Sierra Wireless Reports Third Quarter 2013 Results

  Sierra Wireless Reports Third Quarter 2013 Results

Business Wire

VANCOUVER, British Columbia -- November 7, 2013

Sierra Wireless (NASDAQ: SWIR) (TSX: SW):

Q3 highlights from continuing operations

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

Sierra Wireless, Inc. today reported results for its third quarter ending
September 30, 2013. All results are reported in U.S. dollars and are prepared
in accordance with United States generally accepted accounting principles
(GAAP), except as otherwise indicated below.

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

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

GAAP

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

NON-GAAP

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

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

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

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

Financial Guidance

The Company provides the following guidance for continuing operations for the
fourth quarter of 2013, excluding any impact from the acquired M2M module and
modem assets of AnyDATA:

In the fourth quarter of 2013, revenue is expected to increase sequentially
and on a year-over-year basis. Gross margin and operating expenses are
expected to remain similar to third quarter levels.

                           Consolidated
Q4 2013 Guidance          Non-GAAP

                           
                           
Revenue                    $112.0 to $116.0 million
Earnings from operations   $2.4 to $3.3 million
Net earnings               $2.2 to $3.0 million
Earnings per share         $0.07 to $0.10 per share

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

Conference call, webcast and instant replay details

Sierra Wireless President and CEO, Jason Cohenour, and CFO, David McLennan,
will host a conference call and webcast with analysts and investors to review
the results on Thursday, November 7, 2013, at 5:30 PM Eastern Time (2:30 PM
PT). A live slide presentation will be available for viewing during the call
from the link provided below.

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

  *Toll-free (Canada and US): 1-877-201-0168
  *Alternate number: 1-647-788-4901
  *Conference ID: 7687072

For those unable to participate in the live call, a replay will be available
until November 29, 2013. Dial 1-855-859-2056 or 1-800-585-8367 and enter the
Conference ID number above to access the replay.

To access the webcast, please follow the link below:

Sierra Wireless Q3 2013 Financial Results Webcast

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

http://www.snwebcastcenter.com/webcast/sierrawireless/2013q3/

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

We look forward to having you participate in our call.

Cautionary Note Regarding Forward-Looking Statements

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

Forward-looking statements:

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

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

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

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

About Sierra Wireless

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

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

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

                             Three months ended     Nine months ended
                               September 30,           September 30,
                               2013      2012       2013       2012
Revenue                        $ 112,262   $ 100,183   $ 323,252    $ 287,916
Cost of goods sold              74,916     69,097     216,054     198,875
Gross margin                    37,346     31,086     107,198     89,041
                                                                      
Expenses
Sales and marketing              10,452      8,572       31,489       26,891
Research and development         17,806      15,886      54,038       45,491
Administration                   9,297       8,013       26,323       25,034
Restructuring                    14          498         157          2,209
Integration                      —           —           27           —
Acquisition                      139         2,196       139          2,795
Amortization                    2,939      2,649      9,142       7,311
                               40,647     37,814     121,315     109,731
Loss from operations             (3,301)     (6,728)     (14,117)     (20,690)
Foreign exchange gain            2,563       1,176       1,902        1,718
Other income (expense)          (26)       (70)       (124)       (231)
Loss before income taxes         (764)       (5,622)     (12,339)     (19,203)
Income tax expense              (1,839)    (2,010)    1,266       522
(recovery)
Net earnings (loss) from         1,075       (3,612)     (13,605)     (19,725)
continuing operations
Net earnings (loss) from        (505)      7,279      69,510      27,318
discontinued operations
Net earnings                   $ 570       $ 3,667     $ 55,905     $ 7,593
Other comprehensive income
(loss):
Foreign currency translation
adjustments, net of taxes of    693        1,203      425         (138)
$nil
Comprehensive income           $ 1,263     $ 4,870     $ 56,330     $ 7,455
Basic and diluted net
earnings (loss) per share
attributable to the
Company’s common
shareholders (in dollars)
Continuing operations          $ 0.03      $ (0.12)    $ (0.44)     $ (0.64)
Discontinued operations         (0.01)     0.24       2.26        0.89
                               $ 0.02      $ 0.12      $ 1.82       $ 0.25
Weighted average number of
shares outstanding (in
thousands)
Basic                            30,688      30,573      30,717       30,854
Diluted                         31,176     30,573     30,717      30,854

SIERRA WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
(unaudited)
                                                         
