be significantly incorrect:

  *Our ability to develop, manufacture and sell new products and services
    that meet the needs of our customers and gain commercial acceptance;
  *Our ability to continue to sell our products and services in the expected
    quantities at the expected prices and expected times;
  *Expected cost of goods sold;
  *Expected component supply situation;
  *Our ability to “win” new business;
  *Expected deployment of next generation networks by wireless network
    operators;
  *Our operations are not adversely disrupted by component shortages or other
    development, operating or regulatory risks; and
  *Expected tax rates relative mix of earnings amongst the tax jurisdictions
    in which we operate, along with foreign exchange rates.

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

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

About Sierra Wireless

Sierra Wireless (NASDAQ: SWIR) (TSX: SW) offers industry-leading products and
solutions for connected devices and machine-to-machine (M2M) communications
over cellular networks. Wireless service providers, equipment manufacturers,
enterprises and government organizations around the world depend on us for
reliable wireless technology. We offer 2G, 3G and 4G wireless modems, routers
and gateways as well as a comprehensive suite of software, tools, and services
that ensure our customers can successfully bring wireless applications to
market. For more information about Sierra Wireless, visit
www.sierrawireless.com.

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

                            SIERRA WIRELESS,INC.
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
        (in thousands of U.S. dollars, except where otherwise stated)
                                 (Unaudited)

                                                     Three months ended
                                                      March 31,
                                                     2013         2012
Revenue                                               $ 101,401     $ 92,335
Cost of goods sold                                    68,023       64,461   
Gross margin                                          33,378       27,874   
                                                                    
Expenses
Sales and marketing                                   10,356        9,321
Research and development                              18,363        14,931
Administration                                        8,123         8,459
Restructuring                                         117           180
Integration                                           27            —
Amortization                                          3,276        2,387    
                                                     40,262       35,278   
Loss from operations                                  (6,884    )   (7,404   )
Foreign exchange gain (loss)                          (2,370    )   206
Other expense                                         (132      )   (171     )
Loss before income taxes                              (9,386    )   (7,369   )
Income tax recovery                                   1,448        124      
Net loss from continuing operations                   (7,938    )   (7,245   )
Net earnings from discontinued operations             1,863        7,590    
Net earnings (loss)                                   $ (6,075  )   $ 345    
Other comprehensive income (loss):
Foreign currency translation adjustments, net of      (904      )   2,002    
taxes of $nil
Comprehensive income (loss)                           $ (6,979  )   $ 2,347  
Basic and diluted net earnings (loss) per share
attributable to the Company’s common shareholders
(in dollars)
Continuing operations                                 $ (0.26   )   $ (0.23  )
Discontinued operations                               0.06         0.24     
                                                      $ (0.20   )   $ 0.01   
Weighted average number of shares outstanding (in
thousands)
Basic                                                 30,695        31,175
Diluted                                               30,695        31,175

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

                                          March 31, 2013  December 31, 2012
Assets
Current assets
Cash and cash equivalents                   $  55,923        $   63,646
Accounts receivable, net of allowance for
doubtful accounts of $1,959                 114,160          108,624
(December 31, 2012 - $2,435)
Inventories                                 11,017           12,675
Deferred income taxes                       22,230           22,199
Prepaids and other                          34,323           24,252
Assets held for sale                        46,876          54,340        
                                            284,529          285,736
Property and equipment                      19,153           20,039
Intangible assets                           50,525           56,357
Goodwill                                    96,205           97,961
Deferred income taxes                       3,880            3,880
Other assets                                767             790           
                                           $  455,059      $   464,763   
                                                             
Liabilities
Current liabilities
Accounts payable and accrued liabilities    $  128,125       $   128,216
Deferred revenue and credits                1,306            1,312
Liabilities held for sale                   7,075           10,353        
                                            136,506          139,881
Long-term obligations                       24,771           26,526
Deferred income taxes                       300             300           
                                           161,577         166,707       
Equity
Shareholders’ equity
Common stock: no par value; unlimited
shares authorized; issued and               324,748          322,770
outstanding 30,791,455 shares (December
31, 2012 - 30,592,423 shares)
Preferred stock: no par value; unlimited
shares authorized;                          —                —
issued and outstanding: nil shares
Treasury stock: at cost 312,502 shares      (2,283      )    (5,172        )
(December 31, 2012 - 716,313 shares)
Additional paid-in capital                  20,807           23,203
Deficit                                     (41,424     )    (35,283       )
Accumulated other comprehensive loss        (8,366      )    (7,462        )
                                           293,482         298,056       
                                           $  455,059      $   464,763   

                            SIERRA WIRELESS, INC.

