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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Sierra Wireless Inc | NASDAQ:SWIR | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 30.99 | 30.98 | 31.00 | 0 | 01:00:00 |
Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported results for its second quarter ended June 30, 2020. 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 continue to improve the Company’s operating efficiency and drive focus towards being the global leader in fully integrated IoT solutions, showcased by our recently announced divestiture in the embedded automobile business,” said Kent Thexton, President and CEO of Sierra Wireless. “Despite a challenging environment given the COVID-19 pandemic, our Second Quarter results met our expectations and we are cautiously optimistic about the second half of the year as we are seeing some business improvements as we prepare for an upcoming launch of our new 5G embedded modules and routers.”
Revenue for the second quarter of 2020 was $144.1 million compared to $191.4 million in the second quarter of 2019, a decrease of 24.7%. Quarterly revenue for our two business segments was as follows: (i) Revenue from Embedded Broadband at $62.2 million in the second quarter of 2020, a decrease of 32.5% compared to $92.2 million in the second quarter of 2019, reflecting lower automotive revenue due to the impact of COVID-19 and lower mobile computing module sales. (ii) Revenue from IoT Solutions was $81.8 million in the second quarter of 2020, a decrease of 17.5% compared to $99.2 million in the second quarter of 2019 due to lower hardware sales in Enterprise gateway products and IoT Solutions modules due to the impact of COVID-19. Within this segment we had solid year-over-year recurring and other service revenue growth of 12.2% driven by growth in connected devices and the addition of revenue from the M2M Group acquisition. Recurring and other services revenue in the second quarter was $28.1 million, representing 19.5% of consolidated revenue and Product revenue was $116.0 million, representing 80.5% of consolidated revenue.
GAAP RESULTS
NON-GAAP RESULTS(1)
(1) See "Non-GAAP Financial Measures" and "Reconciliation of GAAP and Non-GAAP Results by Quarter" below.
Cash, cash equivalents and restricted cash at the end of the second quarter of 2020 was $62.5 million, representing a decrease of $10.3 million from the end of the first quarter of 2020. The decrease in cash was primarily driven by the partial repayment of our revolving credit facility and capital expenditures, partially offset by cash flow provided by operating activities.
Divestiture of Automotive Embedded Module Product Line
On July 23, 2020, we entered into a definitive agreement with Rolling Wireless (H.K.) Limited ("Rolling Wireless"), a consortium led by Fibocom Wireless Inc. of Shenzhen to divest our Shenzhen, China-based automotive embedded module product line for $165 million in cash, subject to normal working capital adjustments at closing. The automotive product line includes approximately $19 million in cash. Revenue for the automotive product line is part of our Embedded Broadband reportable segment and was approximately $166 million in 2019. The Company will exit automotive applications but will continue to invest in other products in its Embedded Broadband segment, specifically high-speed cellular modules typically used in Enterprise applications. We expect that approximately 150 employees will become employees of Rolling Wireless, of which approximately 120 employees are located in Mainland China and 30 are located in Europe or the Asia-Pacific region. The transaction is expected to close in the fourth quarter of 2020 and remains subject to customary closing conditions, including approval from China's Ministry of Commerce.
The divestiture enables the Company to strengthen its focus on fully integrated, device-to-cloud IoT solutions, driving high value recurring revenue and allows the Company to invest further in 5G embedded modules and routers. The transaction will also strengthen our balance sheet by providing additional liquidity.
Credit Facilities
During the second quarter, we amended our revolving credit agreement with Canadian Imperial Bank of Commerce ("CIBC") to increase our total borrowing capacity from $30.0 million to $50.0 million and extended the maturity date of the facility form July 2021 to April 2023. On July 22, we entered into a Cdn$12.5M term loan agreement with CIBC backed by the Canadian Government under the Business Credit Availability Program to provide for additional liquidity to the Company.
Financial Guidance
The impact of the COVID-19 pandemic on our global business continues to remain uncertain. While we continue to evaluate the effects of COVID-19 on our business, the overall severity and duration of adverse impacts related to COVID-19 on our business, financial condition, cash flows and/or results of operations for the third quarter 2020 and beyond cannot be reasonably estimated at this time. The ultimate size of the impact of the COVID-19 pandemic on our business will depend on future developments which cannot be currently predicted.
Given these conditions, we continue not to provide guidance although we are seeing some business improvements. In conjunction with the recently announced divestiture of the embedded automotive business, we have begun to initiate actions to reduce operating expenses by approximately $20 million which serves to rightsize the remaining business and improve ongoing earnings and cashflows.
We will continue to monitor the effects of COVID-19 on our business.
