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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Sierra Wireless Inc | TSX:SW | Toronto | 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% | 40.99 | 40.82 | 41.28 | 0 | 01:00:00 |
Revenue in Q2'22 was $188.0 million and Adjusted EBITDA was $22.4 million
Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) reported results for its second quarter of 2022. All results are reported in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP" or "GAAP"), except as otherwise indicated below.1
Second Quarter 2022 Compared to Second Quarter 2021
Segmented Information
IoT Solutions
Revenue from IoT Solutions increased 54.7% to $139.7 million as compared to $90.3 million in the second quarter of 2021. The increase was primarily due to strong demand for connected devices globally and the realization of investments in inventory to combat the ongoing supply chain tightness. Increase in demand includes acceleration in IoT modules deployment across our industrial customers. IoT Solutions gross margin was 30.1%, compared to 27.0% in the second quarter of 2021. The increase in gross margin was primarily due to price increases, product mix, and improved absorption of fixed costs from increased volume.
Enterprise Solutions
Revenue from Enterprise Solutions increased 13.6% to $48.3 million as compared to $42.5 million in the second quarter of 2021. The increase was primarily due to strong demand for routers in our key industrial and public safety verticals, partially offset by decline in connectivity, software, and services revenue resulting from the sale of the Omnilink offender monitoring business and the impact of the shutdown of 2G/3G networks in the United States on our home security business. Enterprise Solutions gross margin was 43.9% as compared to 51.3% in the second quarter of 2021. The decrease in gross margin was primarily due to product mix and higher component costs.
Liquidity and Capital Resources
Cash and cash equivalents and restricted cash at the end of the second quarter of 2022 were $127.4 million, an increase of $30.0 million from the first quarter of 2022. The increase in cash was primarily driven by proceeds received from the sale of our Omnilink offender monitoring business.
Acquisition by Semtech Corporation
On August 2, 2022, we entered into a definitive agreement (the "Arrangement Agreement") with Semtech Corporation and a subsidiary of Semtech Corporation (the "Purchaser") pursuant to which the Purchaser will acquire all of the outstanding shares of Sierra Wireless (the "Transaction"). Under the terms of the Transaction, Sierra Wireless shareholders will receive $31 in cash per share (in U.S. dollars).
The Transaction, which is not subject to any financing conditions, will be carried out by way of a court-approved plan of arrangement under the Canada Business Corporations Act and will require the approval of at least (1) 66⅔% of the votes cast by Sierra Wireless shareholders, and (2) 66⅔% of the votes cast by Sierra Wireless security holders (comprised of shareholders, optionholders, restricted share unit holders and performance share unit holders), at a special meeting expected to be held to consider the Transaction. In addition to such approval by Sierra Wireless shareholders and security holders, the Transaction is also subject to court approval and regulatory approvals, including approval under the Canadian Competition Act and the United States Hard-Scott-Rodino Antitrust Improvements Act of 1976. Subject to the satisfaction of such conditions, the Transaction is expected to be completed by early 2023.
Disposition of Offender Monitoring Business Line
On April 15, 2022, we signed a definitive agreement and closed the sale of our Omnilink offender monitoring business to Sentinel Advantage LLC for $37.6 million in cash, subject to customary working capital adjustments. Sentinel continues to be an important customer, and we are providing them with embedded modules and connectivity services for their offender monitoring products. The divestiture allows the Company to focus on its core businesses and strengthen its balance sheet.
_____________________________
1 Non-GAAP financial measures referred to in this news release are labeled as "non-GAAP measure" or designated as such with an asterisk (*). Please see "Non-GAAP Financial Measures" for explanations of why the Company uses these non-GAAP measures and "Reconciliation of GAAP and Non-GAAP Results by Quarter" for reconciliation to the most comparable GAAP financial measures.
2 MRR is defined as the monthly recurring revenue generated from connectivity, software, and services as well as usage fees from current customers. MRR is a key performance metric to measure our performance and growth in our recurring revenue, both to help investors better understand and assess the performance of our business and also because our mix of revenue generated from recurring sources has increased in recent years. MRR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. MRR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. MRR is not a forecast.
