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Sierra Wireless Reports Third Quarter 2011 Results

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.

Financial Guidance

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
About Sierra Wireless
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.
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