This non-GAAP guidance constitutes "forward-looking statements" within the meaning of applicable securities laws and reflects current business indicators and expectations. These statements are based on management's current beliefs and assumptions, which could prove to be significantly incorrect. Forward-looking statements, particularly those that relate to longer periods of time, are subject to substantial known and unknown risks and uncertainties that could cause actual events or results to differ significantly from those expressed or implied by our forward-looking statements, including those described in our regulatory filings. See "Cautionary Note Regarding Forward-Looking Statements" below.
Non-GAAP Financial Measures
We disclose these non-GAAP financial measures as we believe they provide useful information to investors and analysts to assist them in their evaluation of our operating results and to assist in comparisons from one period to another. Readers are cautioned that non-GAAP financial measures do not have any standardized meaning prescribed by U.S. GAAP and therefore may not be comparable to similar measures presented by other companies.
Non-GAAP gross margin excludes the impact of stock-based compensation expense and related social taxes and certain other non-recurring costs or recoveries.
Non-GAAP earnings (loss) from operations includes allocation of realized gains or losses on forward contracts and excludes the impact of stock-based compensation expense and related social taxes, acquisition-related amortization, acquisition-related and integration costs, restructuring costs, impairment and certain other non-recurring costs or recoveries.
Non-GAAP income tax expense includes certain tax adjustments and taxes on acquisition-related amortization, acquisition-related and integration costs, restructuring costs, other non-recurring costs and foreign exchange.
In addition to the above, non-GAAP net earnings (loss) and non-GAAP net earnings (loss) per share exclude the impact of foreign exchange gains or losses on translation of certain balance sheet accounts, foreign exchange gains or losses on forward contracts and certain tax adjustments.
Adjusted EBITDA is defined as net earnings (loss) plus stock-based compensation expense and related social taxes, acquisition-related and integration costs, restructuring cost, impairment, certain other nonrecurring costs or recoveries, amortization, foreign exchange gains or losses on translation of certain balance sheet accounts, unrealized foreign exchange gains or losses on forward contracts, interest and income tax expense. Adjusted EBITDA is a metric used by investors and analysts for valuation purposes and is an important indicator of our operating performance and our ability to generate liquidity through operating cash flow that will fund future working capital needs and fund future capital expenditures.
We use the above-noted non-GAAP financial measures for planning purposes and to allow us to assess the performance of our business before including the impacts of the items noted above as they affect the comparability of our financial results. These non-GAAP measures are reviewed regularly by management and the Board of Directors as part of the ongoing internal assessment of our operating performance. We also use non-GAAP earnings from operations as one component in determining short-term incentive compensation for management employees.
Conference call and webcast details
Sierra Wireless President and CEO, Kent Thexton, and CFO, Samuel Cochrane, will host a conference call and webcast with analysts and investors to review the results pre-market open on Thursday August 6, 2020, at 7:30 AM Eastern time (4:30 AM Pacific time). 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 start of the call:
To access the webcast, please follow the link below:
Sierra Wireless Q2 2020 Conference Call and Webcast
If the above link does not work, please copy and paste the following URL into your browser:
https://onlinexperiences.com/scripts/Server.nxp?LASCmd=AI:4;F:QS!10100&ShowUUID=A280B71B-E106-4CC3-8EF3-F7F8A9B6DA04
The webcast will remain available at the above link for one year following the 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 (collectively, “forward-looking statements”) and may include statements and information relating to our 2020 corporate update; financial guidance for our fiscal year 2020; the impact of COVID-19 on customer demand, our supply chain, manufacturing capacity, our ability to meet customer demand and our financial results; expectations regarding post-COVID-19 recovery; expectations regarding the Company's cost savings initiatives; anticipated benefits of our recently announced divestiture of the automotive product line (the "Sale Transaction") and the Company's exit from automotive applications; the anticipated timing of the closing of the Sale Transaction; expectations regarding movement of employees pursuant to the Sale Transaction; our business outlook for the short and long term; statements regarding our strategy, plans, goals, objectives, expectations and future operating performance; the Company's liquidity and capital resources; the Company's financial and operating objectives and strategies to achieve them; general economic conditions; estimates of our expenses, future revenues, financial results and capital requirements; our expectations regarding the legal proceedings we are involved in; statements with respect to the Company's estimated working capital; expectations with respect to the adoption of Internet of Things ("IoT") solutions; expectations regarding trends and growth in the IoT market and wireless module market; expectations regarding product and price competition from other wireless device manufacturers and solution providers; our ability to implement effective control procedures; and expectations regarding the launch of fifth generation cellular embedded modules and routers. Forward-looking statements are provided to help you understand our views of our short and long term plans, expectations and prospects. We caution you that forward-looking statements may not be appropriate for other purposes.