3 Following the sale of our Omnilink offender monitoring business in the second quarter of 2022 and the decision to not develop additional products for our home security business in light of the shutdown of 2G/3G networks in the United States in the first quarter of 2022, revenues from these businesses have been excluded from MRR for the current and prior periods.
4 In accordance with U.S. GAAP, the results of operations of the Automotive Business are reported as discontinued operations in our consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2022 and 2021.
Non-GAAP Financial Measures
Our consolidated financial statements are prepared in accordance with U.S. GAAP on a basis consistent for all periods presented. In addition to results reported in accordance with U.S. GAAP, we use non-GAAP financial measures as supplemental indicators of our operating performance. The term “non-GAAP financial measure” is used to refer to a numerical measure of a company’s historical or future financial performance, financial position or cash flows that: (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP in a company’s statement of earnings, balance sheet or statement of cash flows; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.
Our non-GAAP financial measures included in this press release are adjusted net earnings (loss) from continuing operations*, basic and diluted adjusted earnings (loss) per share from continuing operations* and adjusted EBITDA* (earnings before interest, taxes, depreciation and amortization).
Adjusted net earnings (loss) from continuing operations* excludes the impact of stock-based compensation expense and related social taxes, phantom RSU expense which represents expenses related to compensation units settled in cash based on the stock price at vesting, restructuring costs, government grants related to COVID-19 relief, CEO retirement/search, impairment, gain on sale of Omnilink, the ransomware incident, COVID-19 factory constraint incremental costs, certain other non-recurring costs or recoveries, acquisition-related amortization, the impact of foreign exchange gains or losses on translation of certain balance sheet accounts, unrealized foreign exchange gains or losses on forward contracts, recognition of cumulative translation adjustments on dissolution of subsidiaries, and certain tax adjustments.
Adjusted EBITDA* is defined as net earnings (loss) from continuing operations plus stock-based compensation expense and related social taxes, phantom RSU expense which represents expenses related to compensation units settled in cash based on the stock price at vesting, restructuring costs, government grants related to COVID-19 relief, CEO retirement/search, impairment, gain on sale of Omnilink, the ransomware incident, COVID-19 factory constraint incremental costs, certain other non-recurring costs or recoveries, amortization, interest and other income (expense), foreign exchange gains or losses on translation of certain balance sheet accounts, unrealized foreign exchange gains or losses on forward contracts, recognition of cumulative translation adjustments on dissolution of subsidiaries, and income tax expense (recovery). 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 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.
Cautionary Note Regarding Forward-Looking Statements
This press release contains certain statements and information that 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, among others, the consummation of the proposed transaction and the expected timing thereof, the synergies and other benefits to be realized if the proposed transaction is consummated; our expectations regarding customer demand, our supply chain, manufacturing capacity (including manufacturing shutdowns or slowdowns) and the potential impact of COVID-19 in these areas; our ability to meet customer demand and our financial results; expectations regarding post-COVID-19 recovery; expectations regarding the Company's cost savings initiatives; 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; our work to review and evaluate additional security measures and the ability that they will have to protect our IT systems; 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 gateways. 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 a leading IoT solutions provider that combines devices, network services, and software to unlock value in the connected economy. Companies globally are adopting 4G, 5G, and LPWA solutions to improve operational efficiency, create better customer experiences, improve their business models, and create new revenue streams. Sierra Wireless works with its customers to develop the right industry-specific solution for their IoT deployments, whether this is an integrated solution to help connect edge devices to the cloud, a software/API service to manage processes with billions of connected assets, or a platform to extract real-time data to improve business decisions. With more than 25 years of cellular IoT experience, Sierra Wireless is the global partner customers trust to deliver them their next IoT solution. For more information, visit www.sierrawireless.com.
