Sierra Wireless Reports First Quarter 2014 Results

  Sierra Wireless Reports First Quarter 2014 Results

        Record revenue of $121.2 million; 19.5% year-over-year growth

Business Wire

VANCOUVER, British Columbia -- May 1, 2014

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

First Quarter 2014 highlights from continuing operations

  *Record revenue of $121.2 million, an increase of 19.5% compared with Q1
    2013
  *Adjusted EBITDA of $4.1 million compared with $1.8 million in Q1 2013
  *Non-GAAP earnings from operations of $0.7 million compared with a non-GAAP
    loss from operations of $1.4 million in Q1 2013

Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported results for its
first quarter ending March 31, 2014. 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 achieved record revenue in the first quarter and also completed the
acquisition of In Motion Technology. I believe we are well positioned for
continued revenue growth and improving profitability in the second quarter and
beyond,” said Jason Cohenour, President and Chief Executive Officer. “We
continue to focus on driving profitable organic growth in M2M devices and
cloud services, while pursuing additional strategic acquisitions.”

Revenue for the first quarter of 2014 was $121.2 million, an increase of 19.5%
compared to $101.4 million in the first quarter of 2013, and an increase of
2.2% compared to $118.6 million in the fourth quarter of 2013. Revenue from
OEM Solutions was $106.2 million in the first quarter of 2014, up 19.0%
compared to $89.2 million in the first quarter of 2013. Revenue from
Enterprise Solutions was $15.0 million (including $1.3 million contribution
from In Motion Technology) in the first quarter of 2014, up 23.3% compared to
$12.2 million in the first quarter of 2013.

GAAP

  *Gross margin was $38.6 million, or 31.9% of revenue, in the first quarter
    of 2014, compared to $33.4 million, or 32.9% of revenue, in the first
    quarter of 2013.
  *Operating expenses were $45.3 million and loss from operations was $6.7
    million in the first quarter of 2014, compared to operating expenses of
    $40.3 million and a loss from operations of $6.9 million in the first
    quarter of 2013.
  *Net loss from continuing operations was $4.0 million, or $0.13 per diluted
    share, in the first quarter of 2014, compared to a net loss from
    continuing operations of $7.9 million, or $0.26 per diluted share, in the
    first quarter of 2013.

NON-GAAP

  *Gross margin was 32.0% in the first quarter of 2014, compared to 33.0% in
    the first quarter of 2013.
  *Operating expenses were $38.0 million and earnings from operations were
    $0.7 million in the first quarter of 2014, compared to operating expenses
    of $34.9 million and a loss from operations of $1.4 million in the first
    quarter of 2013.
  *Adjusted earnings before interest, taxes, depreciation and amortization
    ("Adjusted EBITDA") were $4.1 million in the first quarter of 2014,
    compared to $1.8 million in the first quarter of 2013.
  *Net earnings from continuing operations were $0.5 million, or $0.02 per
    diluted share, in the first quarter of 2014, compared to a net loss from
    continuing operations of $0.7 million, or $0.02 per diluted share, in the
    first quarter of 2013.

Non-GAAP results exclude the impact of stock-based compensation expense and
related social taxes, acquisition costs, gain on sale of the AirCard business,
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.

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

Financial Guidance

The Company provides the following guidance for continuing operations for the
second quarter of 2014.

In the second quarter of 2014 we expect revenue to increase sequentially and
on a year-over-year basis, driven by organic growth as well as the addition of
revenue for a full quarter from In Motion Technology. We expect gross margin
percentage to improve slightly from the first quarter of 2014 and operating
expenses to increase, primarily reflecting the addition of In Motion
Technology expenses for a full quarter.

