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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 |
Revenue increases 17.9% year-over-year to $203.4 million in the third quarter of 2018
Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported results for its third quarter ending September 30, 2018. 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 had strong growth in revenue and adjusted EBITDA on a year-over-year basis in the Third Quarter,” said Kent Thexton, President and CEO. “We continued to strengthen our position as the leader in Device-to-Cloud IoT solutions and our two highest margin businesses - namely Enterprise Solutions and IoT Services - increased to 27% of total revenue in Q3.”
Revenue for the third quarter of 2018 was $203.4 million, an increase of 17.9%, compared to $172.6 million in the third quarter of 2017. Product revenue was $179.4 million, up 11.1% year-over-year, and Services and Other revenue was $24.0 million, up 117.8% compared to the third quarter of 2017. Quarterly revenue for the three business segments was as follows: (i) Revenue from OEM Solutions was $148.3 million in the third quarter of 2018, up 7.6% compared to $137.9 million in the third quarter of 2017; (ii) Revenue from Enterprise Solutions was $32.1 million in the third quarter of 2018, up 22.0% compared to $26.3 million in the third quarter of 2017; and (iii) Revenue from IoT Services was $23.0 million in the third quarter of 2018, up 172.8%, compared to $8.4 million in the third quarter of 2017 driven by the contribution from Numerex and organic subscriber growth.
GAAP RESULTS
NON-GAAP RESULTS(1)
(1) See "Non-GAAP Financial Measures" and "Reconciliation of GAAP and Non-GAAP Results by Quarter" below.
Cash and cash equivalents at the end of the third quarter of 2018 were $67.5 million, representing a decrease of $5.9 million, compared to the end of the second quarter of 2018. The decrease in cash was primarily due to capital expenditures and repurchase of common shares under our Normal Course Issuer Bid, partly offset by cash provided by operating activities.
Chief Operating Officer Appointment
Jason Krause has been appointed Chief Operating Officer of the company. In his new role, Jason will be responsible for all aspects of Sierra Wireless product and services, including: product portfolio strategy; product management; R&D supply chain; quality; and global MNVO network and service operations. Prior to his new position, Jason was Senior Vice President and General Manager of the Enterprise Solutions business unit, and before that, he was Senior Vice President of Marketing, Strategy, and Corporate Development. Before joining Sierra Wireless in 2007, Jason worked at the Boston Consulting Group and held marketing and engineering roles at Altera Corporation. He has an MBA from the Rotman School of Management at the University of Toronto and a BASc in Electronics Engineering from Simon Fraser University.
Accounting Standard Adoption
We adopted the new accounting standard for revenue recognition (ASC 606) effective January 1, 2018. Our third quarter 2018 financial results reflect the adoption of this new standard and prior periods have been adjusted accordingly.
Financial Guidance
For the fourth quarter of 2018, we expect revenue to be in the range of $200 million to $208 million and non-GAAP net earnings per share to be in the range of $0.22 to $0.30. Included in this guidance range for the fourth quarter is an estimated negative impact of approximately $0.03 on earnings per share related to U.S. tariffs on goods imported from China.
This non-GAAP guidance 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.
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 nonrecurring 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 nonrecurring 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.
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.
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.
Conference call and webcast details
Sierra Wireless President and CEO, Kent Thexton, and CFO, David McLennan, will host a conference call and webcast with analysts and investors to review the results on Thursday, November 8, 2018, 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 start of the call:
To access the webcast, please follow the link below:
Sierra Wireless Q3 2018 Conference Call and Webcast
If the above link does not work, please copy and paste the following URL into your browser:
http://event.on24.com/r.htm?e=1823236&s=1&k=E4170A61B49EA5F9B5C0F935576B42D2