“Sierra Wireless” is a registered trademark 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 INCOME (LOSS)
(In thousands of U.S. dollars, except where otherwise stated)
(unaudited)
Three months ended June 30,
Six months ended June 30,
2022
2021
2022
2021
Revenue
IoT Solutions
$
139,678
$
90,309
$
273,386
$
164,887
Enterprise Solutions
48,273
42,476
87,522
75,960
187,951
132,785
360,908
240,847
Cost of sales
IoT Solutions
97,665
65,884
190,848
118,376
Enterprise Solutions
27,104
20,670
51,815
38,513
124,769
86,554
242,663
156,889
Gross margin
63,182
46,231
118,245
83,958
Expenses
Sales and marketing
18,115
21,423
36,132
41,244
Research and development
17,296
16,930
35,631
34,414
Administration
11,733
11,097
21,849
27,405
Restructuring
3,715
1,720
7,719
4,294
Impairment
—
—
10,299
—
Gain on sale of Omnilink
(9,179
)
—
(9,179
)
—
Amortization
2,900
4,389
6,720
9,013
44,580
55,559
109,171
116,370
Earnings (loss) from operations
18,602
(9,328
)
9,074
(32,412
)
Foreign exchange (loss) gain
(5,355
)
1,143
(7,633
)
(3,116
)
Other expense
(650
)
(1,246
)
(1,733
)
(1,889
)
Earnings (loss) before income taxes
12,597
(9,431
)
(292
)
(37,417
)
Income tax expense
1,691
605
2,712
1,157
Net earnings (loss) from continuing operations
$
10,906
$
(10,036
)
$
(3,004
)
$
(38,574
)
Net earnings (loss) from discontinued
operations
793
85
2,024
(1,237
)
Net earnings (loss)
$
11,699
$
(9,951
)
$
(980
)
$
(39,811
)
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $nil
(1,914
)
1,233
(2,340
)
(1,667
)
Comprehensive income (loss)
$
9,785
$
(8,718
)
$
(3,320
)
$
(41,478
)
Basic and diluted net earnings (loss) per share (in dollars)
Continuing operations
$
0.28
$
(0.27
)
$
(0.08
)
$
(1.05
)
Discontinued operations
0.02
—
0.05
(0.03
)
$
0.30
$
(0.27
)
$
(0.03
)
$
(1.08
)
Weighted average number of shares outstanding
(in thousands)
Basic
38,770
36,992
38,439
36,865
Diluted
39,079
36,992
38,439
36,865
SIERRA WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except where otherwise stated)
(unaudited)
June 30, 2022
December 31, 2021
Assets
Current assets
Cash and cash equivalents
$
127,343
$
76,784
Restricted cash
77
100
Accounts receivable
104,442
85,310
Inventories
92,357
82,177
Prepaids and other
52,252
27,372
376,471
271,743
Property and equipment, net
25,757
31,134
Operating lease right-of-use assets
11,163
14,348
Intangible assets, net
34,064
54,708
Goodwill
147,646
167,379
Deferred income taxes
1,186
1,268
Other assets
4,154
6,473
$
600,441
$
547,053
Liabilities
Current liabilities
Accounts payable and accrued liabilities
192,984
183,529
Deferred revenue
12,320
11,770
Current portion of long-term debt
971
494
206,275
195,793
Long-term obligations
38,257
42,808
Operating lease liabilities
13,159
15,033
Long-term debt
55,452
9,394
Deferred income taxes
6,022
6,371
319,165
269,399
Equity
Shareholders’ equity
Common stock: no par value; unlimited shares authorized; issued and outstanding: 38,940,753 shares (December 31, 2021 - 37,774,800 shares)
476,011
460,331
Preferred stock: no par value; unlimited shares authorized;
issued and outstanding: nil shares
—
—
Treasury stock: at cost; 1,026 shares (December 31, 2021 – 119,761 shares)
(22
)
(2,128
)
Additional paid-in capital
39,678
48,747
Retained deficit
(223,319
)
(220,564
)
Accumulated other comprehensive loss
(11,072
)
(8,732
)
281,276
277,654
$
600,441
$
547,053
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,
2022
2021
2022
