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Sierra Wireless Reports Fourth Quarter and Fiscal Year 2009 Results
Feb 10, 2010 (03:02 PM EST)


    TSX: SW
    NASDAQ: SWIR

    -  Fourth quarter revenue increased to $144.0 million - up 6%
       sequentially and 8% over Q4 2008
    -  Strong momentum in machine-to-machine product lines - sequential
       revenue increases of 52% in AirPrime(TM) embedded modules and 11% in
       AirLink(TM) machine-to-machine (M2M) gateways
    -  Launched new AirCard(R) products with AT&T, Sprint, Telus, Telstra and
       Telefonica - including the world's first 3G/4G mobile hotspot
    -  Fourth quarter cash flow from operations of $3.7 million, total cash
       of $134.4 million
    -  Expecting continued sequential revenue growth in Q1 2010

VANCOUVER, Feb. 10 /PRNewswire-FirstCall/ - Sierra Wireless, Inc. (NASDAQ: SWIR, TSX: SW) today reported fourth quarter and fiscal year 2009 results. All results are reported in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles.

"Sierra Wireless continues to build momentum and execute well in our target markets of machine-to-machine and mobile computing," said Jason Cohenour, President and Chief Executive Officer.

"In the fourth quarter of 2009, our M2M product lines experienced strong sequential revenue growth, with sales of our AirPrime embedded modules up 52% to $67.6 million and sales of our AirLink M2M gateways up 11% to a record $11.4 million. Our AirVantage(TM) M2M service and solution delivery platform also continued to gain traction in the quarter, securing new partner, operator and OEM wins. Combined, our M2M product lines represented 55% of total sales in the fourth quarter - a remarkable milestone that illustrates the strength of our diversification progress.

In mobile computing, we launched important new AirCard products with key customers including AT&T, Telus, Telstra and Telefonica. In January of 2010, we achieved another world first in launching the first ever 3G/4G mobile hot spot with Sprint. Achievements like this underscore our commitment to developing new, differentiated AirCard products supporting leading edge air interface technologies for our key operator partners.

Looking forward, we have good visibility to Q1 revenue growth and believe we are uniquely positioned in our target markets with the industry's broadest product line, strongest global presence and unmatched innovation capability. Furthermore, we believe that our target markets of M2M and mobile computing present compelling growth opportunities and we are investing to bolster our leadership position."

Q4 and Fiscal Year 2009 Financial Results - GAAP

Revenue for the fourth quarter of 2009 was $144.0 million, gross margin was $47.4 million, or 32.9% of revenue, operating expenses were $48.5 million, loss from operations was $1.1 million and our net loss was $2.7 million, or loss per share of $0.09.

Revenue for the year ended December 31, 2009 was $526.4 million, compared to $567.3 million in 2008. Gross margin was $172.5 million, or 32.8% of revenue in 2009, compared to $156.7 million, or 27.6% of revenue in 2008. Operating expenses were $210.2 million in 2009, compared to $112.1 million in 2008. Loss from operations was $37.7 million, compared to earnings from operations of $44.6 million in 2008. Net loss was $39.9 million, or loss per share of $1.29, compared to net earnings of $62.6 million, or diluted earnings per share of $2.00 in 2008.

Q4 2009 Financial Results - Non-GAAP

Non-GAAP results exclude transaction costs related to Wavecom, restructuring costs, integration costs, stock based compensation expense, acquisition related amortization, foreign exchange on amounts related to the Wavecom acquisition, tax adjustments and non-controlling interest related to non-GAAP adjustments. Adjusting for these amounts, non-GAAP results for Q4 2009 are as follows:

                                       Q4 2009                      Q4 2008
                           ----------------------------------      --------
    (in millions of          Sierra    Wavecom   Consolidated  Consolidated
      U.S. dollars)        Non-GAAP   Non-GAAP       Non-GAAP      Non-GAAP
                           --------   --------       --------      --------

    Revenue - GAAP and
     Non-GAAP               $ 101.9    $  42.1        $ 144.0       $ 132.9