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 (“forward-looking statements”) including statements and information relating to our financial guidance for the fourth quarter of 2018 and our fiscal year 2018, our business outlook for the short and longer term, statements regarding our strategy, plans 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; expectations regarding the acquisition of Numerex; estimates of our expenses, future revenues, non-GAAP earnings per share 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 IoT solutions; expectations regarding trends in the IoT market and wireless module market; expectations regarding product and price competition from other wireless device manufacturers and solution providers; and our ability to implement effective control procedures. 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. We do not intend to update or revise our forward-looking statements unless we are required to do so by securities laws. Forward-looking statements:
About Sierra Wireless
Sierra Wireless (NASDAQ: SWIR) (TSX: SW) is an IoT pioneer, empowering businesses and industries to transform and thrive in the connected economy. Customers start with Sierra because we offer a device to cloud solution, comprised of embedded and networking solutions seamlessly integrated with our secure cloud and connectivity services. OEMs and enterprises worldwide rely on our expertise in delivering fully integrated solutions to reduce complexity, turn data into intelligence and get their connected products and services to market faster. 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 September 30,
Nine months ended September 30,
20182017 As adjusted (1)
20182017 As adjusted (1)
Revenue Product $ 179,390 $ 161,523 $ 521,127 $ 476,093 Services and other 24,036 11,037 71,080 31,101 203,426 172,560 592,207 507,194 Cost of sales Product 124,528 110,131 359,656 319,891 Services and other 11,631 5,135 33,875 14,878 136,159 115,266 393,531 334,769 Gross margin 67,267 57,294 198,676 172,425 Expenses Sales and marketing 21,743 17,975 66,234 54,699 Research and development 22,621 21,044 71,477 60,825 Administration 14,998 10,560 47,066 31,525 Restructuring 227 199 4,770 831 Acquisition-related and integration 570 2,077 3,349 3,403 Impairment — — — 3,668 Amortization 6,255 5,049 19,858 14,435 66,414 56,904 212,754 169,386 Earnings (loss) from operations 853 390 (14,078 ) 3,039 Foreign exchange gain (loss) (159 ) 1,667 (3,092 ) 6,283 Other income (loss) 7 32 70 29 Earnings (loss) before income taxes 701 2,089 (17,100 ) 9,351 Income tax expense 1,738 735 3,684 1,319 Net earnings (loss) $ (1,037 ) $ 1,354 $ (20,784 ) $ 8,032 Other comprehensive earnings (loss): Foreign currency translation adjustments, net of taxes of $nil 322 3,822 (6,919 ) 11,862 Comprehensive earnings (loss) $ (715 ) $ 5,176 $ (27,703 ) $ 19,894 Net earnings (loss) per share (in dollars) Basic $ (0.03 ) $ 0.04 $ (0.58 ) $ 0.25 Diluted (0.03 ) 0.04 (0.58 ) 0.25 Weighted average number of shares outstanding (in thousands) Basic 36,085 32,200 36,007 32,093 Diluted 36,085 32,735 36,007 32,665(1) Three and nine months ended September 30, 2017 have been adjusted to reflect the adoption of ASC 606 - Revenue from Contracts with Customers.
SIERRA WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except where otherwise stated)
(unaudited)
September 30, 2018December 31, 2017 As adjusted (1)
Assets Current assets Cash and cash equivalents $ 67,460 $ 65,003 Restricted cash 221 221Accounts receivable, net of allowance for doubtful accounts of $2,656(December 31, 2017 - $1,827)
173,285 173,054 Inventories 51,430 53,143 Prepaids and other 12,205 8,221 304,601 299,642 Property and equipment 42,451 42,977 Intangible assets 91,743 108,599 Goodwill 213,663 218,516 Deferred income taxes 9,018 12,197 Other assets 12,824 12,713 $ 674,300 $ 694,644 Liabilities Current liabilities Accounts payable and accrued liabilities $ 173,739 $ 175,367 Deferred revenue6,248
7,275 179,987 182,642 Long-term obligations 40,771 36,637 Deferred income taxes 6,866 7,845 227,624 227,124 Equity Shareholders’ equity Common stock: no par value; unlimited shares authorized; issued andoutstanding: 36,047,933 shares (December 31, 2017 - 35,861,510 shares)
432,211 427,748 Preferred stock: no par value; unlimited shares authorized;issued and outstanding: nil shares
— — Treasury stock: at cost; 42,066 shares (December 31, 2017 – 222,639 shares) (754 ) (3,216 ) Additional paid-in capital 29,083 27,962 Retained earnings (deficit) (4,469 ) 17,502 Accumulated other comprehensive loss (9,395 ) (2,476 ) 446,676 467,520 $ 674,300 $ 694,644(1) December 31, 2017 has been adjusted to reflect the adoption of ASC 606 - Revenue from Contracts with Customers.