                                       September 30, 2013   December 31, 2012
Assets
Current assets
Cash and cash equivalents               $    183,220         $     63,646
Short-term investments                       5,221                 —
Accounts receivable, net of allowance
for doubtful accounts of $2,531              94,090                108,624
(December 31, 2012 - $2,435)
Inventories                                  6,221                 12,675
Deferred income taxes                        4,200                 22,199
Prepaids and other                           37,235                24,252
Assets held for sale                        —                    54,340
                                             330,187               285,736
Property and equipment                       22,588                20,039
Intangible assets                            45,107                56,357
Goodwill                                     99,365                97,961
Deferred income taxes                        4,685                 3,880
Other assets                                811                  790
                                       $    502,743         $     464,763
                                                                   
Liabilities
Current liabilities
Accounts payable and accrued            $    121,606         $     128,216
liabilities
Deferred revenue and credits                 1,807                 1,312
Liabilities held for sale                   —                    10,353
                                             123,413               139,881
Long-term obligations                        22,074                26,526
Deferred income taxes                       300                  300
                                           145,787              166,707
Equity
Shareholders’ equity
Common stock: no par value; unlimited
shares authorized; issued and
outstanding 30,761,517 shares
(December 31, 2012 - 30,592,423              324,975               322,770
shares)
Preferred stock: no par value;
unlimited shares authorized;
issued and outstanding: nil shares           —                     —
Treasury stock: at cost 538,439
shares (December 31, 2012 – 716,313          (5,399)               (5,172)
shares)
Additional paid-in capital                   24,183                23,203
Retained earnings (deficit)                  20,234                (35,283)
Accumulated other comprehensive loss        (7,037)              (7,462)
                                           356,956              298,056
                                       $    502,743         $     464,763

SIERRA WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
                          Three months ended        Nine months ended
                            September 30,              September 30,
                            2013       2012        2013       2012
Cash flows provided by                  
(used in):
Operating activities
Net earnings                $ 570         $ 3,667        55,905     $ 7,593
Items not requiring
(providing) cash
Amortization                  6,873         7,082        21,150       20,795
Stock-based compensation      2,481         1,695        7,170        5,010
Gain on sale of AirCard       17            —            (94,078)     —
business
Deferred income taxes         (770)         (2,032)      17,194       (3,905)
Loss (gain) on disposal
of property, equipment,       10            57           (10)         183
and intangibles
Impairment of assets
related to discontinued       —             —            1,012        —
operations
Other                         (1,912)       (1,226)      (1,399)      (1,226)
Taxes paid related to net
settlement of equity          (14)          (4)          (342)        (4)
awards
Changes in non-cash
working capital
Accounts receivable           15,877        (6,970)      28,862       (11,384)
Inventories                   51            (6,044)      12,604       (5,127)
Prepaid expenses and          (2,767)       (17,596)     (11,870)     (20,557)
other
Accounts payable and          (824)         16,065       (15,079)     37,537
accrued liabilities
Deferred revenue and         (512)       513         485         (145)
credits
Cash flows provided by
(used in) operating          19,080      (4,793)     21,604      28,770
activities
Investing activities
Additions to property and     (3,835)       (3,290)      (9,730)      (11,850)
equipment
Proceeds from sale of
property, equipment, and      —             (8)          32           56
intangibles
Increase in intangible        (555)         (596)        (1,669)      (1,934)
assets
Net proceeds from sale of     (17)          —            119,978      —
AirCard business
Purchase of M2M business      —             (55,218)     —            (55,218)
of Sagemcom
Net change in short-term     4,779       2,153       (5,221)     9,347
investments
Cash flows provided by
(used in) investing          372         (56,959)    103,390     (59,599)
activities
Financing activities
Issuance of common shares     1,186         158          4,947        427
Repurchase of common          —             —            (5,772)      (6,312)
shares for cancellation
Purchase of treasury
shares for RSU                (3,433)       —            (3,433)      (2,489)
distribution
Decrease in other            (108)       (176)       (827)       (831)
long-term obligations
Cash flows used in           (2,355)     (18)        (5,085)     (9,205)
financing activities
Effect of foreign
exchange rate changes on     (450)       (1,861)     (335)       (1,813)
cash and cash equivalents
Cash and cash
equivalents, increase         16,647        (63,631)     119,574      (41,847)
(decrease) in the period
Cash and cash
equivalents, beginning of    166,573     123,159     63,646      101,375
period
Cash and cash
equivalents, end of         $ 183,220    $ 59,528     $ 183,220    $ 59,528
period

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

                                                                                                          
(in thousands of U.S.
dollars, except where                                                                 
otherwise stated)
               2013                                  2012 ^(1)                                           
                  Q3         Q2           Q1          Total       Q4          Q3         Q2         Q1
                                                                                                           
