Sierra Wireless Reports Third Quarter 2011 Results
- Revenue in the third quarter 2011 of $146.8 million
- Non-GAAP net earnings per diluted share of $0.15
- Core M2M revenue up 15% year-over-year
- Gross margin increased to 29.5%, up from 28.0% in the second quarter
Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported third 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 third quarter of 2011 was $146.8 million, a decrease of 15% compared to $172.7 million in the third quarter of 2010, and an increase of 5% compared to $139.9 million in the second quarter of 2011. The year-over-year revenue decrease was primarily driven by the loss of revenue from Barnes & Noble and Clearwire, which combined accounted for approximately $30 million in revenue in the third quarter of 2010. Machine-to-Machine ("M2M") revenue was $75.3 million, down 1% compared to $76.1 million in the third quarter of 2010. Excluding sales to Barnes & Noble, the company's core M2M business increased 15% in the third quarter of 2011 on a year-over-year basis. Mobile Computing revenue was $71.5 million, down 26% compared to $96.6 million in the third quarter of 2010.
"Solid execution led to significant profitability improvements in the quarter, despite a slower than expected ramp in AirCard® revenue," said Jason Cohenour, President and Chief Executive Officer. "Looking forward, steady growth in core segments such as Automotive, Energy, and Networking continues to drive our market leadership in Machine-to-Machine. In addition, our PCOEM business continues to show substantial year-over-year growth and our market position with key operators has strengthened considerably with the launch of new 4G LTE AirCard products."
On a GAAP basis, gross margin was $43.3 million, or 29.5%, in the third quarter of 2011 compared to $49.0 million, or 28.3%, in the third quarter of 2010. Operating expenses were $45.1 million and loss from operations was $1.8 million in the third quarter of 2011, compared to operating expenses of $51.2 million and a loss from operations of $2.2 million in the third quarter of 2010. Net loss was $1.0 million, or $0.03 per diluted share, in the third quarter of 2011, compared to net earnings of $0.7 million, or $0.02 per diluted share, in the third quarter of 2010.
On a non-GAAP basis, gross margin was 29.6% in the third quarter of 2011, compared to 28.4% in the third quarter of 2010. Operating expenses were $39.4 million and earnings from operations were $4.0 million in the third quarter of 2011, compared to operating expenses of $41.3 million and earnings from operations of $7.8 million in the third quarter of 2010. Net earnings were $4.6 million, or $0.15 per diluted share, in the third quarter of 2011 compared to net earnings of $6.5 million, or $0.21 per diluted share, in the third 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 certain tax adjustments. We disclose 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 fourth quarter of 2011 reflects current business indicators and expectations. In the fourth quarter of 2011, we expect total revenue to be relatively unchanged from third quarter levels, we expect the majority of the gross margin improvements we achieved in the third quarter to be sustained and we expect operating expenses to be slightly above the seasonally low level experienced in the third quarter.
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.
Q4 2011 Guidance Consolidated Non-GAAP
Revenue $145 to 150 million
Earnings from operations $1.5 to $3.0 million
Net earnings $1.5 to $3.0 million
Earnings per share $0.05 to $0.10 per share
Conference Call, Webcast and Instant Replay Details
We will host a conference call to review our results on Wednesday, November 2, 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 US): 1-877-201-0168
- Alternate number: 1-647-788-4901
- Conference ID: 17659973
For those unable to participate in the live call, a replay will be available for 10 days following. 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: http://www.snwebcastcenter.com/...
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 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.
- 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 transition period to our 4G products;
Expected cost of goods sold;
Expected component supply constraints;
Our ability to "win" new business;
That wireless network operators will deploy next generation networks when expected;
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, most of which are discussed in greater detail. 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, the continuing uncertain economic conditions, price and product competition, different product mix, the loss of any of our significant customers, 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.
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.