    Gross margin - GAAP                               $  47.4       $  36.4
       Stock-based
        compensation                                      0.1           0.1
                                                      --------      -------
    Gross margin - Non-GAAP                           $  47.5       $  36.5

    Earnings (loss) from
     operations - GAAP      $   2.3    $  (3.4)       $  (1.1)      $   9.0
      Transaction costs         0.1          -            0.1             -
      Restructuring and
       other costs                -        4.8            4.8             -
      Integration costs         1.4       (0.1)           1.3             -
      Stock-based
       compensation             1.6        0.1            1.7           1.5
      Acquisition related
       amortization             0.6       (3.7)          (3.1)          0.6
                            -------    --------       --------      -------
    Earnings (loss) from
     operations  -
     Non-GAAP               $   6.0    $  (2.3)        $  3.7       $  11.1
                            -------    --------       --------      -------
    Net earnings (loss)
     - GAAP                                            $ (2.7)      $  34.7
      Transaction,
       restructuring,
       integration,
       stock-based
       compensation and
       acquisition
       amortization costs,
       net of tax                                         4.2           1.4
      Unrealized foreign
       exchange (gain) loss                               0.8         (18.4)
      Interest expense                                    0.1             -
      Tax impact related to
       change in tax asset                                0.5          (6.5)
      Non-controlling interest                           (0.2)            -
                                                       --------      -------
    Net earnings - Non-GAAP                            $  2.7       $  11.2
                                                       --------      -------

    Diluted earnings (loss)
     per share - GAAP                                  $(0.09)      $  1.12
    Diluted earnings per share - Non-GAAP              $ 0.09       $  0.36


    On a non-GAAP basis, results for the fourth quarter of 2009, relative to
    guidance provided on October 28, 2009 are as follows:

      Fourth quarter revenue for 2009 of $144.0 million was better than
      guidance of $143.0 million. Our earnings from operations were $3.7
      million, lower than guidance of earnings from operations of $6.0
      million. The shortfall in expected earnings from operations is the
      result of slightly lower gross margin driven by product mix shifts,
      some programmed cost reductions taking more time to realize than
      originally expected and selective investments in compelling growth
      areas. Net earnings of $2.7 million, or diluted earnings per share of
      $0.09, were lower than our guidance of a net earnings of $5.2 million,
      or earnings per share of $0.17.

    On a non-GAAP basis, results for the fourth quarter of 2009, compared to
    the fourth quarter of 2008 are as follows:

      Fourth quarter revenue increased to $144.0 million in 2009, compared to
      $132.9 million for the same period in 2008. Gross margin for the fourth
      quarter of 2009 was 33.0% of revenue, compared to 27.5% for the same
      period in 2008. Operating expenses were $43.8 million and earnings from
      operations were $3.7 million in the fourth quarter of 2009, compared to
      $25.5 million and $11.1 million, respectively, in the same period of
      2008. Net earnings for the fourth quarter of 2009 were $2.7 million, or
      diluted earnings per share of $0.09, compared to net earnings of $11.2
      million, or diluted earnings per share of $0.36, in the same period of
      2008.

    On a non-GAAP basis, results for the fourth quarter of 2009, compared to
    the third quarter of 2009 are as follows:

      Revenue for the fourth quarter of 2009 increased to $144.0 million,
      compared to $135.7 million in the third quarter of 2009. Gross margin
      was 33.0% of revenue in the fourth quarter of 2009, compared to 34.9%
      of revenue in the third quarter of 2009. Operating expenses were $43.8
      million and earnings from operations were $3.7 million in the fourth
      quarter of 2009, compared to $42.3 million and $5.1 million,
      respectively, in the third quarter of 2009. Net earnings for the fourth
      quarter of 2009 were $2.7 million, or diluted earnings per share of
      $0.09, compared to $5.9 million, or diluted earnings per share of $0.19
      in the third quarter of 2009.

    Our balance sheet remains strong, with $134.4 million of cash, cash
equivalents and short-term investments at December 31, 2009. In the fourth
quarter of 2009, we generated $3.7 million of cash from operations on a GAAP
basis.

