Sierra Wireless Reports First Quarter 2011 Results
Revenue in the first quarter 2011 of $144.3 million, in-line with guidance
- Mobile Computing well positioned in 4G to drive growth in second half M2M represented 50% of sales in the first quarter of 2011 and core
- M2M revenue grew 16% year-over-year, excluding Barnes & Noble
Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported first quarter 2011 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.
Revenue for the first quarter of 2011 was $144.3 million, a decrease of 5% compared to $151.3 million in the first quarter of 2010. Mobile Computing revenue was $71.6 million, up 14% compared to $62.6 million in the first quarter of 2010. Machine-to-Machine ("M2M") revenue was $72.7 million, down 18% compared to $88.7 million in the first quarter of 2010. The year-over-year revenue decrease in M2M was driven by significantly lower sales to Barnes & Noble, declining from $26.7 million in the first quarter of 2010 to $0.7 million in the first quarter of 2011, offset by solid year-over-year revenue growth of 16% in the remainder of the M2M business.
"While we are experiencing some weakness in the first half of 2011, we believe this is a short-term situation and expect to return to year-over-year growth and profitability in the second half," said Jason Cohenour, President and Chief Executive Officer. "The company continues to execute on our strategy and make good progress on a number of business initiatives. In Mobile Computing, we have a strong pipeline of 4G products and anticipate numerous launches with leading operators and PC OEMs during the year. In M2M, we continue to build on our market leadership position and expand our role in the value chain."
On a GAAP basis, gross margin was $39.5 million, or 27.4% of revenue, in the first quarter of 2011 compared to $46.3 million, or 30.6% of revenue, in the first quarter of 2010. Operating expenses were $48.9 million and loss from operations was $9.4 million in the first quarter of 2011, compared to operating expenses of $50.8 million and a loss from operations of $4.5 million in the first quarter of 2010. Net loss was $7.8 million, or $0.25 per diluted share, in the first quarter of 2011 compared to a net loss of $7.5 million, or $0.24 per diluted share, in the first quarter of 2010.
On a non-GAAP basis, gross margin was 27.4% in the first quarter of 2011, compared to 30.7% in the first quarter of 2010. Operating expenses were $43.2 million and loss from operations was $3.6 million in the first quarter of 2011, compared to operating expenses of $42.3 million and earnings from operations of $4.1 million in the first quarter of 2010. Net loss was $2.4 million, or $0.08 per diluted share, in the first quarter of 2011 compared to net earnings of $4.1 million, or $0.13 per diluted share, in the first quarter of 2010.
Non-GAAP results exclude the impact of stock-based compensation expense, acquisition amortization, integration costs, restructuring costs, foreign exchange gains or losses on translation of balance sheet accounts, and tax adjustments. We disclose these non-GAAP amounts as we believe that these measures provide our shareholders with better information on actual operating results and assist in comparisons from one period to another. The reconciliation between our GAAP and non-GAAP results of operations is provided in the accompanying schedules.
The following guidance for the second quarter of 2011 reflects current business indicators and expectations. In the second quarter of 2011, we expect revenue to remain relatively flat sequentially from the first quarter and we expect Non-GAAP gross margin percentage to increase modestly compared to the first quarter of 2011 as we realize targeted product cost reductions. Primarily due to unfavourable foreign exchange created by a strengthening euro and Canadian dollar, we expect Non-GAAP operating expense to increase modestly compared to the first quarter of 2011.
With respect to the recent natural disaster in Japan, we expect to see some modest impact on our business in the second quarter of 2011. We are experiencing some component supply constraints and, in the second quarter, we expect the impact to be approximately $2 million in revenue.
For the second half of 2011, we expect year-over-year revenue and earnings growth.
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 below. All figures are approximations based on management's current beliefs and assumptions.
Q2 2011 Guidance Consolidated
Revenue $140.0 to $145.0 million
Earnings (loss) from operations ($5.0) to ($3.0) million
Net earnings (loss) ($3.8) to ($2.2) million
Earnings (loss) per share ($0.12) to ($0.07) per share
Conference Call, Webcast and Instant Replay Details
We will host a conference call to review our results on Wednesday, May 4, 2011 at 2:30 p.m. PDT, 5:30 p.m. EDT. You can participate in the conference call either via telephone or webcast. 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 U.S.): 1-888-231-8191 Passcode: Not required or
Outside Canada and the U.S.: 1-647-427-7450 Passcode: Not required
We will also broadcast our conference call over the Internet. To access the web broadcast, please follow the link below and choose one of the following options:
- If you are following the conference call on the phone, please choose the "Non-Streaming" version
- If you would prefer to follow online only, with streaming audio, select any of the other options according to your preferred format http://event.on24.com/...
This webcast event will be optimized for Microsoft Windows Media Player version 11. To download go to: http://www.microsoft.com/...
Should you be unable to participate, Instant Replay (audio) will be available following the conference call for 7 business days. The webcast will be available at the above link for 90 days following the call.
Audio only dial: 1-800-642-1687 or 1-416-849-0833
Passcode: 45205838 #
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 2011 and our fiscal year 2011, 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.
Sierra Wireless Inc.
Sierra Wireless (NASDAQ: SWIR) (TSX: SW) offers industry-leading mobile computing and machine-to-machine (M2M) communications products and solutions that connect people, devices, and applications 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.
"AirCard" is a registered trademark of Sierra Wireless. "AirPrime," "AirLink," and "AirVantage" are also trademarks of Sierra Wireless. Other product or service names mentioned herein may be the trademarks of their respective owners.