Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported results
for its fourth quarter and full year, ending December 31, 2016. 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.
"In the fourth quarter of 2016, we delivered strong financial results,
driven by sequential and year-over-year revenue growth, improved gross
margin and sound expense management," said Jason Cohenour, President and
CEO. "In 2016, we continued to strengthen our position as a leader in
device-to-cloud solutions for the IoT with the introduction of new
products and services, new customer wins, targeted investments in sales
& marketing and two strategic acquisitions."
Revenue for the fourth quarter of 2016 was $163.0 million, an increase
of 12.5% compared to $144.8 million in the fourth quarter of 2015.
Revenue from OEM Solutions was $135.2 million in the fourth quarter of
2016, up 11.2% compared to $121.5 million in the fourth quarter of 2015.
Revenue from Enterprise Solutions was $21.0 million in the fourth
quarter of 2016, up 27.1% compared to $16.5 million in the fourth
quarter of 2015. Revenue from Cloud and Connectivity Services was $6.8
million in the fourth quarter of 2016, comparable to the fourth quarter
Gross margin in the fourth quarter of 2016 was 42.2%, compared to 31.1%
in the same period of 2015. Gross margin was favorably impacted by a
$14.4 million reduction in our cost of goods sold as a result of a
change in estimate of our Intellectual Property ("IP") royalty
obligations, of which $13.0 million relates to a one-time adjustment in
our accrued royalty obligations effective October 1, 2016, and $1.4
million relates to a lower royalty accrual amount for products sold
during the three months ended December 31, 2016. In addition, gross
margin benefited from continued product cost reductions in our OEM and
Enterprise Solutions segments.
Cash and cash equivalents at the end of the fourth quarter of 2016 were
$102.8 million, representing a decrease of $9.2 million compared to the
end of the third quarter of 2016. The decrease in cash was primarily due
to capital expenditures, the acquisition of Blue Creation, and the
repurchase of common shares for cancellation.
FULL YEAR 2016
Revenue for 2016 was $615.6 million, an increase of 1.3% compared to
$607.8 million in 2015. Revenue from OEM Solutions was $516.5 million in
2016, down 1.3% compared to $523.4 million in 2015. Revenue from
Enterprise Solutions was $71.5 million in 2016, up 13.3% compared to
$63.0 million in 2015. Revenue from Cloud and Connectivity Services was
$27.6 million in 2016, up 29.2% compared to $21.4 million in 2015.
Gross margin was 35.4% in 2016 compared to 31.9% in 2015. The increase
was primarily a result of the change in estimate mentioned above. Other
favorable gross margin drivers included continued product cost
reductions in our OEM and Enterprise Solutions segments and the impact
of two legal settlements during the first half of 2016.
For the first quarter of 2017, we expect revenue to be in the range of
$152 million to $161 million and non-GAAP earnings per share to be in
the range of $0.13 to $0.20.
This Non-GAAP guidance 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.
Non-GAAP Financial Measures
We disclose non-GAAP financial measures as we believe they provide
useful information on actual operating performance 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 gross margin excludes the impact of stock-based compensation
expense and related social taxes and certain other nonrecurring costs or
Non-GAAP earnings (loss) from operations excludes the impact of
stock-based compensation expense and related social taxes, amortization
related to acquisitions, acquisition-related and integration expense,
restructuring expense, impairment and certain other nonrecurring costs
In addition to the above, Non-GAAP net earnings (loss) and non-GAAP
earnings (loss) per share exclude the impact of foreign exchange gains
or losses on translation of certain balance sheet accounts and certain
We use the above-noted non-GAAP financial measures for planning purposes
and to allow us to assess the performance of our business before
including the impacts of the items noted above as they affect the
comparability of our financial results. These non-GAAP measures are
reviewed regularly by management and the Board of Directors as part of
the ongoing internal assessment of our operating performance. We also
use non-GAAP earnings from operations as one component in determining
short-term incentive compensation for management employees.
Adjusted EBITDA is defined as net earnings (loss) plus stock-based
compensation expense and related social taxes, acquisition-related and
integration expense, restructuring expense, impairment, certain other
nonrecurring costs or recoveries, amortization, foreign exchange gains
or losses on translation of certain balance sheet accounts, interest and
income tax expense. Adjusted EBITDA is a metric used by investors and
analysts for valuation purposes and we believe that it is an important
indicator of our operating performance and our ability to generate
liquidity through operating cash flow that will fund future working
capital needs and capital expenditures.