2021
Cash flows provided by (used in):
Operating activities
Net earnings (loss)
$
11,699
$
(9,951
)
$
(980
)
$
(39,811
)
Items not requiring (providing) cash
Amortization
4,741
7,267
11,425
14,575
Stock-based compensation
3,753
3,722
6,819
12,237
Capitalized interest expense
674
—
1,584
—
Impairment
—
—
10,299
—
Gain on sale of Omnilink
(9,179
)
—
(9,179
)
—
Deferred income taxes
1
(3
)
1
(3
)
Unrealized foreign exchange loss (gain)
5,878
(867
)
7,245
4,161
Recognition of cumulative translation adjustments on dissolution of subsidiaries
817
—
817
—
Other
27
317
445
337
Changes in non-cash working capital
Accounts receivable
(18,228
)
3,548
(23,954
)
(7,196
)
Inventories
(4,357
)
(12,703
)
(10,852
)
(14,235
)
Prepaids and other
(6,338
)
5,150
(23,278
)
(11,084
)
Accounts payable and accrued liabilities
13,812
18,541
10,799
5,495
Deferred revenue and other
(687
)
235
(2,323
)
396
Cash flows provided by (used in) operating activities
2,613
15,256
(21,132
)
(35,128
)
Investing activities
Additions to property and equipment
(5,280
)
(3,972
)
(7,729
)
(8,681
)
Additions to intangible assets
(202
)
(2,502
)
(875
)
(2,922
)
Proceeds from sale of property and equipment
12
25
23
39
Proceeds from sale of Omnilink, net of transaction costs and cash sold
34,959
—
34,959
—
Acquisition of M2M New Zealand, net of cash acquired
—
(319
)
—
(319
)
Cash flows provided by (used in) investing activities
29,489
(6,768
)
26,378
(11,883
)
Financing activities
Issuance of common shares, net of issuance cost
1,687
799
2,565
3,601
Purchase of treasury shares for RSU distribution
(2,443
)
(3,530
)
(2,443
)
(7,463
)
Taxes paid related to net settlement of equity awards
—
(111
)
—
(1,057
)
Decrease in other long-term obligations
(35
)
(66
)
(40
)
(102
)
Proceeds from long-term debt, net of issuance cost
(50
)
—
45,732
—
Cash flows (used in) provided by financing activities
(841
)
(2,908
)
45,814
(5,021
)
Effect of foreign exchange rate changes on cash and cash equivalents
(1,282
)
672
(524
)
(906
)
Cash, cash equivalents and restricted cash, increase (decrease) in the period
29,979
6,252
50,536
(52,938
)
Cash, cash equivalents and restricted cash, beginning of period
97,441
112,234
76,884
171,424
Cash, cash equivalents and restricted cash, end of period
$
127,420
$
118,486
$
127,420
$
118,486
SIERRA WIRELESS, INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS BY QUARTER
(in thousands of U.S. dollars, except where otherwise stated)
2022
2021
2020
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Net earnings (loss) from continuing operations - GAAP
$
10,906
$
(13,910
)
$
(11,752
)
$
(38,406
)
$
(10,036
)
$
(28,538
)
$
(11,167
)
$
(14,483
)
Stock-based compensation and related social taxes
3,758
3,281
5,832
1,820
3,807
7,928
6,461
5,085
Phantom RSU expense (recovery)
157
(202
)
393
(69
)
569
206
691
261
Restructuring
3,715
4,004
7,592
369
1,720
2,574
4,800
3,089
COVID-19 government relief
(22
)
(11
)
(5,557
)
(168
)
(1,016
)
(2,049
)
(954
)
(6,298
)
CEO retirement/search
—
—
44
42
400
1,655
—
—
Impairment
—
10,299
741
11,544
—
—
—
—
Gain on sale of Omnilink
(9,179
)
—
—
—
—
—
—
—
Ransomware incident
(1,089
)
(59
)
(959
)
271
1,135
533
—
—
COVID-19 factory constraint incremental costs
—
1,096
22
1,135
—
—
—
—
Other non-recurring costs
682
99
978
323
593
508
445
439
Amortization
4,741
6,684
6,935
7,208
7,267
7,308
7,054
8,030
Interest and other expense, net
922
1,142
307
192
111
110
564