Forward-looking statements:
About Sierra Wireless
Sierra Wireless (NASDAQ: SWIR) (TSX: SW) is the leading IoT solutions provider that combines devices, network and software to unlock value in the connected economy. Companies globally are adopting IoT to improve operational efficiency, create better customer experiences, improve their business models and create new revenue streams. Whether it is a solution to help a business securely connect edge devices to the cloud, or a software/API solution to help manage processes associated with billions of connected assets, or a platform to extract real-time data to make the best business decisions, Sierra Wireless will work with you to create the right industry-specific solution for your next IoT endeavor. Sierra Wireless has more than 1,300 employees globally and operates R&D centers in North America, Europe and Asia. For more information, visit www.sierrawireless.com.
AirPrime, AirLink, AirVantage, mangOH and Legato 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 EARNINGS (LOSS) (In thousands of U.S. dollars, except where otherwise stated) (unaudited)
Three months ended June 30,
Six months ended June 30,
2020
2019
2020
2019
Revenue
IoT Solutions
$
81,836
$
99,145
$
160,626
$
193,432
Embedded Broadband
62,226
92,229
141,012
171,755
144,062
191,374
301,638
365,187
Cost of sales
IoT Solutions
51,298
62,334
102,077
122,142
Embedded Broadband
46,894
70,091
110,104
129,466
98,192
132,425
212,181
251,608
Gross margin
45,870
58,949
89,457
113,579
Expenses
Sales and marketing
22,283
23,755
47,053
46,261
Research and development
22,680
22,111
44,829
44,908
Administration
12,977
12,893
25,112
25,290
Restructuring
245
18,180
860
19,577
Acquisition-related and integration
185
314
185
409
Amortization
5,330
4,967
10,729
10,211
63,700
82,220
128,768
146,656
Loss from operations
(17,830
)
(23,271
)
(39,311
)
(33,077
)
Foreign exchange gain
3,534
854
565
2
Other expense
(280
)
(102
)
(471
)
(71
)
Loss before income taxes
(14,576
)
(22,519
)
(39,217
)
(33,146
)
Income tax expense (recovery)
1,031
5,657
(947
)
6,253
Net loss
$
(15,607
)
$
(28,176
)
$
(38,270
)
$
(39,399
)
Other comprehensive gain (loss):
Foreign currency translation adjustments, net of taxes of $nil
4,318
95
(548
)
(3,520
)
Comprehensive loss
$
(11,289
)
$
(28,081
)
$
(38,818
)
$
(42,919
)
Net loss per share (in dollars)
Basic
$
(0.43
)
$
(0.78
)
$
(1.05
)
$
(1.09
)
Diluted
(0.43
)
(0.78
)
(1.05
)
(1.09
)
Weighted average number of shares outstanding (in thousands)
Basic
36,341
36,156
36,309
36,131
Diluted
36,341
36,156
36,309
36,131
SIERRA WIRELESS, INC. CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars, except where otherwise stated) (unaudited)
June 30, 2020
December 31, 2019
Assets
Current assets
Cash and cash equivalents
$
60,111
$
75,454
Restricted cash
2,346
3,629
Accounts receivable, net of allowance of $3,820 (December 31, 2019 - $3,170)
105,260
131,432
Inventories
66,326
54,291
Prepaids and other
25,427
19,256
259,470
284,062
Property and equipment, net
41,195
39,924
Operating lease right-of-use assets
22,433
25,609
Intangible assets, net
78,842
70,072
Goodwill
216,231
207,595
Deferred income taxes
2,108
2,096
Other assets
9,512
9,982
$
629,791
$
639,340
Liabilities
Current liabilities
Short-term borrowings
$
15,000
$
—
Accounts payable and accrued liabilities
181,855
173,556
Deferred revenue
10,310
10,610
207,165
184,166
Long-term obligations
44,361
43,774
Operating lease liabilities
21,193
25,154
Deferred income taxes
9,731