    Fourth Quarter and Recent Highlights Included:

    -  On January 6, 2010, Sprint launched the Overdrive(TM) by Sierra
       Wireless, the world's first 3G/4G Mobile Hotspot. Overdrive allows
       multiple Wi-Fi enabled devices to be connected simultaneously through
       a single connection to Sprint's high speed 3G and 4G networks.

    -  AT&T launched the USBConnect Lightning, a new HSPA AirCard from Sierra
       Wireless. Lightning is now available in AT&T retail, business and
       online channels across the US.

    -  We introduced the MC8795V embedded module, a high performance HSPA
       device for OEMs. This latest addition to the AirPrime embedded module
       family supports 7.2 Mbps downlink speeds, quad-band operation, and
       antenna diversity.

    -  Telefonica launched our new AirCard(R) USB 307 - the first HSPA+
       device available in Spain, supporting download speeds of up to 21
       Mbps.

    -  We launched a world-first embedded SIM solution based on our inSIM
       technology with Vodacom and Tracker in South Africa. Vodacom and
       Tracker intend to target vehicle tracking opportunities with the
       solution.

    -  We launched a major new release of M2M Studio, our fully integrated
       environment for the development of embedded M2M software, enabling
       developers to easily create, compile, download, debug and test their
       M2M applications.

    -  We announced a collaboration with Atos Worldline who intends to
       leverage our AirVantage services platform for the development and
       deployment of large scale M2M solutions in Europe.

    -  We announced a collaboration with MobiPower to develop asset
       protection solutions based on the Sierra Wireless AirPrime WMP100
       Wireless Microprocessor(R) and Open AT(R) application environment.

Financial Guidance

The following guidance for the first quarter of 2010 reflects our current business indicators and expectations. This guidance is presented on a non-GAAP basis, which excludes Wavecom transaction and integration costs, restructuring costs, stock-based compensation expense, acquisition amortization, foreign exchange on amounts related to the Wavecom acquisition and non-controlling interest related to non-GAAP adjustments.

Our guidance for the first quarter of 2010 reflects the uncertain macro economic environment and expected component supply constraints on certain products. Our guidance also includes some revenue contribution from recent and expected new product launches and the uncertainties associated with these launches could affect our ability to achieve guidance.

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.

                                     Consolidated
    Q1 2010 Guidance                     Non-GAAP
    ----------------                 ------------

    Revenue                        $150.0 million
    Earnings from operations         $3.5 million
    Net earnings                     $3.3 million
    Diluted earnings per share        $0.11/share

Conference Call, Webcast and Instant Replay

We will host a conference call to review our results on Wednesday, February 10, 2010 at 2:30 PM PDT, 5:30 PM EDT. You can participate in the conference call either via telephone or webcast. To participate in this conference call, please dial the following number approximately ten minutes prior to the commencement of the call.

    Telephone participation:

      Toll free (Canada and US):      1-888-231-8191  Passcode: Not required
      or
      Outside Canada and the US:      1-647-427-7450 Passcode: Not required

    Webcast:

      We will also broadcast our conference call over the Internet. To access
      the web broadcast, please follow the link below and choose one of the
      following options:

        -  If you are following the conference call on the phone, please
           choose the "Non-Streaming" version

        -  If you would prefer to follow online only, with streaming audio,
           select any of the other options according to your preferred format


https://event.on24.com/eventRegistration/EventLobbyServlet?target=registration
.jsp&eventid=183259&sessionid=1&key=34929FC7A68D643ED92956AC9727EFD4&sourcepag
e=register


      This webcast event will be optimized for Microsoft Windows Media Player
      version 11. To download go to:

      http://www.microsoft.com/windows/windowsmedia/download

      The webcast will be available at the above link for 90 days following
      the call.

    Should you be unable to participate, Instant Replay (audio) will be
    available following the conference call for 7 business days.

      Audio only dial: 1-800-642-1687 or 1-416-849-0833
      Passcode: 45561869 followed by the number sign

    We look forward to having you participate in our call.

