Sierra Wireless Reports First Quarter 2015 Results

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Sierra Wireless Reports First Quarter 2015 Results

Q1 2015 revenue of $150.4 million; 24.1% year-over-year growth.

Highlights:

  • Record revenue of $150.4 million, an increase of 24.1% compared to Q1 2014
  • Non-GAAP earnings from operations of $8.8 million compared to $0.7 million in Q1 2014
  • Adjusted EBITDA of $11.3 million compared to $4.1 million in Q1 2014
  • Non-GAAP EPS of $0.22 compared to $0.02 in Q1 2014

Sierra Wireless, Inc. today reported results for its first quarter, ending March 31, 2015.
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.

Jason Cohenour, President and Chief Executive Officer, said:

“We delivered record revenue and strong year-over-year growth in profitability in the first quarter of 2015.”

“We also significantly expanded our position in the Internet of Things value chain with the acquisition of Wireless Maingate, adding connectivity and managed services to our device-to-cloud solutions. As we continue to strengthen our device-to-cloud offering, we remain focused on profitable growth and enhancing our leadership position with strategic acquisitions.”

Revenue for the first quarter of 2015 was $150.4 million, an increase of 24.1% compared to $121.2 million in the first quarter of 2014.
Revenue from OEM Solutions was $133.0 million in the first quarter of 2015, up 25.3% compared to $106.2 million in the first quarter of 2014.
Revenue from Enterprise Solutions was $17.4 million in the first quarter of 2015, up 15.8% compared to $15.0 million in the first quarter of 2014.

GAAP RESULTS

  • Gross margin was $48.8 million, or 32.5% of revenue, in the first quarter of 2015, compared to $38.6 million, or 31.9% of revenue, in the first quarter of 2014.
  • Operating expenses were $46.4 million and earnings from operations were $2.5 million in the first quarter of 2015, compared to operating expenses of $45.3 million and a loss from operations of $6.7 million in the first quarter of 2014.
  • Net loss was $9.7 million, or $0.30 per diluted share, in the first quarter of 2015, compared to a net loss of $4.0 million, or $0.13 per diluted share, in the first quarter of 2014. The first quarter of 2015 included an $11.8 million after-tax foreign exchange loss associated with the translation of certain foreign denominated balances, compared to a $0.4 million foreign exchange gain in the first quarter of 2014.

NON-GAAP RESULTS

  • Gross margin was 32.6% in the first quarter of 2015, compared to 32.0% in the first quarter of 2014.
  • Operating expenses were $40.2 million and earnings from operations were $8.8 million in the first quarter of 2015, compared to operating expenses of $38.0 million and earnings from operations of $0.7 million in the first quarter of 2014.
  • Net earnings were $7.2 million, or $0.22 per diluted share, in the first quarter of 2015, compared to net earnings of $0.5 million, or $0.02 per diluted share, in the first quarter of 2014. The non-GAAP tax rate in the first quarter of 2015 was 19.8%.
  • Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) were $11.3 million in the first quarter of 2015, compared to $4.1 million in the first quarter of 2014.

Cash and cash equivalents at the end of the first quarter of 2015 were $99.6 million, representing a decrease of $107.5 million, compared to the end of the fourth quarter of 2014. The decrease was primarily due to the payment of $88.4 million (net of cash acquired), for the purchase of Wireless Maingate AB and higher working capital requirements in the quarter.

We disclose non-GAAP financial measures as we believe they provide useful information on actual operating results and 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.

Non-GAAP results exclude the impact of stock-based compensation expense and related social taxes, acquisition costs, restructuring costs, integration costs, acquisition amortization, impairment, foreign exchange gains or losses on translation of balance sheet accounts, and certain tax adjustments.

Adjusted EBITDA as defined equates to earnings (loss) from operations plus stock-based compensation expense and related social taxes, acquisition costs, restructuring costs, integration costs, impairment, and amortization. The reconciliation between our GAAP and non-GAAP results is provided in the accompanying schedules.

Financial Guidance

In the second quarter of 2015, we expect revenue to grow sequentially and on a year-over-year basis, gross margin percentage to be similar to the first quarter of 2015 and operating expenses to increase slightly compared to the first quarter of 2015. This guidance does not include any contribution from the acquisition of Accel Networks (see below). This results in the following non-GAAP guidance for the second quarter of 2015:

Q2 2015 Guidance Consolidated

Non-GAAP

Revenue $153.0 to $156.0 million
Earnings from operations $8.5 to $10.0 million
Net earnings $6.7 to $7.9 million
Earnings per share $0.21 to $0.24 per share

This non-GAAP guidance for the second quarter of 2015 reflects current business indicators and expectations, including a continued tight component supply environment. 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.

Sierra Wireless acquires Accel Networks

Sierra Wireless has entered into a definitive agreement to purchase substantially all of the assets of Accel Networks (“Accel”) for US$9.3 million in cash with the potential for an additional US$1.5 million under a performance-based earnout formula. Accel is a leading provider of 4G LTE managed connectivity services with more than 300 enterprise customers in sectors such as retail, finance, security, energy, and hospitality. With 4G LTE providing high connectivity speeds and legacy carriers transitioning from copper-based networks, many distributed enterprises are adopting wireless connectivity. Accel’s revenue in 2014 was US$8.5 million. The transaction is expected to close in June 2015. Following the completion of the acquisition, we expect revenue in the next 12 months of approximately $10 million and to break even on an adjusted EBITDA basis. Approximately 80 percent of Accel’s annual revenue is subscription-based and recurring. Accel was founded in 2002 and has 28 employees. Its head office is in Florida, with its primary operations center located in Georgia.

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