Gross margin    $ 37,346    $ 36,474       $ 33,378    $ 125,274    $ 36,233     $ 31,086    $ 30,081    $ 27,874
- GAAP
Stock-based      117        95           75         304         61          82         78         83
compensation
Gross margin    $ 37,463    $ 36,569      $ 33,453    $ 125,578    $ 36,294     $ 31,168    $ 30,159    $ 27,957
- Non-GAAP
                                                                                                           
Loss from
operations -    $ (3,301)   $ (3,932)      $ (6,884)   $ (22,206)   $ (1,516)    $ (6,728)   $ (6,558)   $ (7,404)
GAAP
Stock-based       2,145       2,013          1,655       5,781        1,470        1,462       1,403       1,446
compensation
Acquisition       139         —              —           3,182        387          2,196       599         —
Restructuring     14          26             117         2,251        42           498         1,531       180
Integration       —           —              27          —            —            —           —           —
Impairment of
an asset in       —           —              280         —            —            —           —           —
R&D
Acquisition
related          3,405      3,363        3,393      11,890      3,338       2,906      2,665      2,981
amortization
Earnings
(loss) from     $ 2,402     $ 1,470        $ (1,412)   $ 898        $ 3,721      $ 334       $ (360)     $ (2,797)
operations -
Non-GAAP
Amortization
(excluding
acquisition      3,468      3,403        3,212      11,747      3,293       2,904      2,717      2,833
related
amortization)
Adjusted        $ 5,870     $ 4,873       $ 1,800     $ 12,645     $ 7,014      $ 3,238     $ 2,357     $ 36
EBITDA
                                                                                                           
Net earnings
(loss) from
continuing      $ 1,075     $ (6,742)      $ (7,938)   $ (4,202)    $ 15,523     $ (3,612)   $ (8,868)   $ (7,245)
operations -
GAAP
Stock-based
compensation,
restructuring and
other,
integration,      5,760       5,393          5,355       22,241       5,162        6,885       5,658       4,536
and acquisition
related
amortization, net
of tax
Unrealized
foreign           (2,457)     (1,359)        1,874       (3,139)      (1,655)      (1,218)     (165)       (101)
exchange loss
(gain)
Income tax       (895)      3,754        —          (15,344)    (14,540)    (804)      —          —
adjustments
Net earnings
(loss) from
continuing      $ 3,483     $ 1,046       $ (709)     $ (444)      $ 4,490      $ 1,251     $ (3,375)   $ (2,810)
operations -
Non-GAAP
                                                                                                           
Net earnings
(loss) from
discontinued    $ (505)     $ 68,152       $ 1,863     $ 31,401     $ 4,083      $ 7,279     $ 12,449    $ 7,590
operations -
GAAP
Stock-based
compensation
and               1,402       876            1,733       2,395        1,696        233         233         233
disposition
costs
Gain on sale
of AirCard       (49)       (69,077)     —          —           —           —          —          —
business
Net earnings
(loss) from
discontinued    $ 848       $ (49)        $ 3,596     $ 33,796     $ 5,779      $ 7,512     $ 12,682    $ 7,823
operations -
Non-GAAP
                                                                                                           
Net earnings    $ 570       $ 61,410       $ (6,075)   $ 27,199     $ 19,606     $ 3,667     $ 3,581     $ 345
(loss) - GAAP
Net earnings
(loss) -          4,331       997            2,887       33,352       10,269       8,763       9,307       5,013
Non-GAAP
                                                                                                           
Diluted
earnings
(loss) from
continuing
operations
per share
GAAP - (in      $ 0.03      $ (0.22)       $ (0.26)    $ (0.14)     $ 0.50       $ (0.12)    $ (0.29)    $ (0.23)
dollars)
Non-GAAP -      $ 0.11      $ 0.03         $ (0.02)    $ (0.01)     $ 0.15       $ 0.04      $ (0.11)    $ (0.09)
(in dollars)
                                                                                                           
Net earnings
(loss) per
share -
diluted
GAAP - (in      $ 0.02      $ 2.00         $ (0.20)    $ 0.88       $ 0.64       $ 0.12      $ 0.12      $ 0.01
dollars)
Non-GAAP -      $ 0.14      $ 0.03        $ 0.09      $ 1.08       $ 0.33       $ 0.29      $ 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 LINES
                        (In thousands of U.S. dollars)
                                 (Unaudited)

                Three months ended September 30,  Nine months ended September
                                                   30,
                2013              2012^(1)        2013           2012^(1)
                                                                      
OEM Solutions   $    95,850        $   88,270      $   280,158     $  251,669
Enterprise          16,412           11,913         43,094        36,247
Solutions
                $    112,262       $   100,183     $   323,252     $  287,916
                                                              
(1) Comparative information has been reclassified to conform to current period
presentation.

Contact:

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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