Sierra Wireless reported results for its third quarter ended Sept. 30.
Revenue for the third quarter 2019 was $174 million compared with $203.4 million in the third quarter of 2018.
Revenue from IoT solutions was $93.4 million in the third quarter, a decrease of 2.1% compared with $95.5 million in the third quarter of 2018 because of lower integrated IoT solutions module revenue, partially offset by stronger subscription, support and other services revenue and stronger sales of enterprise gateway products. Product revenue was $149.4 million, representing 86% of consolidated revenue.
Gross margin was $55 million, or 31.6% of revenue, in the third quarter of 2019 compared with $67.3 million, or 33.1% of revenue, in the third quarter of 2018. Restructuring expense was $6.3 million compared to $200,000 in the third quarter of 2018. Operating expenses were $67.6 million and loss from operations was $12.6 million in the third quarter of 2019 compared with operating expenses of $66.4 million and earnings from operations of $900,000 in the third quarter of 2018.
Net loss was $20.2 million in the third quarter compared with $1 million in the third quarter of 2018.
Kent Thexton, president and CEO, said:
“We continue to make strong progress on our transformation to an integrated IoT (internet of things) solutions company.”
“We had a record quarter in new recurring services wins, and our services pipeline is growing. In addition, we are continuing to drive greater efficiencies in our business under our two-year cost reduction program.”
Cash and cash equivalents at the end of the third quarter of 2019 were $86.9 million, representing an increase of $2.1 million from the end of the second quarter of 2019. The increase in cash was primarily due to cash flow from operating activities, partially offset by capital expenditures.
In the third quarter, Sierra recorded $2.7 million in severance and $3.6 million in transitional costs related to the consolidation of engineering and product management resources, as well as the outsourcing initiatives previously announced.
The company also signed an agreement to purchase the M2M Group of companies in Australia to expand its IoT solutions business in the Asia-Pacific region. The M2M Group is focused on connectivity services and IoT cellular devices with a strong history of IoT leadership and solid carrier relations in the region. The purchase price of $19.8 million is based on cash consideration of $18.8 million for 100% of the equity plus about $1 million for the retirement of certain obligations, subject to normal working capital adjustments.
The company expects the transaction to close early in January 2020, subject to the satisfaction of customary closing conditions.
For the full year 2019 outlook, Sierra expects IoT solutions segment revenue to increase about 3% to 4% year-over-year and embedded broadband segment revenue to decrease about 22% to 23% year-over-year. We expect this will result in full year 2019 revenue in the range of $708 million to $712 million.