                           Consolidated
Q2 2014 Guidance         
                           Non-GAAP
                           
Revenue                    $128.0 to $131.0 million
Earnings from operations   $2.7 to $3.5 million
Net earnings               $1.9 to $2.5 million
Earnings per share         $0.06 to $0.08 per share

This non-GAAP guidance for the second quarter of 2014 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 1, 2014, 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: 15895706

For those unable to participate in the live call, a replay will be available
until June 1, 2014. 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 2014 Conference Call and Webcast

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

http://www.snwebcastcenter.com/webcast/sierrawireless/2014q1/

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

To access a full copy of our Q1 2014 earnings release, please follow the link
below:

http://www.sierrawireless.com/AboutUs/investorinformation.aspx

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 2014 and our fiscal year 2014, 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.

  *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 litigation that has 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;
  *Unanticipated costs associated with litigation or settlements associated
    with intellectual property matters; and
  *Higher than anticipated costs; disruption of, and demands on, our ongoing
    business; and diversion of management's time and attention in connection
    with acquisitions or divestitures.

About Sierra Wireless

Sierra Wireless (NASDAQ: SWIR) (TSX: SW) is the global leader in
machine-to-machine (M2M) devices and cloud services, delivering intelligent
wireless solutions that simplify the connected world. We offer the industry's
most comprehensive portfolio of 2G, 3G and 4G embedded modules and gateways,
seamlessly integrated with our secure M2M cloud services. Customers worldwide,
including OEMs, enterprises, and mobile network operators, trust our
innovative solutions to get their connected products and services to market
faster. Sierra Wireless has more than 900 employees globally and has R&D
centers in North America, Europe and Asia. 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 LOSS
        (In thousands of U.S. dollars, except where otherwise stated)
                                 (unaudited)

                                                Three months ended March 31,
                                                 2014           2013      
Revenue                                           $  121,163       $ 101,401
Cost of goods sold                                82,566          68,023    
Gross margin                                      38,597          33,378    
                                                                             
Expenses
Sales and marketing                               12,366           10,356
Research and development                          20,017           18,363
Administration                                    9,333            8,123
Restructuring                                     —                117
Integration                                       20               27
Acquisition                                       950              —
Amortization                                      2,583           3,276     
                                                 45,269          40,262    
Loss from operations                              (6,672      )    (6,884    )
Foreign exchange gain (loss)                      392              (2,370    )
Other income (expense)                            26              (132      )
Loss before income taxes                          (6,254      )    (9,386    )
Income tax recovery                               2,249           1,448     
Net loss from continuing operations               (4,005      )    (7,938    )
Net earnings from discontinued operations         —               1,863     
Net loss                                          $  (4,005   )    $ (6,075  )
Other comprehensive income (loss):
Foreign currency translation adjustments, net     20              (904      )
of taxes of $nil
Comprehensive loss                                $  (3,985   )    $ (6,979  )
Basic and diluted net earnings (loss) per share
attributable to the Company’s
common shareholders (in dollars)
Continuing operations                             $  (0.13    )    $ (0.26   )
Discontinued operations                           0.00            0.06      
                                                  $  (0.13    )    $ (0.20   )
Weighted average number of shares outstanding
(in thousands)
Basic                                             31,235           30,695
Diluted                                           31,235          30,695    

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

                                          March 31, 2014  December 31, 2013
Assets
Current assets
Cash and cash equivalents                   $  151,339       $   177,416
Short-term investments                      —                2,470
Accounts receivable, net of allowance for
doubtful accounts of $2,326                 116,796          112,490
(December 31, 2013 - $2,279)
Inventories                                 9,191            8,253
Deferred income taxes                       2,393            2,391
Prepaids and other                          23,965          28,741        
                                            303,684          331,761
Property and equipment                      21,076           21,982
Intangible assets                           53,578           43,631
Goodwill                                    112,015          102,718
Deferred income taxes                       4,208            7,176
Other assets                                7,490           4,732         
                                           $  502,051      $   512,000   
                                                                           
Liabilities
Current liabilities
Accounts payable and accrued liabilities    $  111,015       $   124,846
Deferred revenue and credits                4,155           2,481         
                                            115,170          127,327
Long-term obligations                       22,890           21,550
Deferred income taxes                       505             127           
                                           138,565         149,004       
Equity
Shareholders’ equity
Common stock: no par value; unlimited
shares authorized; issued and
outstanding 31,431,851 shares (December
31, 2013 -                                  333,945          329,628
31,097,844 shares)


