Sierra Wireless Reports Fourth Quarter and Full Year 2015 Results

Fourth Quarter 2015 highlights : Revenue of $144.8 million in the quarter | Full Year 2015 highlights : Record revenue of $607.8 million.

Sierra Wireless, Inc. today reported results for its fourth quarter and full year, ending December 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:

“In 2015, we delivered year-over-year revenue growth of 10.8% to a record $607.8 million and our non-GAAP operating profit increased 42.0% to $32.4 million. We also completed three strategic managed connectivity acquisitions during the year, adding the technology, scale and talent to enable us to deliver fully integrated device-to-cloud solutions for our customers.”

“In the fourth quarter of 2015, our revenue was slightly below our expectations, as we experienced softer demand at select OEM customers. We believe this reflects increased caution on the part of some customers in the face of an uncertain macro-economic environment. Notwithstanding the current environment, we expect our business to gain strength over the course of the year as we enter commercial production on a number of new customer programs, and continue to bring new industry-leading products and solutions to market.”

In 2015, we significantly expanded our cloud and connectivity services business by successfully completing three managed connectivity acquisitions. As a result of these acquisitions and organizational changes designed to provide dedicated leadership and focus to our Enterprise Gateway and Cloud and Connectivity lines of businesses, we commenced operating the Company under three reportable segments, effective October 1, 2015.

Our three reportable segments are:

OEM Solutions;
Enterprise Solutions;
Cloud and Connectivity Services.

Prior to October 1, our Enterprise Solutions segment included the business operations of both our Enterprise Gateways and our new Cloud and Connectivity Services segment. Comparative information for the Cloud and Connectivity Services segment is not disclosed as the related business prior to 2015 was not material.

Q4 2015

Revenue for the fourth quarter of 2015 was $144.8 million, a decrease of 2.8% compared to $149.0 million in the fourth quarter of 2014.
Revenue from OEM Solutions was $121.5 million in the fourth quarter of 2015, down 6.2% compared to $129.5 million in the fourth quarter of 2014.
Revenue from Enterprise Solutions was $16.5 million in the fourth quarter of 2015, down 15.3% compared to $19.5 million in the fourth quarter of 2014.
Revenue from Cloud and Connectivity Services was $6.8 million.

GAAP RESULTS

Gross margin was $45.1 million, or 31.1% of revenue, in the fourth quarter of 2015, compared to $50.0 million, or 33.5% of revenue, in the fourth quarter of 2014.
Operating expenses were $45.7 million and loss from operations was $0.7 million in the fourth quarter of 2015, compared to operating expenses of $46.6 million and earnings from operations of $3.4 million in the fourth quarter of 2014.
Net loss was $0.4 million, or $0.01 per diluted share, in the fourth quarter of 2015, compared to a net loss of $1.7 million, or $0.05 per diluted share, in the fourth quarter of 2014.

NON-GAAP RESULTS

Gross margin was 31.2% in the fourth quarter of 2015, compared to 33.6% in the fourth quarter of 2014.
Operating expenses were $41.9 million and earnings from operations were $3.3 million in the fourth quarter of 2015, compared to operating expenses of $40.1 million and earnings from operations of $10.0 million in the fourth quarter of 2014.
Net earnings were $2.5 million, or $0.08 per diluted share, in the fourth quarter of 2015, compared to net earnings of $9.1 million, or $0.29 per diluted share, in the fourth quarter of 2014. The non-GAAP tax rate in the fourth quarter of 2015 was 23.1%.
Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) were $6.3 million in the fourth quarter of 2015, compared to $12.7 million in the fourth quarter of 2014.

Cash and cash equivalents at the end of 2015 were $93.9 million, representing an increase of $5.5 million compared to the end of the third quarter of 2015.
Cash generated from operations during the fourth quarter was $13.1 million.

Full Year 2015

Revenue for 2015 was $607.8 million, an increase of 10.8% compared to $548.5 million in 2014.
Revenue from OEM Solutions was $523.4 million in 2015, up 9.8% compared to $476.6 million in 2014.
Revenue from Enterprise Solutions was $63.0 million in 2015, down 12.2% compared to $71.9 million in 2014.
Revenue from Cloud and Connectivity Services was $21.4 million in 2015.

GAAP RESULTS

Gross margin was $193.8 million, or 31.9% of revenue, in 2015, compared to $179.0 million, or 32.6% of revenue, in 2014.
Operating expenses were $183.7 million and earnings from operations were $10.1 million in 2015, compared to operating expenses of $185.6 million and a loss from operations of $6.6 million in 2014.
Net loss was $2.7 million, or $0.08 per diluted share, in 2015, compared to a net loss of $16.9 million, or $0.53 per diluted share, in 2014.

NON-GAAP RESULTS

Gross margin was 32.0% in 2015, compared to 32.7% in 2014.
Operating expenses were $162.1 million and earnings from operations were $32.4 million in 2015, compared to operating expenses of $156.7 million and earnings from operations of $22.8 million in 2014.
Net earnings were $25.8 million, or $0.80 per diluted share, in 2015, compared to net earnings of $19.8 million, or $0.63 per diluted share, in 2014.
Adjusted EBITDA was $42.9 million in 2015, compared to $35.4 million in 2014.

Cash and cash equivalents decreased $113.1 million during 2015, reflecting the use of funds for the acquisitions of Wireless Maingate AB, Accel Networks LLC and MobiquiThings SAS in 2015, as well as the purchase of an end of life 2G component in sufficient volume to support future sales of certain legacy products.

Financial Guidance

For the full year 2016, we expect revenue to be in the range of $630 million to $670 million and non-GAAP earnings per share to be in the range of $0.60 to $0.90.
In the first quarter of 2016, we expect revenue to be in the range of $135 million and $145 million and non-GAAP earnings per share to be slightly negative to slightly positive.