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this press release that are not based on historical facts constitute forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws ("forward-looking statements"). These forward-looking statements are not promises or guarantees of future performance but are only predictions that relate to future events, conditions or circumstances or our future results, performance, achievements or developments and are subject to substantial known and unknown risks, assumptions, uncertainties and other factors that could cause our actual results, performance, achievements or developments in our business or in our industry to differ materially from those expressed, anticipated or implied by such forward-looking statements. Forward-looking statements in this press release include all financial guidance for the first quarter of 2010, and all other disclosure regarding possible events, conditions, circumstances or results of operations that are based on assumptions about future economic conditions, courses of action and other future events. We caution you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. These forward-looking statements appear in a number of different places in this press release and can be identified by words such as "may", "estimates", "projects", "expects", "intends", "believes", "plans", "anticipates", "continue", "growing", "expanding", or their negatives or other comparable words. Forward-looking statements include statements regarding the outlook for our future operations, plans and timing for the introduction or enhancement of our services and products, statements concerning strategies or developments, statements about future market conditions, supply conditions, end customer demand conditions, channel inventory and sell through, revenue, gross margin, operating expenses, profits, forecasts of future costs and expenditures, the outcome of legal proceedings, and other expectations, intentions and plans that are not historical fact. The risk factors and uncertainties that may affect our actual results, performance, achievements or developments are many and include, amongst others, our ability to develop, manufacture, supply and market new products that we do not produce today that meet the needs of customers and gain commercial acceptance, our reliance on the deployment of next generation networks by major wireless operators, the continuous commitment of our customers, and increased competition. These risk factors and others are discussed in our Annual Information Form and Management's Discussion and Analysis of Financial Condition and Results of Operations, which may be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov and in our other regulatory filings with the Securities and Exchange Commission in the United States and the Provincial Securities Commissions in Canada. Many of these factors and uncertainties are beyond our control. Consequently, all forward-looking statements in this press release are qualified by this cautionary statement and we cannot assure you that actual results, performance, achievements or developments that we anticipate will be realized. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions and we do not undertake any obligation to update forward-looking statements should the assumptions related to these plans, estimates, projections, beliefs and opinions change, except as required by law.

About Sierra Wireless

Sierra Wireless (NASDAQ: SWIR - TSX: SW) products connect people and machines to wireless networks around the world. We offer an advanced, comprehensive product line, addressing consumer, enterprise, original equipment manufacturer and specialized vertical industry markets. We also offer a wide range of professional and operated services. Our solutions are used for mobile computing, transportation, industrial M2M (machine-to-machine), enterprise, residential and consumer communications applications. For more information about Sierra Wireless, visit www.sierrawireless.com.

"AirCard" is a registered trademark of Sierra Wireless. Other product or service names mentioned herein may be the trademarks of their respective owners.

                            SIERRA WIRELESS, INC.
    Consolidated Statements of Operations and Retained Earnings (Deficit)
    (Expressed in thousands of United States ("U.S.") dollars, except per
                               share amounts)
    (Prepared in accordance with United States generally accepted accounting
                          principles ("U.S. GAAP"))
                                 (Unaudited)

                                    Three months ended         Year ended
                                    ------------------         ----------
                                         December 31,          December 31,
                                         ------------          ------------
                                       2009       2008       2009       2008
                                       ----       ----       ----       ----

    Revenue...................... $ 143,952  $ 132,867  $ 526,384  $ 567,308
    Cost of goods sold...........    96,576     96,482    353,931    410,611
                                  ---------- ---------- ---------- ----------
    Gross margin.................    47,376     36,385    172,453    156,697
                                  ---------- ---------- ---------- ----------

    Expenses:
      Sales and marketing........    14,551      8,204     52,804     32,684
      Research and development...    20,179     13,166     80,821     54,060
      Administration.............     8,617      4,871     32,990     20,567
      Acquisition costs..........        95          -      7,785          -
      Restructuring..............     4,678          -     20,605          -
      Integration................     1,337          -      3,859          -
      Amortization...............      (997)     1,186     11,313      4,814
                                  ---------- ---------- ---------- ----------
                                     48,460     27,427    210,177    112,125
                                  ---------- ---------- ---------- ----------
    Earnings (loss) from
     operations..................    (1,084)     8,958    (37,724)    44,572