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


Treasury stock: at cost 81,475 shares       (796        )    (5,137        )
(December 31, 2013 – 507,147 shares)
Additional paid-in capital                  21,813           25,996
Retained earnings                           15,362           19,367
Accumulated other comprehensive loss        (6,838      )    (6,858        )
                                           363,486         362,996       
                                           $  502,051      $   512,000   

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

                                               Three months ended March 31, 
                                               2014            2013       
Cash flows provided by (used in):
Operating activities
Net loss                                        $  (4,005   )     $  (6,075  )
Items not requiring (providing) cash
Amortization                                    6,483             7,511
Stock-based compensation                        2,251             1,928
Deferred income taxes                           2,966             (31        )
Gain on disposal of property and equipment      (14         )     —
Impairment of assets related to discontinued    —                 1,004
operations
Other                                           14                1,750
Taxes paid related to net settlement of equity  (501        )     (250       )
awards
Changes in non-cash working capital
Accounts receivable                             860               (6,643     )
Inventories                                     139               7,354
Prepaid expenses and other                      5,098             (9,044     )
Accounts payable and accrued liabilities        (17,238     )     (3,079     )
Deferred revenue and credits                    52               28         
Cash flows used in operating activities         (3,895      )     (5,547     )
Investing activities
Additions to property and equipment             (1,430      )     (2,199     )
Proceeds from sale of property and equipment    37                11
Increase in intangible assets                   (527        )     (659       )
Acquisition of In Motion Technology, net of     (22,578     )     —
cash acquired
Net change in short-term investments            2,470             —
Increase in other assets                        (2,748      )     —          
Cash flows used in investing activities         (24,776     )     (2,847     )
Financing activities
Issuance of common shares                       2,725             2,104
Repurchase of common shares for cancellation    —                 (1,377     )
Decrease in other long-term obligations         (112        )     (627       )
Cash flows provided by financing activities     2,613            100        
Effect of foreign exchange rate changes on cash (19         )     571        
and cash equivalents
Cash and cash equivalents, decrease in the      (26,077     )     (7,723     )
period
Cash and cash equivalents, beginning of period  177,416          63,646     
Cash and cash equivalents, end of period        $  151,339       $  55,923  

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

(in thousands of U.S. dollars, except where otherwise stated)
                2014        2013
                 Q1           Total        Q4          Q3          Q2          Q1
                                                                                               
Gross margin      $ 38,597       $ 145,641     $ 38,443     $ 37,346     $ 36,474     $ 33,378
- GAAP
Stock-based
compensation     160          406          119         117         95          75       
and related
social taxes
Gross margin     $ 38,757     $ 146,047    $ 38,562    $ 37,463    $ 36,569    $ 33,453 
- Non-GAAP
                                                                                               
Loss from
operations -      $ (6,672 )     $ (17,664 )   $ (3,547 )   $ (3,301 )   $ (3,932 )   $ (6,884 )
GAAP
Stock-based
compensation      3,304          7,990         2,177        2,145        2,013        1,655
and related
social taxes
Acquisition       950            508           369          139          —            —
Restructuring     —              171           14           14           26           117
Integration       20             27            —            —            —            27
Impairment of
an asset in       —              280           —            —            —            280
R&D
Acquisition
related          3,118        13,741       3,580       3,405       3,363       3,393    
amortization
Earnings
(loss) from       $ 720          $ 5,053       $ 2,593      $ 2,402      $ 1,470      $ (1,412 )
operations -
Non-GAAP
Amortization
(excluding
acquisition      3,365        13,649       3,566       3,468       3,403       3,212    
related
amortization)
Adjusted         $ 4,085      $ 18,702     $ 6,159     $ 5,870     $ 4,873     $ 1,800  
EBITDA
                                                                                               