4,921
282,450
258,015
Equity
Shareholders’ equity
Common stock: no par value; unlimited shares authorized; issued and outstanding: 36,345,691 shares (December 31, 2019 - 36,233,361 shares)
437,608
435,532
Preferred stock: no par value; unlimited shares authorized;
issued and outstanding: nil shares
—
—
Treasury stock: at cost; 10,274 shares (December 31, 2019 – 44,487 shares)
(86
)
(370
)
Additional paid-in capital
41,465
38,212
Retained deficit
(117,882
)
(78,833
)
Accumulated other comprehensive loss
(13,764
)
(13,216
)
347,341
381,325
$
629,791
$
639,340
SIERRA WIRELESS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of U.S. dollars) (unaudited)
Three months ended June 30,
Six months ended June 30,
2020
2019
2020
2019
Cash flows provided by (used in):
Operating activities
Net loss
$
(15,607
)
$
(28,176
)
$
(38,270
)
$
(39,399
)
Items not requiring (providing) cash
Amortization
8,538
8,118
17,023
16,489
Stock-based compensation
3,276
4,102
6,458
7,260
Deferred income taxes
(16
)
4,961
(9
)
5,038
Unrealized foreign exchange (gain) loss
(4,772
)
(2,230
)
361
(1,976
)
Other
(59
)
478
(207
)
586
Changes in non-cash working capital
Accounts receivable
18,730
1,184
26,288
17,998
Inventories
(2,881
)
1,116
(11,555
)
(5,619
)
Prepaids and other
(4,858
)
2,129
(5,659
)
(5,518
)
Accounts payable and accrued liabilities
3,256
22,765
6,033
7,599
Deferred revenue
82
1,347
(1,216
)
2,718
Cash flows provided by (used in) operating activities
5,689
15,794
(753
)
5,176
Investing activities
Additions to property and equipment
(5,728
)
(4,273
)
(9,727
)
(8,131
)
Additions to intangible assets
(743
)
(905
)
(1,471
)
(1,393
)
Proceeds from sale of property and equipment
204
27
224
84
Proceeds from sale of iTank business
—
—
—
500
Acquisition of M2M Group, net of cash acquired
(172
)
—
(18,391
)
—
Cash flows used in investing activities
(6,439
)
(5,151
)
(29,365
)
(8,940
)
Financing activities
Issuance of common shares
—
73
—
167
Purchase of treasury shares for RSU distribution
(194
)
(267
)
(220
)
(267
)
Taxes paid related to net settlement of equity awards
(50
)
(75
)
(626
)
(745
)
Decrease in other long-term obligations
(83
)
(73
)
(187
)
(214
)
Proceeds from (repayment of) credit facility
(10,000
)
—
15,000
—
Cash flows provided by (used in) financing activities
(10,327
)
(342
)
13,967
(1,059
)
Effect of foreign exchange rate changes on cash and cash equivalents
766
325
(475
)
516
Cash, cash equivalents and restricted cash, increase (decrease) in the period
(10,311
)
10,626
(16,626
)
(4,307
)
Cash, cash equivalents and restricted cash, beginning of period
72,768
74,364
79,083
89,297
Cash, cash equivalents and restricted cash, end of period
$
62,457
$
84,990
$
62,457
$
84,990
SIERRA WIRELESS, INC. RECONCILIATION OF GAAP AND NON-GAAP RESULTS BY QUARTER
(In thousands of U.S. dollars, except where otherwise stated)
2020
2019
Q2
Q1
Total
Q4
Q3
Q2
Q1
Gross margin - GAAP
$
45,870
$
43,587
$
219,990
$
51,368
$
55,043
$
58,949
$
54,630
Stock-based compensation and related social taxes
65
49
167
20
44
44
59
Realized losses on hedge contracts
(74
)
(1
)
(4
)
1
—
(2
)
(3
)
Gross margin - Non-GAAP
$
45,861
$
43,635
$
220,153
$
51,389
$
55,087
$
58,991
$
54,686
Earnings (loss) from operations - GAAP
$
(17,830
)
$
(21,481
)
$
(58,021
)
$
(12,385
)
$
(12,559
)
$
(23,271
)
$
(9,806
)
Stock-based compensation and related social taxes
3,276
3,224
13,194
1,802
3,876
4,102
3,414
Acquisition-related and integration
185
—
974
274
291
314
95
Restructuring
245
615
28,160
2,309
6,274