SIERRA WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
Three months endedSeptember 30,
Nine months endedSeptember 30, 20182017 As adjusted (1)
20182017 As adjusted (1)
Cash flows provided by (used in): Operating activities Net earnings (loss) $ (1,037 ) $ 1,354 $ (20,784 ) $ 8,032 Items not requiring (providing) cash Amortization 9,483 7,548 29,842 21,739 Stock-based compensation 3,266 2,769 10,317 7,472 Deferred income taxes 1,378 (11 ) 2,460 (1,268 ) Impairment — — — 3,668 Unrealized foreign exchange loss (gain) 653 (2,202 ) 4,978 (8,046 ) Other (348 ) (43 ) 221 (225 ) Changes in non-cash working capital Accounts receivable (5,070 ) (12,751 ) (6,762 ) (23 ) Inventories 2,114 9,047 1,325 (14,193 ) Prepaids and other 1,396 (367 ) (4,322 ) (5,192 ) Accounts payable and accrued liabilities (9,401 ) (17,039 ) 9,025 (24,869 ) Deferred revenue 193 (349 ) (1,496 ) (1,561 ) Cash flows provided by (used in) operating activities 2,627 (12,044 ) 24,804 (14,466 ) Investing activities Additions to property and equipment (4,789 ) (2,939 ) (13,788 ) (10,879 ) Additions to intangible assets (307 ) (288 ) (1,793 ) (1,385 ) Proceeds from sale of property and equipment 14 — 76 27 Acquisition of GNSS business — — — (3,145 ) Cash flows used in investing activities (5,082 ) (3,227 ) (15,505 ) (15,382 ) Financing activities Issuance of common shares 1,257 363 2,535 5,285 Repurchase of common shares for cancellation (3,120 ) — (3,120 ) (2,779 ) Purchase of treasury shares for RSU distribution (1,085 ) — (1,085 ) — Taxes paid related to net settlement of equity awards (334 ) (7 ) (1,788 ) (1,096 ) Payment for contingent consideration — (161 ) (130 ) (1,397 ) Decrease in other long-term obligations (68 ) (106 ) (511 ) (340 ) Cash flows provided by (used in) financing activities (3,350 ) 89 (4,099 ) (327 ) Effect of foreign exchange rate changes on cash and cash equivalents (146 ) 376 (2,743 ) 1,609 Cash, cash equivalents and restricted cash, increase (decrease) in the period (5,951 ) (14,806 ) 2,457 (28,566 ) Cash, cash equivalents and restricted cash, beginning of period 73,632 89,012 65,224 102,772 Cash, cash equivalents and restricted cash, end of period $ 67,681 $ 74,206 $ 67,681 $ 74,206(1) Three and nine months ended September 30, 2017 have been adjusted to reflect the adoption of ASC 606 - Revenue from Contracts with Customers.
SIERRA WIRELESS, INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS BY QUARTER
(in thousands of U.S. dollars, except where otherwise stated) 2018 2017 (1) Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 Gross margin - GAAP $ 67,267 $ 69,309 $ 62,100 $ 234,239 $ 61,814 $ 57,294 $ 59,636 $ 55,495 Stock-based compensation and related social taxes 57 57 307 461 122 123 108 108 Realized gains (losses) on hedge contracts (11 ) — (6 ) 23 11 12 — — Gross margin - Non-GAAP $ 67,313 $ 69,366 $ 62,401 $ 234,723 $ 61,947 $ 57,429 $ 59,744 $ 55,603 Earnings (loss) from operations - GAAP $ 853 $ (5,055 ) $ (9,876 ) $ 100 $ (2,939 ) $ 390 $ 3,994 $ (1,345 ) Stock-based compensation and related social taxes 3,473 3,950 2,840 10,374 2,869 2,780 2,577 2,148 Acquisition-related and integration 570 1,014 1,765 8,195 4,792 2,077 875 451 Restructuring 227 952 3,591 1,076 245 199 259 373 Other nonrecurring costs 1,583 5,141 — 318 — — 42 276 Realized gains (losses) on hedge contracts (201 ) (14 ) (51 ) 419 209 210 — — Impairment — — — 3,668 — — — 3,668 Acquisition-related amortization 4,354 4,426 5,534 15,486 4,306 3,845 3,694 3,641 Earnings from operations - Non-GAAP $ 10,859 $ 10,414 $ 3,803 $ 39,636 $ 9,482 $ 9,501 $ 11,441 $ 9,212 Net earnings (loss) - GAAP $ (1,037 ) $ (11,384 ) $ (8,363 ) $ 4,518 $ (3,514 ) $ 1,354 $ 6,770 $ (92 ) Stock-based compensation and related social taxes, restructuring, impairment, acquisition-related, integration and other nonrecurring costs (recoveries) 5,853 11,057 8,196 23,631 7,906 5,056 3,753 6,916 Amortization 9,483 9,651 10,708 30,503 8,764 7,548 7,194 6,997 Interest and other, net (7 ) (8 ) (55 ) (67 ) (38 ) (32 ) 12 (9 ) Foreign exchange loss (gain) (42 ) 4,034 (1,166 ) (7,131 ) (1,058 ) (1,457 ) (3,517 ) (1,099 ) Income tax expense (recovery) 1,738 2,289 (343 ) 3,199 1,880 735 729 (145 ) Adjusted EBITDA 15,988 15,639 8,977 54,653 13,940 13,204 14,941 12,568 Amortization (exclude acquisition-related amortization) (5,129 ) (5,225 ) (5,174 ) (15,017 ) (4,458 ) (3,703 ) (3,500 ) (3,356 ) Interest and other, net 7 8 55 67 38 32 (12 ) 9 Income tax expense - Non-GAAP (352 ) (769 ) (564 ) (5,184 ) (312 ) (1,816 ) (1,615 ) (1,441 ) Net earnings - Non-GAAP $ 10,514 $ 9,653 $ 3,294 $ 34,519 $ 9,208 $ 7,717 $ 9,814 $ 7,780 Diluted net earnings (loss) per share GAAP - (in dollars per share) $ (0.03 ) $ (0.32 ) $ (0.23 ) $ 0.14 $ (0.11 ) $ 0.04 $ 0.21 $ — Non-GAAP - (in dollars per share) $ 0.29 $ 0.27 $ 0.09 $ 1.05 $ 0.28 $ 0.24 $ 0.30 $ 0.24(1) 2017 has been adjusted to reflect the adoption of ASC 606 - Revenue from Contracts with Customers.