                      CONSOLIDATED STATEMENTS OF EQUITY

                        (in thousands of U.S. dollars)

                                 (unaudited)

             Common Stock            Treasury Shares                                                  
                                                                  Additional                  Accumulated
              # of         $         # of       $           paid-in      Deficit     other            Total
               shares                   shares                    capital                     comprehensive
                                                                                              income (loss)
Balance as
at December    31,306,692   $ 328,440   877,559     $ (6,141)   $ 20,087       $ (62,482)   $ (8,000)         $ 271,904
31, 2011
                                                                                                                
Common share   (800,000)      (6,312)   —             —           —              —            —                 (6,312)
cancellation
Stock option
tax benefit    —              —         —             —           71             —            —                 71
for U.S.
employees
Stock option   85,051         637       —             —           (201)          —            —                 436
exercises
Stock-based    —              —         —             —           6,713          —            —                 6,713
compensation
Purchase of
treasury
shares for     —              —         336,638       (2,489)     —              —            —                 (2,489)
RSU
distribution
Distribution
of vested      680            5         (497,884)     3,458       (3,467)        —            —                 (4)
RSUs
Net earnings   —              —         —             —           —              27,199       —                 27,199
Foreign
currency
translation    —             —         —            —          —             —           538              538
adjustments,
net of tax
Balance as
at December    30,592,423   $ 322,770   716,313     $ (5,172)   $ 23,203       $ (35,283)   $ (7,462)         $ 298,056
31, 2012
                                                                                                                
Common share   (124,300)      (1,311)   —             —           —              (66)         —                 (1,377)
cancellation
Stock option   295,206        3,071     —             —           (967)          —            —                 2,104
exercises
Stock-based    —              —         —             —           1,928          —            —                 1,928
compensation
Distribution
of vested      28,126         218       (403,811)     2,889       (3,357)        —            —                 (250)
RSUs
Net earnings   —              —         —             —           —              (6,075)      —                 (6,075)
(loss)
Foreign
currency
translation    —             —         —            —          —             —           (904)            (904)
adjustments,
net of tax
Balance as
at March 31,   30,791,455   $ 324,748   312,502     $ (2,283)   $ 20,807       $ (41,424)   $ (8,366)         $ 293,482
2013

                            SIERRA WIRELESS,INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (in thousands of U.S. dollars)
                                 (Unaudited)

                                                  Three months ended March 31,
                                                 2013            2012
Cash flows provided (used) by:
Operating activities
Net earnings (loss)                               $  (6,075  )     $ 345
Items not requiring (providing) cash
Amortization                                      7,511            6,982
Stock-based compensation                          1,928            1,679
Deferred income taxes                             (31        )     (1,030    )
Loss on disposal of property, equipment, and      —                159
intangibles
Impairment of assets related to discontinued      1,004            —
operations
Other                                             1,750            —
Taxes paid related to net settlement of equity    (250       )     —
awards
Changes in non-cash working capital
Accounts receivable                               (6,643     )     613
Inventories                                       7,354            3,224
Prepaid expenses and other                        (9,044     )     716
Accounts payable and accrued liabilities          (3,079     )     (7,085    )
Deferred revenue and credits                      28              (480      )
Cash flows provided (used) by operating           (5,547     )     5,123     
activities
Investing activities
Additions to property and equipment               (2,199     )     (3,603    )
Proceeds from sale of property, equipment, and    11               61
intangibles
Increase in intangible assets                     (659       )     (771      )
Net change in short-term investments              —               9,345     
Cash flows provided (used) by investing           (2,847     )     5,032     
activities
Financing activities
Issuance of common shares, net of share issue     2,104            14
costs
Repurchase of common shares for cancellation      (1,377)         (3,037    )
Purchase of treasury shares for RSU distribution  —                (987      )
Decrease in other long-term obligations           (627       )     (642      )
Cash flows provided (used) by financing           100             (4,652    )
activities
Effect of foreign exchange rate changes on cash   571             (105      )
and cash equivalents
Cash and cash equivalents, increase (decrease) in (7,723     )     5,398
the period
Cash and cash equivalents, beginning of period    63,646          101,375   
Cash and cash equivalents, end of period          $  55,923       $ 106,773 