Conference call and webcast details
Sierra Wireless President and CEO, Jason Cohenour, and CFO, David
McLennan, will host a conference call and webcast with analysts and
investors to review the results on Thursday, February 9, 2017, at 5:30
PM Eastern Time (2:30 PM PT). A live slide presentation will be
available for viewing during the call from the link provided below.
To participate in this conference call, please dial the following number
approximately ten minutes prior to the start of the call:
To access the webcast, please follow the link below:
Wireless Q4 2016 and YE 2016 Conference Call and Webcast
If the above link does not work, please copy and paste the following URL
into your browser:
The webcast will remain available at the above link for one year
following the call.
Cautionary Note Regarding Forward-Looking Statements
Certain statements and information in this press release are not based
on historical facts and constitute forward-looking statements or
forward-looking information within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995 and Canadian securities laws
("forward-looking statements") including statements and information
relating to our financial guidance for the first quarter of 2017 and our
fiscal year 2017, our business outlook for the short and longer term,
statements regarding our strategy, plans and future operating
performance. Forward-looking statements are provided to help you
understand our views of our short and long term plans, expectations and
prospects. We caution you that forward-looking statements may not be
appropriate for other purposes. We do not intend to update or revise our
forward-looking statements unless we are required to do so by securities
About Sierra Wireless
Sierra Wireless (NASDAQ: SWIR) (TSX: SW) is building the Internet of
Things with intelligent wireless solutions that empower organizations to
innovate in the connected world. We offer the industry's most
comprehensive portfolio of 2G, 3G and 4G embedded modules and gateways,
seamlessly integrated with our secure cloud and connectivity services.
OEMs and enterprises worldwide trust our innovative solutions to get
their connected products and services to market faster. Sierra Wireless
has more than 1,100 employees globally and operates R&D centers in North
America, Europe and Asia. For more information, visit www.sierrawireless.com.
"AirPrime," "AirLink," and "AirVantage" are trademarks 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 COMPREHENSIVE EARNINGS
(In thousands of U.S. dollars, except where otherwise stated)
taxes of $nil
CONSOLIDATED BALANCE SHEETS
Accounts receivable, net of allowance for doubtful accounts of
$2,486(December 31, 2015 - $2,088)
Common stock: no par value; unlimited shares authorized; issued and
outstanding: 31,859,960 shares (December 31, 2015 - 32,337,201shares)
issued and outstanding: nil shares
Treasury stock: at cost: 355,471 shares (December 31, 2015 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
SIERRA WIRELESS, INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS BY QUARTER
(in thousands of U.S. dollars, except whereotherwise
Stock-based compensation and relatedsocial taxes
Earnings (loss) from operations - Non-GAAP
Stock-based compensation and relatedsocial taxes,
restructuring, acquisition-related, integration and other
Amortization (exclude acquisition-relatedamortization)
(In thousands of U.S.dollars, except whereotherwise
Gross margin (2) (3)
Gross margin % (2)(3)
Gross margin (1) (2) (3)
Gross margin % (1) (2)(3)
Cloud and ConnectivityServices
(1) Q1 2016 Enterprise Solutions results include a $1.9 million
recovery from a legal settlement with a supplier related to a quality
issue with a component used in some of our gateway products. Excluding
this recovery, GAAP and Non-GAAP gross margin percentage would have been
52.4% and 52.5%, respectively.
(2) Q2 2016 OEM Solutions results include a $1.7 million recovery
from certain legal costs pursuant to a favorable arbitration decision on
a contract dispute with an intellectual property licensor. Excluding
this recovery, GAAP and Non-GAAP gross margin percentage would have been
29.6% and 29.7%, respectively. Q2 2016 Enterprise Solutions results also
include a $0.2 million recovery from this arbitration decision.
Excluding this recovery, GAAP and Non-GAAP gross margin percentage would
have been 52.7% and 52.8%, respectively.
(3) Q4 2016 OEM Solutions and Enterprise Solutions GAAP gross
margins include a favorable impact of $12.9 million and $1.5 million,
respectively, of a change in estimate on accrued royalty obligations.
This is comprised of two components, an amount of $11.7 million and
$1.3 million, respectively, related to a one-time reduction effective
October 1, 2016 (excluded from non-GAAP gross margin), and a $1.2
million and $0.2 million, respectively, favorable impact related to
royalties accrued on the products sold in Q4, 2016 (included in non-GAAP
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