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Sierra Wireless Reports Fourth Quarter and Fiscal Year 2005 Results
VANCOUVER, Jan. 26 /PRNewswire-FirstCall/ -- Sierra Wireless, Inc. is reporting fourth quarter results.
Our results are reported in US dollars and are prepared in accordance with United States generally accepted accounting principles.
"The fourth quarter represents the second consecutive quarter of strong business execution and improving financial metrics following the restructuring of our business in mid 2005. During the fourth quarter, we had two first-to-market product launches, grew sales by 37% over the third quarter, had stronger gross margins, showed a modest profit and had positive cash flow" said Jason Cohenour, President and Chief Executive Officer. "Our intense focus on our core PC Card and Embedded Module businesses is driving this recovery and is strengthening our competitive position in both areas, which we believe have significant growth opportunities. While we are pleased with the progress we have made, we also recognize that a lot of hard work and continued strong execution is required before we achieve the goals we have set for ourselves in terms of product line strength, market position and financial results."
Our revenue for the three months ended December 31, 2005 amounted to $37.6 million, gross margin was $14.5 million, operating expenses were $14.6 million and net earnings were $0.9 million. Our diluted earnings per share were $0.04 for the fourth quarter of 2005. Our balance sheet remains strong, with $104.1 million of cash, short-term and long-term investments.
Our fourth quarter results include a favorable adjustment to gross margin of $1.2 million, or 3.2%, resulting from the finalization of an intellectual property royalty agreement, the cost of which had previously been accrued for at higher rates.
Results for the fourth quarter of 2005 relative to company guidance originally provided on October 27, 2005 and as updated on January 4, 2006 are as follows:
Fourth quarter revenue for 2005 of $37.6 million was in line with our
updated guidance of approximately $37.0 million and better than our
original guidance of approximately $32.0 million. Gross margin was
38.6%, higher than our guidance of 33%. Operating expenses were
$14.6 million, higher than our guidance of $14.0 million. Our net
earnings of $0.9 million, or diluted earnings per share of $0.04,
were better than our original guidance of a net loss of approximately
$2.9 million, or loss per share of $0.12. Our cash flow from
operations was positive $3.4 million, consistent with our updated
guidance of positive cash flow and better than our original guidance
of negative cash flow.
Results for the fourth quarter of 2005, compared to the fourth quarter of 2004 are as follows:
Fourth quarter revenue decreased by 36.1% to $37.6 million in 2005,
from $58.8 million for the same period in 2004. Gross margin was
38.6% compared to 38.8%. Operating expenses declined 7.6% to
$14.6 million in the fourth quarter of 2005, compared to
$15.8 million for the same period in 2004. Net earnings for the
fourth quarter of 2005 were $0.9 million, or diluted earnings per
share of $0.04, compared to net earnings of $7.3 million, or diluted
earnings per share of $0.28, in the fourth quarter of 2004.
Results for the fourth quarter of 2005, compared to the third quarter of 2005 were as follows:
Revenue for the three months ended December 31, 2005 amounted to
$37.6 million, an increase of 36.7% compared to $27.5 million in the
third quarter of 2005. Gross margins were 38.6% in the fourth quarter
of 2005, compared to 34.9% in the third quarter of 2005. Operating
expenses were $14.6 million in the fourth quarter of 2005, compared
to $14.0 million in the third quarter of 2005. Net earnings were
$0.9 million for the fourth quarter of 2005, or earnings per share of
$0.04, compared to net loss of $3.1 million, or loss per share of
$0.12, for the third quarter of 2005.
Results for fiscal year 2005, excluding the impact of restructuring, other charges and legal provisions of $19.5 million, compared to fiscal year 2004 were as follows:
Revenue for the year ended December 31, 2005 decreased by 49.3% to
$107.1 million, compared to $211.2 million in 2004. Gross margin for
2005 was 35.4%, compared to 39.6% for 2004. Operating expenses were
$58.7 million in 2005, compared to $56.0 million in 2004. Net loss
was $17.0 million in 2005, or $0.67 per diluted share, compared to
net earnings of $24.9 million in 2004, or $0.96 per diluted share.
Results for fiscal year 2005, including the impact of restructuring, other charges and legal provisions of $19.5 million, compared to fiscal year 2004 were as follows:
Revenue for the year ended December 31, 2005 decreased by 49.3% to
$107.1 million, compared to $211.2 million in 2004. Gross margin for
2005 was 23.6%, compared to 39.6% for 2004. Operating expenses were
$65.0 million in 2005, compared to $56.0 million in 2004. Net loss
was $36.5 million in 2005, or $1.44 per diluted share, compared to
net earnings of $24.9 million in 2004, or $0.96 per diluted share.
