Sierra Wireless Reports Fourth Quarter and Full Year 2012 Results

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Sierra Wireless Reports Fourth Quarter and Full Year 2012 Results

4th Quarter 2012: Total revenue of $163.8 million and non-GAAP net earnings of $10.3 million | Revenue from continuing operations of $109.4 million, 32.8 percent year-over-year growth, and non-GAAP operating earnings from continuing operations of $3.7 million

Full Year 2012: Total revenue of $644.2 million and non-GAAP net earnings of $33.4 million | Revenue from continuing operations of $397.3 million, 19.3 percent year-over-year growth, and non-GAAP operating earnings from continuing operations of $0.9 million.

Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported fourth quarter and full year 2012 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.

On January 28, 2013, the company announced a definitive agreement for the sale of substantially all of the assets and operations related to its AirCard business to Netgear, Inc. In accordance with GAAP, assets and liabilities associated with the sale have been recorded as “held for sale” and the results of operations of the AirCard business as discontinued operations. The consolidated statements of operations and related selected financial information have been retrospectively modified to distinguish between continuing operations and discontinued operations.

Our fourth quarter results highlight our continued solid revenue growth and improving earnings,” said Jason Cohenour, President and Chief Executive Officer.

“As the global leader in M2M and connected device solutions, we believe that we are exceptionally well positioned to drive profitable growth both organically and through strategic acquisitions.”

Fourth Quarter 2012
Revenue from continuing operations in the fourth quarter of 2012 was $109.4 million, compared to $82.4 million in the fourth quarter of 2011, and $100.2 million in the third quarter of 2012. The 32.8 percent year-over-year revenue increase was driven by better than expected growth in Machine-to-Machine (“M2M”) sales, including a $15.5 million contribution from the recently acquired M2M business of Sagemcom, along with solid growth in sales to PC OEMs.

On a GAAP basis, gross margin from continuing operations was $36.2 million, or 33.1 percent of revenue, in the fourth quarter of 2012, compared to $25.2 million, or 30.6 percent of revenue, in the fourth quarter of 2011. Operating expenses from continuing operations were $37.7 million and loss from continuing operations was $1.5 million in the fourth quarter of 2012, compared to operating expenses of $45.2 million and a loss from operations of $20.0 million in the fourth quarter of 2011. Fourth quarter of 2011 operating expenses included an intangible asset impairment charge of $11.2 million, primarily related to a software development program that was acquired through the purchase of Wavecom, S.A. in 2009 and which we abandoned during the fourth quarter of 2011.
Net earnings from continuing operations were $15.5 million, or $0.50 per diluted share, in the fourth quarter of 2012, compared to net loss of $20.4 million, or $0.65 per diluted share, in the fourth quarter of 2011. Net earnings from continuing operations in 2012 included an income tax recovery that was the result of the recognition of certain tax assets that will be realizable as a result of the sale of the AirCard business.
Net earnings, including discontinued operations, were $19.6 million, or $0.64 per diluted share, in the fourth quarter of 2012, compared to net loss, including discontinued operations, of $13.8 million, or $0.44 per diluted share, in the fourth quarter of 2011.

On a non-GAAP basis, gross margin from continuing operations was 33.2 percent of revenue in the fourth quarter of 2012, compared to 30.7 percent of revenue in the fourth quarter of 2011. Operating expenses from continuing operations were $32.6 million and operating earnings from continuing operations were $3.7 million in the fourth quarter of 2012, compared to operating expenses of $29.7 million and an operating loss of $4.4 million in the fourth quarter of 2011. Net earnings from continuing operations were $4.5 million, or $0.15 per diluted share, in the fourth quarter of 2012 compared to net loss of $4.4 million, or $0.14 per diluted share, in the fourth quarter of 2011.

The cash, cash equivalents, and short-term investments balance at the end of the fourth quarter of 2012 was $63.6 million, up from $59.5 million at the end of the third quarter of 2012.

Full Year 2012
Revenue from continuing operations for the year ended December 31, 2012 was $397.3 million, compared to $333.2 million for the year ended December 31, 2011. The 19.3 percent year-over-year revenue increase was driven by significant growth in M2M sales, including a $20.1 million contribution from the recently acquired M2M business of Sagemcom, along with strong growth in sales to PC OEMs.

On a GAAP basis, gross margin from continuing operations was $125.3 million, or 31.5 percent of revenue, in 2012, compared to $101.7 million, or 30.5 percent of revenue, in 2011. Operating expenses from continuing operations were $147.5 million and loss from operations was $22.2 million in 2012, compared to operating expenses of $156.0 million and a loss from operations of $54.2 million in 2011. The operating loss in 2011 included an intangible asset impairment charge of $11.2 million, primarily related to a software development program that was acquired through the purchase of Wavecom, S.A. in 2009 and which we abandoned during the fourth quarter of 2011.
Net loss from continuing operations was $4.2 million, or $0.14 per diluted share, in 2012, compared to $50.7 million, or $1.62 per diluted share, in 2011.
Net earnings, including discontinued operations, were $27.2 million, or $0.88 per diluted share, in 2012, compared to net loss, including discontinued operations, of $29.3 million, or $0.94 per diluted share, in 2011.

On a non-GAAP basis, gross margin from continuing operations was 31.6 percent of revenue in 2012, compared to 30.7 percent of revenue in 2011. Operating expenses from continuing operations were $124.7 million and operating earnings from continuing operations were $0.9 million in 2012, compared to operating expenses of $124.5 million and an operating loss of $22.4 million in 2011. Net loss from continuing operations was $0.4 million, or $0.01 per diluted share, in 2012, compared to net loss of $18.7 million, or $0.60 per diluted share, in 2011.

Non-GAAP results exclude the impact of stock-based compensation expense, acquisition costs, restructuring costs, integration costs, disposition 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 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
The Company provides the following guidance for the first quarter of 2013 for its continuing operations.

In the first quarter of 2013, we expect revenue from our continuing operations to be down sequentially following the exceptionally strong fourth quarter of 2012. We expect gross margin to be similar or slightly lower than fourth quarter 2012 levels, and operating expenses to increase as a result of higher new product certification costs combined with the negative impact of a strengthening euro.

Looking forward to the second quarter of 2013, we expect a return to solid sequential and year-over-year revenue growth and modest profitability.

Q1 2013 Guidance Non-GAAP – Continuing Operations
Revenue $98.0 to $102.0 million
Earnings (loss) from operations ($2.5) to ($1.5) million
Net earnings (loss) from continuing operations ($2.5) to ($1.5) million
Earnings (loss) per share from continuing operations ($0.08) to ($0.05) per share

 

This Non-GAAP guidance for the first quarter of 2013 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.

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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