Sierra Wireless third quarter 2012 results

Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) recently reported third quarter 2012 results

+ Revenue in the third quarter 2012 of $162.6 million, 10.8 percent year-over-year growth
+ Non-GAAP earnings from operations of $8.3 million, up from $4.0 million in the third quarter of 2011
+ Non-GAAP net earnings of $8.8 million, or $0.28 per diluted share, up from net earnings of $4.6 million, or $0.15 per diluted share in the third quarter of 2011

Revenue for the third quarter of 2012 was $162.6 million, compared to $146.8 million in the third quarter of 2011, and $167.4 million in the second quarter of 2012.
The year-over-year revenue increase of 10.8 percent was driven by exceptional growth in Machine-to-Machine (“M2M”) sales, including a $4.6 million contribution from the recently acquired Sagemcom M2M business, and solid growth in Mobile Computing, driven by higher sales to PC OEMs.
M2M revenue was $86.1 million, an increase of 14.3 percent compared to $75.3 million in the third quarter of 2011.
Mobile Computing revenue was $76.5 million, an increase of 7.0 percent compared to $71.5 million in the third quarter of 2011.

Jason Cohenour, President and Chief Executive Officer, said:

“Our Machine-to-Machine business had an exceptional quarter, with revenue up 14 percent year-over-year driven by strong organic growth and contribution from the recently acquired Sagemcom M2M business.
Our success in M2M, combined with solid year-over-year revenue growth in Mobile Computing and tight cost control, resulted in profitability that exceeded our expectations.”

On a GAAP basis, gross margin was $47.9 million, or 29.4 percent of revenue, in the third quarter of 2012, compared to $43.3 million, or 29.5 percent of revenue, in the third quarter of 2011.
Operating expenses were $46.8 million and earnings from operations were $1.1 million in the third quarter of 2012, compared to operating expenses of $45.1 million and a loss from operations of $1.8 million in the third quarter of 2011.
Net earnings were $3.7 million, or $0.12 per diluted share, in the third quarter of 2012, compared to a net loss of $1.0 million, or $0.03 per diluted share, in the third quarter of 2011.
A favorable income tax recovery contributed to the stronger than expected net earnings.
The third quarter results also included $2.7 million in acquisition and restructuring costs, compared to $1.0 million in restructuring and integration costs in the third quarter of 2011.

On a non-GAAP basis, gross margin was 29.5 percent of revenue in the third quarter of 2012, compared to 29.6 percent of revenue in the third quarter of 2011.
Operating expenses were $39.6 million and earnings from operations were $8.3 million in the third quarter of 2012, compared to operating expenses of $39.4 million and earnings from operations of $4.0 million in the third quarter of 2011.
Net earnings were $8.8 million, or $0.28 per diluted share, in the third quarter of 2012 compared to net earnings of $4.6 million, or $0.15 per diluted share, in the third quarter of 2011.

During the third quarter of 2012, we successfully completed the acquisition of the M2M business of Sagemcom. The purchase price of €44.9 million (US$55.2 million) and the related transaction expenses were funded by cash on hand. The cash, cash equivalents, and short term investments balance at the end of the third quarter of 2012 was $59.5 million, down from $125.3 million at the end of the second quarter of 2012.

Subsequent to the completion of the quarter, we entered into a new $50 million revolving line of credit. This facility replaces our existing $10 million line of credit and is designed to augment our working capital capacity. There are currently no borrowings under the facility.

Financial guidance
In the fourth quarter of 2012, on a sequential basis, we expect revenue to be flat compared to the third quarter, as a result of continued strength in our M2M business, including a full quarter of contribution from the acquired Sagemcom M2M business, offset by lower sales in Mobile Computing. We expect gross margin to be slightly higher, driven largely by a favorable shift in product mix and we expect operating expenses to be modestly higher as a result of the timing of new product certification and launch expenses, as well as a full quarter of Sagemcom M2M.