Net earnings
(loss) from
continuing        $ (4,005 )     $ (15,550 )   $ (1,945 )   $ 1,075      $ (6,742 )   $ (7,938 )
operations -
GAAP
Stock-based
compensation
and related
social taxes,
restructuring
and other,        7,389          22,620        6,112        5,760        5,393        5,355
integration,
and
acquisition
related
amortization,
net of tax
Unrealized
foreign           (382     )     (3,912    )   (1,970   )   (2,457   )   (1,359   )   1,874
exchange loss
(gain)
Income tax        (2,519   )    3,784        925         (895     )   3,754       —        
adjustments
Net earnings
(loss) from
continuing        $ 483        $ 6,942      $ 3,122     $ 3,483     $ 1,046     $ (709   )
operations -
Non-GAAP
                                                                                               
Net earnings
(loss) from
discontinued      $ —            $ 70,588      $ 1,078      $ (505   )   $ 68,152     $ 1,863
operations –
GAAP
Stock-based
compensation
and               —              4,014         3            1,402        876          1,733
disposition
costs
Gain on sale
of AirCard        —            (70,182   )   (1,056   )   (49      )   (69,077  )   —        
business
Net earnings
(loss) from
discontinued      $ —          $ 4,420      $ 25        $ 848       $ (49    )   $ 3,596  
operations -
Non-GAAP
                                                                                               
Net earnings      $ (4,005 )     $ 55,038      $ (867   )   $ 570        $ 61,410     $ (6,075 )
(loss) - GAAP
Net earnings
(loss) -          483            11,362        3,147        4,331        997          2,887
Non-GAAP
                                                                                               
Diluted
earnings
(loss) from
continuing
operations
per share
GAAP - (in        $ (0.13  )     $ (0.50   )   $ (0.06  )   $ 0.03       $ (0.22  )   $ (0.26  )
dollars)
Non-GAAP -        $ 0.02         $ 0.23        $ 0.10       $ 0.11       $ 0.03       $ (0.02  )
(in dollars)
                                                                                               
Net earnings
(loss) per
share -
diluted
GAAP - (in        $ (0.13  )     $ 1.79        $ (0.03  )   $ 0.02       $ 2.00       $ (0.20  )
dollars)
Non-GAAP -       $ 0.02      $ 0.37       $ 0.10      $ 0.14      $ 0.03      $ 0.09   
(in dollars)

                            SIERRA WIRELESS,INC.
                              SEGMENTED RESULTS

(In thousands of U.S. dollars, except where otherwise stated)
             2014         2013
              Q1             Total        Q4           Q3          Q2          Q1
OEM
Solutions
Revenue        $ 106,162       $ 382,016     $ 101,858     $ 95,850     $ 95,076     $ 89,232
Cost of        75,634         266,867      72,336       66,395      65,514      62,622
goods sold
Gross          $ 30,528       $ 115,149    $ 29,522     $ 29,455    $ 29,562    $ 26,610
margin
Gross          28.8%           30.1%         29.0%         30.7%        31.1%        29.8%
margin %
                                                                                     
Enterprise
Solutions
Revenue        $ 15,001        $ 59,844      $ 16,750      $ 16,412     $ 14,513     $ 12,169
Cost of        6,932          29,352       7,829        8,521       7,601       5,401
goods sold
Gross          $ 8,069        $ 30,492     $ 8,921      $ 7,891     $ 6,912     $ 6,768
margin
Gross          53.8%           51.0%         53.3%         48.1%        47.6%        55.6%
margin %

Contact:

Sierra Wireless, Inc.
Media Contact:
Sharlene Myers, +1 604-232-1445
Manager, Global Public Relations
smyers@sierrawireless.com
or
Investor Contact:
David Climie, +1 604-231-1137
Senior Director, Investor Relations
dclimie@sierrawireless.com
or
David G. McLennan, +1 604-231-1181
Chief Financial Officer
investor@sierrawireless.com
 
Press spacebar to pause and continue. Press esc to stop.