Fourth Quarter Highlights Included:
Progress on products using CDMA technology:
- We have announced OEM design wins with Lenovo and HP for our
MC5720 PCI express Mini Card embedded module ("minicard") for EVDO
networks and commenced commercial shipments of our EVDO minicard
to Lenovo in the fourth quarter. Our MC5720 is the world's first
3G wireless minicard module for laptop OEMs. Early in 2006, we
announced that Lenovo had selected our MC5720 minicard for two
additional business notebook computers. Early in the first quarter
of 2006, HP announced the availability of their first notebook
incorporating our MC5720 minicard. Our MC5720 minicard has been
certified for operation on both the Sprint and Verizon EVDO
networks.
- Our AirCard 580 EVDO PC Card is now available to Telus Mobility
customers in conjunction with the launch of its National Wireless
High Speed Network, which offers customers in five major urban
centers across Canada high-speed wireless access to the Internet,
e-mail and other applications.
- We have also commenced the development of next generation EVDO
(Rev A) PC cards and minicards, which we expect to be commercially
available in the second half of 2006.
Progress on products using GSM or UMTS technology:
- We have successfully completed the development of the AirCard 860
and AirCard 850, our first UMTS/HSDPA PC cards, and during the
fourth quarter of 2005 commenced commercial shipments of these
products to Cingular in North America, as well as Manx Telecom and
sunrise in Europe, making us the first company in the world to
launch a fully functional UMTS/HSDPA PC card.
- The MC8755 and MC8765 PCI Express Mini Card modules (minicard) for
UMTS/HSDPA networks are available to OEM customers for testing and
integration, with commercial shipments expected to begin in the
first quarter of 2006. In 2005, we announced that we had secured a
design win for our HSDPA minicard with one of the major laptop
OEMs that is currently using our MC5720 EVDO minicard. We have
also secured an additional OEM design win for our HSDPA minicard
with another major laptop OEM focused principally on the European
market.
- We have also commenced the development of next generation HSDPA
(3.6Mbps/tri-band) PC cards and minicards, which we expect to be
commercially available in the second half of 2006.
Corporate Developments:
- During the quarter, Jason Cohenour, previously our COO, was named
as our President and CEO. Jason succeeded David Sutcliffe, who has
served as the company's CEO since 1995. Mr. Sutcliffe, at the
request of the Board of Directors, continues to serve the company
in a non-management capacity as a member of the Board.
Financial Guidance
The following guidance for the first quarter of 2006 reflects our current business indicators and expectations. Our guidance for the quarter includes a higher than usual contribution from recently launched and soon-to-be launched products. There are uncertainties associated with the launch and early ramp of new products that could affect our ability to achieve guidance. Inherent in this guidance are risk factors that are described in 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.
Q1 2006
-------
Guidance
--------
Revenue $40.0 million
Gross margin 33.5%
Operating expenses before
stock-based compensation $13.70 million
Stock-based compensation expense $1.0 million
Operating expenses after
stock-based compensation $14.70 million
Net loss $(0.8) million
Loss per share $(0.03)
Excluding stock option expense, net income is expected to be
approximately breakeven to slightly positive
Cash flow from operations Negative
Forward-Looking Statements
This press release contains forward-looking statements that are not promises or guarantees but are only predictions that relate to future events or our future performance or state other forward-looking information and are subject to substantial risks and uncertainties that could cause our actual results, performance or achievements to differ materially from those expressed, anticipated or implied by the forward-looking statements. These forward-looking statements relate to, among other things, our revenue, earnings, and other financial guidance for the first quarter of fiscal 2006, plans, objectives and timing for the introduction or enhancement of our services and products, statements concerning strategies, developments, statements about future market conditions, supply conditions, channel and end customer demand conditions, projected or future revenues, gross margins, operating expenses, profits and other statements of expectations, intentions, objectives and plans that are not statements of historical facts. When used in this press release, the words "may", "plan", "expect", "believe", "intends", "anticipates", "estimates", "predicts" and similar expressions generally identify forward-looking statements. Forward-looking statements reflect our current expectations. The risks and uncertainties that may affect our actual results, performance or achievements are many and include, among others, our ability to develop, manufacture, supply and market new products that we do not produce today and that may not gain commercial acceptance, our reliance on the deployment of next generation networks by major wireless operators, and increased competition. These risk factors and others are discussed in our Annual Information Form which may be found on SEDAR at http://www.sedar.com/ and in our other regulatory filings with the Securities and Exchange Commission in the United States and the Provincial Securities Commissions in Canada. These factors should be reviewed carefully and you should not place undue reliance on any forward-looking statements. Unless otherwise required by applicable securities laws, Sierra Wireless disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Comparative figures
We have reclassified certain of the figures presented for comparative purposes to conform to the financial statement presentation we adopted for the current period.