    Foreign exchange gain
     (loss)......................    (1,754)    20,800      1,261     20,583
    Other income (expense).......      (279)     1,112     (4,399)     5,579
                                  ---------- ---------- ---------- ----------
    Earnings (loss) before
     income taxes................    (3,117)    30,870    (40,862)    70,734
    Income tax expense
     (recovery)..................        12     (3,809)       340      8,151
                                  ---------- ---------- ---------- ----------
    Net earnings (loss)..........    (3,129)    34,679    (41,202)    62,583
    Net loss attributable to the
     non-controlling interest....      (394)         -     (1,303)         -
                                  ---------- ---------- ---------- ----------
    Net earnings (loss)
     attributable to Sierra
     Wireless, Inc...............    (2,735)    34,679    (39,899)    62,583
    Retained earnings (deficit),
     beginning of period.........   (15,891)   (13,406)    21,273    (40,602)
    Excess of purchase price over
     assigned value of common
     shares acquired.............         -          -          -       (708)
                                  ---------- ---------- ---------- ----------
    Retained earnings (deficit),
     end of period............... $ (18,626) $  21,273  $ (18,626) $  21,273
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------

    Earnings (loss) per share:
      Basic...................... $   (0.09) $    1.12  $   (1.29) $    2.00
      Diluted.................... $   (0.09) $    1.12  $   (1.29) $    2.00
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------

    Weighted average number of
     shares (in thousands):
      Basic......................    31,042     31,032     31,035     31,254
      Diluted....................    31,042     31,032     31,035     31,323
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------


                            SIERRA WIRELESS, INC.
                         Consolidated Balance Sheets
                   (Expressed in thousands of U.S. dollars)
                   (Prepared in accordance with U.S. GAAP)

                                                   December 31,  December 31,
                                                   ------------  ------------
                                                          2009          2008
                                                          ----          ----
    Assets
    Current assets:
      Cash and cash equivalents..................... $ 107,491     $  63,258
      Restricted cash...............................         -       191,473
      Short-term investments........................    26,898        18,003
      Accounts receivable...........................    86,466        67,058
      Inventories...................................    24,708        33,031
      Deferred income taxes.........................     6,168         5,565
      Prepaid expenses and other....................    14,039         6,233
                                                     ----------    ----------
                                                       265,770       384,621

    Fixed assets....................................    27,956        22,935
    Intangible assets...............................    86,674        15,291
    Goodwill........................................    95,064        33,013
    Deferred income taxes...........................     1,794         2,296
    Other assets....................................     7,261         4,230
                                                     ----------    ----------
                                                     $ 484,519     $ 462,386
                                                     ----------    ----------
                                                     ----------    ----------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable.............................. $  71,035     $  38,631
      Accrued liabilities...........................    54,419        47,568
      Deferred revenue and credits..................       750           683
      Current portion of long-term obligations......     3,371           193
      Current portion of obligations under capital
       leases.......................................       293             -
                                                     ----------    ----------
                                                       129,868        87,075

    Long-term liabilities...........................     3,197           316
    Obligations under capital leases................       245             -
    Other long-term liabilities.....................    32,663        14,789
    Deferred income taxes...........................     1,950         2,758

    Shareholders' equity:
      Share capital.................................   326,043       325,893
      Treasury shares, at cost......................    (6,442)       (1,487)
      Additional paid-in capital....................    13,133        12,518
      Retained earnings (deficit)...................   (18,626)       21,273
      Accumulated other comprehensive loss..........       (37)         (749)
                                                     ----------    ----------
                                                       314,071       357,448
      Non-controlling interest in Wavecom S.A.......     2,525             -
                                                     ----------    ----------
      Total shareholders' equity....................   316,596       357,448
                                                     ----------    ----------
                                                     $ 484,519     $ 462,386
                                                     ----------    ----------
                                                     ----------    ----------



                            SIERRA WIRELESS, INC.
                    Consolidated Statements of Cash Flows
                   (Expressed in thousands of U.S. dollars)
                   (Prepared in accordance with U.S. GAAP)
                                 (Unaudited)