SIERRA WIRELESS, INC.
SEGMENTED RESULTS
(In thousands of U.S. dollars, except where otherwise stated) 2018 2017 (1) Q3 Q2 Q1 Total Q4 Q3 Q2 Q1 OEM Solutions Revenue $ 148,356 $ 150,939 $ 135,211 $ 554,537 $ 139,795 $ 137,850 $ 144,467 $ 132,425 Gross margin - GAAP $ 40,503 $ 45,857 $ 38,924 $ 170,307 $ 41,453 $ 40,680 $ 46,262 $ 41,912 - Non-GAAP $ 40,536 $ 45,900 $ 39,142 $ 170,694 $ 41,554 $ 40,787 $ 46,352 $ 42,001 Gross margin % - GAAP 27.3 % 30.4 % 28.8 % 30.7 % 29.7 % 29.5 % 32.0 % 31.6 % - Non-GAAP 27.3 % 30.4 % 28.9 % 30.8 % 29.7 % 29.6 % 32.1 % 31.7 % Enterprise Solutions Revenue $ 32,068 $ 28,402 $ 29,200 $ 101,535 $ 31,879 $ 26,277 $ 21,661 $ 21,718 Gross margin - GAAP $ 17,318 $ 14,184 $ 14,028 $ 48,521 $ 15,129 $ 12,631 $ 10,276 $ 10,485 - Non-GAAP $ 17,325 $ 14,192 $ 14,075 $ 48,593 $ 15,152 $ 12,652 $ 10,289 $ 10,500 Gross margin % - GAAP 54.0 % 49.9 % 48.0 % 47.8 % 47.5 % 48.1 % 47.4 % 48.3 % - Non-GAAP 54.0 % 50.0 % 48.2 % 47.9 % 47.5 % 48.1 % 47.5 % 48.3 % IoT Services Revenue $ 23,002 $ 22,562 $ 22,467 $ 34,655 $ 11,859 $ 8,433 $ 7,288 $ 7,075 Gross margin - GAAP $ 9,446 $ 9,268 $ 9,148 $ 15,411 $ 5,232 $ 3,983 $ 3,098 $ 3,098 - Non-GAAP $ 9,452 $ 9,274 $ 9,184 $ 15,436 $ 5,241 $ 3,990 $ 3,103 $ 3,102 Gross margin % - GAAP 41.1 % 41.1 % 40.7 % 44.5 % 44.1 % 47.2 % 42.5 % 43.8 % - Non-GAAP 41.1 % 41.1 % 40.9 % 44.5 % 44.2 % 47.3 % 42.6 % 43.8 % Total Revenue $ 203,426 $ 201,903 $ 186,878 $ 690,727 $ 183,533 $ 172,560 $ 173,416 $ 161,218 Gross margin - GAAP $ 67,267 $ 69,309 $ 62,100 $ 234,239 $ 61,814 $ 57,294 $ 59,636 $ 55,495 - Non-GAAP $ 67,313 $ 69,366 $ 62,401 $ 234,723 $ 61,947 $ 57,429 $ 59,744 $ 55,603 Gross margin % - GAAP 33.1 % 34.3 % 33.2 % 33.9 % 33.7 % 33.2 % 34.4 % 34.4 % - Non-GAAP 33.1 % 34.4 % 33.4 % 34.0 % 33.8 % 33.3 % 34.5 % 34.5 %(1) 2017 has been adjusted to reflect the adoption of ASC 606 - Revenue from Contracts with Customers.
View source version on businesswire.com: https://www.businesswire.com/news/home/20181108006008/en/
Sierra Wireless, Inc.Investor and Media Contact:David Climie, +1 (604) 231-1137Vice President, Investor Relationsdclimie@sierrawireless.comorInvestor Contact:David G. McLennan, +1 (604) 231-1181Chief Financial Officerinvestor@sierrawireless.com
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