988
Foreign exchange loss (gain), net of realized gain/loss on hedge contracts
5,317
2,326
1,927
2,693
(821
)
4,816
(2,804
)
(3,572
)
Recognition of cumulative translation adjustments on dissolution of subsidiaries
817
—
—
—
—
—
—
—
Income tax expense (recovery)
1,691
1,021
761
(1,912
)
605
552
(7,984
)
(633
)
Adjusted EBITDA*
$
22,416
$
15,770
$
7,264
$
(14,958
)
$
4,334
$
(4,397
)
$
(2,894
)
$
(7,094
)
Net earnings (loss) from continuing operations - GAAP
$
10,906
$
(13,910
)
$
(11,752
)
$
(38,406
)
$
(10,036
)
$
(28,538
)
$
(11,167
)
$
(14,483
)
Stock-based compensation and related social taxes
3,758
3,281
5,832
1,820
3,807
7,928
6,461
5,085
Phantom RSU expense (recovery)
157
(202
)
393
(69
)
569
206
691
261
Restructuring
3,715
4,004
7,592
369
1,720
2,574
4,800
3,089
COVID-19 government relief
(22
)
(11
)
(5,557
)
(168
)
(1,016
)
(2,049
)
(954
)
(6,298
)
CEO retirement/search
—
—
44
42
400
1,655
—
—
Impairment
—
10,299
741
11,544
—
—
—
—
Gain on sale of Omnilink
(9,179
)
—
—
—
—
—
—
—
Ransomware incident
(1,089
)
(59
)
(959
)
271
1,135
533
—
—
COVID-19 factory constraint incremental costs
—
1,096
22
1,135
—
—
—
—
Other non-recurring costs
682
99
978
323
593
508
445
439
Acquisition-related amortization
1,558
2,152
2,254
2,776
2,890
3,135
3,306
3,555
Foreign exchange loss (gain), net of realized gain/loss on hedge contracts
5,317
2,326
1,927
2,693
(821
)
4,816
(2,804
)
(3,572
)
Recognition of cumulative translation adjustments on dissolution of subsidiaries
817
—
—
—
—
—
—
—
Income tax expense (recovery) adjustment
126
(500
)
(441
)
(3,008
)
(357
)
(393
)
(7,784
)
200
Adjusted earnings (loss) from continuing operations*
$
16,746
$
8,575
$
1,074
$
(20,678
)
$
(1,116
)
$
(9,625
)
$
(7,006
)
$
(11,724
)
Weighted average number of shares outstanding (in thousands)
Basic
38,770
37,974
37,541
37,196
36,992
36,736
36,534
36,417
Diluted
39,079
37,974
37,541
37,196
36,992
36,736
36,534
36,417
Basic and diluted adjusted earnings (loss) per share from continuing operations (in dollars)*
$
0.43
$
0.23
$
0.03
$
(0.56
)
$
(0.03
)
$
(0.26
)
$
(0.19
)
$
(0.32
)
SIERRA WIRELESS, INC.
SEGMENTED RESULTS
(In thousands of U.S. dollars, except where otherwise indicated)
2022
2021
Q2
Q1
Total
Q4
Q3
Q2
Q1
IoT Solutions
Revenue
$
139,678
$
133,708
$
323,075
$
104,531
$
53,657
$
90,309
$
74,578
Gross margin
$
42,013
$
40,525
$
83,765
$
26,578
$
10,676
$
24,425
$
22,086
Gross margin %
30.1
%
30.3
%
25.9
%
25.4
%
19.9
%
27.0
%
29.6
%
Enterprise Solutions
Revenue
$
48,273
$
39,249
$
150,134
$
45,381
$
28,793
$
42,476
$
33,484
Gross margin
$
21,169
$
14,538
$
73,034
$
22,114
$
13,473
$
21,806
$
15,641
Gross margin %
43.9
%
37.0
%
48.6
%
48.7
%
46.8
%
51.3
%
46.7
%
Total
Revenue
$
187,951
$
172,957
$
473,209
$
149,912
$
82,450
$
132,785
$
108,062
Gross margin
$
63,182
$
55,063
$
156,799
$
48,692
$
24,149
$
46,231
$
37,727
Gross margin %
33.6
%
31.8
%
33.1
%
32.5
%
29.3
%
34.8
%
34.9
%
Revenue by Type:
Product
$
156,538
$
138,052
$
332,810
$
113,619
$
47,207
$
97,595
$
74,389
Connectivity, software, and services
$
31,413
$
34,905
$
140,399
$
36,293
$
35,243
$
35,190
$
33,673
View source version on businesswire.com: https://www.businesswire.com/news/home/20220809006123/en/
Media Contact: Louise Matich pr@sierrawireless.com
Investor Contact: Sean Fallis investor@sierrawireless.com
1 Year Sierra Wireless Chart |
1 Month Sierra Wireless Chart |
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