About Sierra Wireless
Sierra Wireless is a leader in delivering highly differentiated wireless solutions that enable our customers to improve their productivity and lifestyle. Sierra Wireless develops and markets AirCard, the industry-leading wireless PC card line for portable computers; embedded modules for OEM wireless applications and the MP line of rugged vehicle-mounted connectivity solutions. For more information about Sierra Wireless, please visit http://www.sierrawireless.com/.
"AirCard" and "Voq" are trademarks of Sierra Wireless, Inc. Other product or service names mentioned herein may be the trademarks of their respective owners.
Conference Call, Webcast and Instant Replay
We will host a conference call to review our results on Thursday, January 26, 2006 at 2:30 PM PST, 5:30 PM EST. You can participate in the conference call either via telephone or webcast. To participate in this conference call, please connect approximately five minutes prior to the commencement of the call.
Telephone participation:
Please dial the following number:
1-800-428-5596 Passcode: Not required
or
1-416-641-6668 Passcode: Not required
Webcast (to listen)
The Company will also broadcast its conference call over the
Internet. To access the web broadcast, click on this URL:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)1353220
This webcast event will be optimized for Microsoft Windows media
player version 9. To download go to:
http://www.microsoft.com/windows/windowsmedia/download.
Should you be unable to participate, Instant Replay (audio and webcast) will be available following the conference call.
- Audio only dial (available for 7 business days): 1-800-558-5253 or
416-626-4100 Passcode: 21268407
- Webcast (available for 90 days):
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)1353220
No Passcode is required.
We look forward to having you participate in our call.
FOR FURTHER INFORMATION PLEASE CONTACT:
Sierra Wireless, Inc.
David G. McLennan
Chief Financial Officer
(604) 231-1185
Website: http://www.sierrawireless.com/
Email: dmclennan@sierrawireless.com
SIERRA WIRELESS, INC.
Consolidated Statements of Operations and Deficit
(Expressed in thousands of United States dollars,
except per share amounts)
(Prepared in accordance with United States generally accepted
accounting principles (GAAP))
(Unaudited)
Three months ended Year ended
------------------ ----------
December 31, December 31,
------------ ------------
2005 2004 2005 2004
---- ---- ---- ----
Revenue...................... $ 37,560 $ 58,820 $ 107,144 $ 211,205
Cost of goods sold........... 23,058 35,974 81,848 127,600
---------- ---------- ---------- ----------
Gross margin................. 14,502 22,846 25,296 83,605
---------- ---------- ---------- ----------
Expenses
Sales and marketing........ 3,986 5,866 15,551 20,029
Research and development,
net....................... 7,841 7,231 30,365 24,527
Administration............. 1,556 2,041 10,818 8,993
Restructuring and other
charges................... 329 - 5,255 -
Amortization............... 899 651 2,997 2,438
---------- ---------- ---------- ----------
14,593 15,789 64,986 55,987
---------- ---------- ---------- ----------
Earnings (loss) from
operations.................. (91) 7,057 (39,690) 27,618
Other income................. 863 1,251 2,277 1,700
---------- ---------- ---------- ----------
Earnings (loss) before
income taxes................ 772 8,308 (37,413) 29,318
Income tax expense
(recovery).................. (139) 1,042 (945) 4,398
---------- ---------- ---------- ----------
Net earnings (loss).......... 911 7,266 (36,468) 24,920
Deficit, beginning of
period...................... (83,768) (53,655) (46,389) (71,309)
---------- ---------- ---------- ----------
Deficit, end of period....... $ (82,857) $ (46,389) $ (82,857) $ (46,389)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings (loss) per share
for the period:
Basic...................... $ 0.04 $ 0.29 $ (1.44) $ 0.99
Diluted.................... $ 0.04 $ 0.28 $ (1.44) $ 0.96
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
shares (in thousands)
Basic...................... 25,439 25,339 25,385 25,212
Diluted.................... 26,111 25,891 25,385 26,064
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SIERRA WIRELESS, INC.