                                    Three months ended         Year ended
                                    ------------------         ----------
                                         December 31,          December 31,
                                         ------------          ------------
                                       2009       2008       2009       2008
                                       ----       ----       ----       ----

    Cash flows from operating
     activities:
      Net earnings (loss)........ $  (3,129) $  34,679  $ (41,202) $  62,583
      Adjustments to reconcile
       net earnings (loss) to
       net cash provided by
       operating activities
        Amortization.............     2,159      4,434     32,704     16,309
        Stock-based
         compensation............     1,670      1,468      8,097      6,381
        Non-cash restructuring
         and other...............     1,748          -      5,911          -
        Deferred income taxes....       282     (4,944)       282     (3,842)
        Loss on disposal.........       211        304        204        377
        Unrealized foreign
         exchange loss (gain)
         on restricted cash......         -    (18,416)    15,653    (18,416)
        Unrealized foreign
         exchange loss on term
         loan....................         -          -      1,215          -
        Tax benefit related to
         stock option deduction..         -         57          -         57
        Gain on sale of
         investments.............         -       (565)         -       (565)
      Changes in operating
       assets and liabilities
        Accounts receivable......    (1,686)    21,840     20,175     14,759
        Inventories..............    (1,472)       252     15,676     (8,043)
        Prepaid expenses and
         other assets............     2,878     (4,675)     3,888        248
        Accounts payable.........     5,935       (817)    (1,301)     7,468
        Accrued liabilities......    (4,587)    (1,471)   (12,793)     8,668
        Deferred revenue and
         credits.................      (353)       140       (810)       149
                                  ---------- ---------- ---------- ----------
      Net cash provided by
       operating activities......     3,656     32,286     47,699     86,133

      Cash flows from investing
       activities:
        Business acquisition,
         net of cash acquired
         of $139,785.............         -          -    (26,493)       (35)
        Acquisition of OCEANE
         convertible bonds.......         -          -   (104,767)         -
        Decrease (increase) in
         restricted cash.........         -   (173,057)   175,820   (173,057)
        Proceeds on disposal.....        32          -        155          2
        Purchase of fixed
         assets..................    (5,024)    (4,663)   (13,296)   (19,653)
        Increase in intangible
         assets..................    (1,468)      (447)    (6,543)    (3,025)
        Purchase of long-term
         investments.............         -    (14,962)         -    (20,131)
        Proceeds on sale of
         long-term investments...         -     39,797          -     39,797
        Purchase of short-term
         investments.............   (20,888)   (94,595)   (68,333)  (237,366)
        Proceeds on maturity of
         short-term investments..    19,300    159,641     59,560    313,775
                                  ---------- ---------- ---------- ----------
        Net cash provided by
         (used in) investing
         activities..............    (8,048)   (88,286)    16,103    (99,693)

      Cash flows from financing
       activities:
        Proceeds on issuance of
         term loan...............         -          -    102,716          -
        Repayment of term loan...         -          -   (103,931)         -
        Financing costs..........       (57)         -     (3,971)         -
        Issuance of common shares,
         net of share issue
         costs...................        91          -         96      1,023
        Purchase of treasury
         shares for RSU
         distribution............         -          -     (6,417)    (2,498)
        Repurchase of common
         shares..................         -          -          -     (4,982)
        Proceeds on exercise of
         Wavecom options.........         -          -      4,148          -
        Decrease in long-term
         liabilities.............    (1,338)      (127)    (2,238)      (349)
                                  ---------- ---------- ---------- ----------
      Net cash used in financing
       activities................    (1,304)      (127)    (9,597)    (6,806)
    Effect of foreign exchange
     on cash and cash
     equivalents.................     2,602          -     (9,972)         -
                                  ---------- ---------- ---------- ----------
    Net increase (decrease) in
     cash and cash equivalents...    (3,094)   (56,127)    44,233    (20,366)
    Cash and cash equivalents,
     beginning of period.........   110,585    119,385     63,258     83,624
                                  ---------- ---------- ---------- ----------
    Cash and cash equivalents,
     end of period............... $ 107,491  $  63,258  $ 107,491  $  63,258
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------

SOURCE Sierra Wireless, Inc.