                            SIERRA WIRELESS,INC.
                 RECONCILLIATION OF GAAP AND NON-GAAP RESULTS
                                 (Unaudited)

(in thousands of U.S. dollars, except where otherwise stated)
               2013         2012 ^ (1)                                    
                Q1            Total       Q4          Q3          Q2         Q1
                                                                             
Revenue -
GAAP and        $ 101,401    $ 397,321  $ 109,405  $ 100,183  $ 95,398  $ 92,335 
Non-GAAP
                                                                             
Gross margin    $ 33,378      $ 125,274   $ 36,233    $ 31,086    $ 30,081   $ 27,874
- GAAP
Stock-based     75           304        61         82         78        83       
compensation
Gross margin    $ 33,453    $ 125,578  $ 36,294   $ 31,168   $ 30,159  $ 27,957 
- Non-GAAP
                                                                             
Loss from
operations -    $ (6,884  )   $ (22,206 ) $ (1,516  ) $ (6,728  ) $ (6,558 ) $ (7,404 )
GAAP
Stock-based     1,655         5,781       1,470       1,462       1,403      1,446
compensation
Acquisition     —             3,182       387         2,196       599        —
Restructuring   117           2,251       42          498         1,531      180
Integration     27            —           —           —           —          —
Impairment of
an asset in     280           —           —           —           —          —
R&D
Acquisition
related         3,393        11,890     3,338      2,906      2,665     2,981    
amortization
Earnings
(loss) from     $ (1,412  )  $ 898      $ 3,721    $ 334      $ (360   ) $ (2,797 )
operations -
Non-GAAP
                                                                             
Net earnings
(loss) from
continuing      $ (7,938  )   $ (4,202  ) $ 15,523    $ (3,612  ) $ (8,868 ) $ (7,245 )
operations -
GAAP
Stock-based
compensation,
restructuring
and other,
integration,    5,355         22,241      5,162       6,885       5,658      4,536
and
acquisition
related
amortization,
net of tax
Unrealized
foreign         1,874         (3,139    ) (1,655    ) (1,218    ) (165     ) (101     )
exchange loss
(gain)
Income tax      —            (15,344   ) (14,540   ) (804      ) —         —        
adjustments
Net earnings
(loss) from
continuing      $ (709    )  $ (444    ) $ 4,490    $ 1,251    $ (3,375 ) $ (2,810 )
operations -
Non-GAAP
                                                                             
Net earnings
from
discontinued    $ 1,863       $ 31,401    $ 4,083     $ 7,279     $ 12,449   $ 7,590
operations -
GAAP
Stock-based
compensation
and             1,733        2,395      1,696      233        233       233      
disposition
costs
Net earnings
from
discontinued    $ 3,596     $ 33,796   $ 5,779    $ 7,512    $ 12,682  $ 7,823  
operations -
Non-GAAP
                                                                             
Net earnings    $ (6,075  )   $ 27,199    $ 19,606    $ 3,667     $ 3,581    $ 345
(loss) - GAAP
Net earnings
(loss) -        2,887         33,352      10,269      8,763       9,307      5,013
Non-GAAP
                                                                             
Diluted
earnings
(loss) from
continuing
operations
per share
GAAP - (in      $ (0.26   )   $ (0.14   ) $ 0.50      $ (0.12   ) $ (0.29  ) $ (0.23  )
dollars)
Non-GAAP -      $ (0.02   )   $ (0.01   ) $ 0.15      $ 0.04      $ (0.11  ) $ (0.09  )
(in dollars)
                                                                             
Net earnings
(loss) per
share -
diluted
GAAP - (in      $ (0.20   )   $ 0.88      $ 0.64      $ 0.12      $ 0.12     $ 0.01
dollars)
Non-GAAP -     $ 0.09      $ 1.08     $ 0.33     $ 0.28     $ 0.30    $ 0.16   
(in dollars)

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

                            SIERRA WIRELESS,INC.
                              REVENUE BY PRODUCT
                        (In thousands of U.S. dollars)
                                 (Unaudited)

                                     
                      Three months ended Mar 31,
                      2013             2012^(1)
                                         
OEM Solutions          $  89,232         $ 80,100
Enterprise Solutions   12,169           12,235
                       $  101,401       $ 92,335

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

Contact:

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