18,180
1,397
Other non-recurring costs
687
87
2,903
795
279
662
1,167
Impairment
—
—
877
877
—
—
—
Realized gains (losses) on hedge contracts
(411
)
(98
)
(187
)
81
24
(183
)
(109
)
Acquisition-related amortization
3,886
3,889
14,514
3,593
3,610
3,624
3,687
Earnings (loss) from operations - Non-GAAP
$
(9,962
)
$
(13,764
)
$
2,414
$
(2,654
)
$
1,795
$
3,428
$
(155
)
Net loss - GAAP
$
(15,607
)
$
(22,663
)
$
(70,538
)
$
(10,918
)
$
(20,221
)
$
(28,176
)
$
(11,223
)
Stock-based compensation and related social taxes, restructuring, impairment, acquisition-related, integration and other non-recurring costs (recoveries)
4,393
3,926
46,108
6,057
10,720
23,258
6,073
Amortization
8,538
8,485
33,177
8,573
8,115
8,118
8,371
Interest and other, net
280
191
301
109
121
102
(31
)
Foreign exchange loss (gain)
(3,945
)
2,871
1,109
(1,585
)
2,988
(1,037
)
743
Income tax expense (recovery)
1,031
(1,978
)
10,920
90
4,577
5,657
596
Adjusted EBITDA
(5,310
)
(9,168
)
21,077
2,326
6,300
7,922
4,529
Amortization (exclude acquisition-related amortization)
(4,652
)
(4,596
)
(18,663
)
(4,980
)
(4,505
)
(4,494
)
(4,684
)
Interest and other, net
(280
)
(191
)
(301
)
(109
)
(121
)
(102
)
31
Income tax expense - Non-GAAP
(838
)
(739
)
(2,418
)
(176
)
(653
)
(859
)
(730
)
Net earnings (loss) - Non-GAAP
$
(11,080
)
$
(14,694
)
$
(305
)
$
(2,939
)
$
1,021
$
2,467
$
(854
)
Diluted net earnings (loss) per share
GAAP - (in dollars per share)
$
(0.43
)
$
(0.62
)
$
(1.95
)
$
(0.30
)
$
(0.56
)
$
(0.78
)
$
(0.31
)
Non-GAAP - (in dollars per share)
$
(0.30
)
$
(0.41
)
$
(0.01
)
$
(0.08
)
$
0.03
$
0.07
$
(0.02
)
SIERRA WIRELESS, INC. SEGMENTED RESULTS
2020
2019
(In thousands of U.S. dollars, except where otherwise stated)
Q2
Q1
Total
Q4
Q3
Q2
Q1
IoT Solutions
Revenue
$
81,836
$
78,790
$
377,808
$
90,937
$
93,439
$
99,145
$
94,287
Gross margin
- GAAP
$
30,538
$
28,011
$
140,158
$
33,665
$
35,203
$
36,811
$
34,479
- Non-GAAP
$
30,533
$
28,035
$
140,222
$
33,676
$
35,203
$
36,833
$
34,510
Gross margin %
- GAAP
37.3
%
35.6
%
37.1
%
37.0
%
37.7
%
37.1
%
36.6
%
- Non-GAAP
37.3
%
35.6
%
37.1
%
37.0
%
37.7
%
37.2
%
36.6
%
Embedded Broadband
Revenue
$
62,226
$
78,786
$
335,705
$
83,364
$
80,586
$
92,229
$
79,526
Gross margin
- GAAP
$
15,332
$
15,576
$
79,832
$
17,703
$
19,840
$
22,138
$
20,151
- Non-GAAP
$
15,328
$
15,600
$
79,931
$
17,713
$
19,884
$
22,158
$
20,176
Gross margin %
- GAAP
24.6
%
19.8
%
23.8
%
21.2
%
24.6
%
24.0
%
25.3
%
- Non-GAAP
24.6
%
19.8
%
23.8
%
21.2
%
24.7
%
24.0
%
25.4
%
Total
Revenue
$
144,062
$
157,576
$
713,513
$
174,301
$
174,025
$
191,374
$
173,813
Gross margin
- GAAP
$
45,870
$
43,587
$
219,990
$
51,368
$
55,043
$
58,949
$
54,630
- Non-GAAP
$
45,861
$
43,635
$
220,153
$
51,389
$
55,087
$
58,991
$
54,686
Gross margin %
- GAAP
31.8
%
27.7
%
30.8
%
29.5
%
31.6
%
30.8
%
31.4
%
- Non-GAAP
31.8
%
27.7
%
30.9
%
29.5
%
31.7
%
30.8
%
31.5
%
Revenue by Type
Product
$
115,975
$
130,743
$
614,384
$
147,760
$
149,396
$
166,348
$
150,880
Recurring and other services
$
28,087
$
26,833
$
99,129
$
26,541
$
24,629
$
25,026
$
22,933
View source version on businesswire.com: https://www.businesswire.com/news/home/20200806005097/en/
Sierra Wireless Investor and Media Contact: David Climie Vice President, Investor Relations +1 (604) 231-1137 dclimie@sierrawireless.com
Investor Contact: Samuel Cochrane Chief Financial Officer +1 (604) 231-1100 investor@sierrawireless.com
1 Year Sierra Wireless Chart |
1 Month Sierra Wireless Chart |
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