Consolidated Balance Sheets
(Expressed in thousands of United States dollars)
(Prepared in accordance with United States GAAP)
(Unaudited)
December 31, December 31,
------------ ------------
2005 2004
---- ----
Assets
Current assets:
Cash and cash equivalents.................... $ 64,611 $ 131,846
Short-term investments....................... 24,724 -
Accounts receivable, net of allowance
for doubtful accounts of $1,561
(2004 - $2,468)............................. 20,540 22,506
Inventories.................................. 3,316 11,090
Prepaid expenses............................. 3,974 5,021
------------ ------------
117,165 170,463
Long-term investments.......................... 14,762 -
Fixed assets................................... 11,647 10,044
Intangible assets.............................. 10,693 14,208
Goodwill....................................... 19,227 19,227
Deferred income taxes.......................... - 500
Other assets................................... 486 1,152
------------ ------------
$ 173,980 $ 215,594
------------ ------------
------------ ------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable............................. $ 3,971 $ 4,122
Accrued liabilities.......................... 28,644 33,890
Deferred revenue and credits................. 422 461
Current portion of long-term liabilities..... 894 758
Current portion of obligations under
capital lease............................... 304 664
------------ ------------
34,235 39,895
Long-term liabilities.......................... 1,926 1,747
Obligations under capital lease................ 4 287
Shareholders' equity:
Share capital................................ 219,398 218,805
Additional paid-in capital................... 556 440
Warrants..................................... 1,538 1,538
Deficit...................................... (82,857) (46,389)
Accumulated other comprehensive loss......... (820) (729)
------------ ------------
137,815 173,665
------------ ------------
$ 173,980 $ 215,594
------------ ------------
------------ ------------
SIERRA WIRELESS, INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of United States dollars)
(Prepared in accordance with United States GAAP)
(Unaudited)
Three months ended Year ended
------------------ ----------
December 31, December 31,
------------ ------------
2005 2004 2005 2004
---- ---- ---- ----
Cash flows from operating
activities:
Net earnings (loss) for
the period................ $ 911 $ 7,266 $ (36,468) $ 24,920
Adjustments to reconcile
net earnings (loss) to
net cash provided by
operating activities
Amortization............. 2,715 1,937 9,012 6,915
Non-cash restructuring
and other charges....... (711) - 12,329 -
Loss (gain) on
disposal................ 1 1 (41) (66)
Tax benefit related
to stock option
deduction............... 116 440 116 440
Changes in operating
assets and liabilities
Accounts receivable...... (499) 7,166 1,967 (1,384)
Inventories.............. 900 (2,475) 219 (9,579)
Prepaid expenses......... (493) (869) 891 (2,798)
Accounts payable......... (2,839) (6,740) (151) (1,844)
Accrued liabilities...... 3,241 (1,020) (5,149) 12,437
Deferred revenue and
credits................. 75 131 75 62
---------- ---------- ---------- ----------
Net cash provided by
(used in) operating
activities................ 3,417 5,837 (17,200) 29,103
Cash flows from investing
activities:
Proceeds on disposal..... - 2 48 69
Purchase of fixed
assets.................. (1,965) (1,584) (8,292) (7,120)
Increase in intangible
assets.................. (377) (441) (2,138) (2,123)
Decrease (increase) in
intangible assets....... - 574 - (1,152)
Purchase of long-term
investments............. (18) - (14,851) (21,369)
Proceeds on disposal
of long-term
investments............. - - - 46,186
Purchase of short-term
investments............. (18,198) (51) (88,320) (21,305)
Proceeds on maturity
of short-term
investments............. 37,731 1,683 63,593 36,247
---------- ---------- ---------- ----------
Net cash provided by
(used in) investing
activities................ 17,173 183 (49,960) 29,433
Cash flows from financing
activities:
Issue of common shares... 430 326 592 4,758
Increase (decrease) in
long-term liabilities... 375 (439) (667) (1,806)
---------- ---------- ---------- ----------
Net cash provided by
(used in) financing
activities................ 805 (113) (75) 2,952
---------- ---------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents... 21,395 5,907 (67,235) 61,488
Cash and cash equivalents,
beginning of period......... 43,216 125,939 131,846 70,358
---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period............... $ 64,611 $ 131,846 $ 64,611 $ 131,846
---------- ---------- ---------- ----------
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Sierra Wireless, Inc.
CONTACT: Sierra Wireless, Inc.: David G. McLennan, Chief FinancialOfficer, (604) 231-1185, Website: http://www.sierrawireless.com/, Email:dmclennan@sierrawireless.com
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