Sierra Wireless third quarter 2012 results

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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

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 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.

Non-GAAP results exclude the impact of stock-based compensation expense, acquisition costs, restructuring costs, integration costs, acquisition amortization, foreign exchange gains or losses on foreign currency contracts and translation of balance sheet accounts, and certain tax adjustments. We disclose non-GAAP amounts as we believe that these measures provide our shareholders with useful information about actual operating results and assist in comparisons from one period to another. The reconciliation between our GAAP and non-GAAP results is provided in the accompanying schedules.

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.

Q4 2012 Guidance Consolidated Non-GAAP
Revenue $160.0 to $165.0 million
Earnings from operations $7.5 to $9.0 million
Net earnings $5.6 to $6.8 million
Earnings per share $0.18 to $0.22 per share
This Non-GAAP guidance for the fourth quarter of 2012 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 below. All figures are approximations based on management’s current beliefs and assumptions.
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