Mr. Jason Cohenour reports
SIERRA WIRELESS REPORTS FOURTH QUARTER AND FULL YEAR 2017 RESULTS
Sierra Wireless Inc. has released the results
for its fourth quarter and fiscal year ending Dec. 31, 2017. All
results are reported in U.S. dollars and are prepared in accordance with
U.S. generally accepted accounting principles (GAAP), except as
otherwise indicated.
"In the fourth quarter of 2017, we delivered year-over-year revenue
increases in each of our three segments, with particularly strong growth
in our high-margin enterprise and IoT [Internet of things] services lines of business," said
Jason Cohenour, president and chief executive officer. "We also significantly strengthened
our IoT services business with the addition of Numerex and are now
better positioned than ever before to expand our IoT services and scale
our subscription-based recurring revenue."
Q4 2017
Revenue for the fourth quarter of 2017 was $183.5-million, an increase
of 12.6 per cent compared with $163-million in the fourth quarter of 2016.
Revenue from OEM (original equipment manufacturing) solutions was $139.8-million in the fourth quarter of
2017, up 3.4 per cent compared with $135.2-million in the fourth quarter of 2016.
Revenue from enterprise solutions was $31.8-million in the fourth
quarter of 2017, up 52 per cent compared with $21-million in the fourth
quarter of 2016. Revenue from IoT services was $11.9-million in the
fourth quarter of 2017, up 73.5 per cent compared with $6.8-million in the fourth
quarter of 2016. The fourth quarter of 2017 includes $3.1-million of
revenue from Numerex Corp., which was acquired on Dec. 7,
2017. Subsequent to the acquisition of Numerex, the company's former cloud and
connectivity services segment was renamed IoT services and now includes
Numerex.
GAAP results:
-
Gross margin was $61.8-million, or 33.7 per cent of revenue, in the fourth
quarter of 2017, compared with $68.8-million, or 42.2 per cent of revenue, in
the fourth quarter of 2016. In the fourth quarter of 2016, gross margin
was favourably impacted by a change in estimate of the company's intellectual
property (IP) royalty accrual.
-
Operating expenses were $64.8-million and loss from operations was
$3-million in the fourth quarter of 2017, compared with operating
expenses of $49.6-million and earnings from operations of $19.2-million in the fourth quarter of 2016.
-
Net loss was $3.5-million, or 11 cents per diluted share, in the fourth
quarter of 2017, compared with net earnings of $15.7-million, or 49
cents diluted per share, in the fourth quarter of 2016.
Non-GAAP results:
-
Gross margin was 33.8 per cent in the fourth quarter of 2017, compared with 34.3 per cent in the fourth quarter of 2016.
-
Operating expenses were $52.5-million and earnings from operations
were $9.5-million in the fourth quarter of 2017, compared with operating
expenses of $44.1-million and earnings from operations of $11.7-million in the fourth quarter of 2016.
-
Net earnings were $9.2-million, or 28 cents per diluted share, in the
fourth quarter of 2017, compared with net earnings of $8.8-million, or
27 cents per diluted share, in the fourth quarter of 2016.
-
Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) were $13.9-million in the fourth
quarter of 2017, compared with $15.5-million in the fourth quarter of
2016.
Cash and cash equivalents at the end of the fourth quarter of 2017 were
$65.2-million, representing a decrease of $9-million compared with the
end of the third quarter of 2017. The decrease in cash was primarily due
to the acquisition of Numerex partially offset by positive cash flows
from operating activities.
Full-year 2017
Revenue for 2017 was $692.1-million, an increase of 12.4 per cent compared with $615.6-million in 2016. Revenue from OEM solutions was $555.9-million in
2017, up 7.6 per cent compared with $516.5-million in 2016. Revenue from
enterprise solutions was $101.5-million in 2017, up 42 per cent compared with $71.5-million in 2016. Revenue from IoT services, including $3.1-million
from Numerex, was $34.7-million in 2017, up 25.5 per cent compared with $27.6-million in 2016.
GAAP results:
-
Gross margin was $234.9-million, or 33.9 per cent of revenue, in 2017,
compared with $217.7-million, or 35.4 per cent of revenue, in 2016. In 2016,
gross margin was favourably impacted by a change in estimate of the company's IP
royalty accrual and two legal settlements.
-
Operating expenses were $235.3-million and loss from operations was
$400,000 in 2017, compared with operating expenses of $196.4-million
and earnings from operations of $21.3-million in 2016.
-
Net earnings were $4.1-million, or 13 cents per share, in 2017, compared with net earnings of $15.4-million, or 48 cents per share, in 2016.
Non-GAAP results:
-
Gross margin was 34 per cent in 2017, compared with 33.3 per cent in 2016.
-
Operating expenses were $196.3-million and earnings from operations
were $39.2-million in 2017, compared with operating expenses of $175-million and earnings from operations of $30.1-million in 2016.
-
Net earnings were $34.1-million, or $1.04 per share, in 2017, compared with net earnings of $22-million, or 68 cents per share, in 2016.
-
Adjusted EBITDA was $54.2-million in 2017, compared with $43.9-million
in 2016.
Acquisition
On Dec. 7, 2017, in accordance with the terms of the agreement and
plan of merger, dated as of Aug. 2, 2017, the company acquired all of the
outstanding shares of Numerex in a stock-for-stock merger transaction whereby Numerex stockholders received a fixed
exchange ratio of 0.18 common share of Sierra Wireless for each share
of Numerex common stock. On closing of the transaction, Sierra Wireless
issued 3,580,832 common shares as merger consideration in exchange for
all of the outstanding shares of Numerex common stock and certain
outstanding Numerex equity awards and warrants. Concurrent with closing,
approximately $20.2-million of cash in the aggregate was paid to retire
outstanding Numerex debt for total consideration of $97.5-million.
Financial guidance
For the first quarter of 2018, the company expects revenue to be in the range of
$181-million to $189-million and non-GAAP earnings per share to be in
the range of four cents to 10 cents. The company's guidance for the first quarter of 2018
includes a full quarter of Numerex following the acquisition of the
company on Dec. 7, 2017. The company expects the first quarter of 2018 to be
impacted by some unusual and mainly non-recurring items, including
higher one-time costs related to a Numerex network upgrade as well as customer
migration and tight component supply constraining revenue and adding to
cost of goods.
Additionally, with the integration of Numerex, the company has commenced various
efficiency and effectiveness initiatives. These initiatives are focused
on capturing synergies as Sierra Wireless integrates Numerex and efficiency gains in
other areas of the company's business. The initiatives being undertaken are
expected to reduce cost of goods sold as well as continuing operating
expenses. As a result of implementing these initiatives, the company is targeting a quarterly non-GAAP operating expense run rate of $56.5-million in the fourth quarter of 2018, down from approximately $59-million in non-GAAP operating expense that is included in the company's guidance
for the first quarter of 2018. Sierra Wireless expects these initiatives will result
in a one-time non-GAAP restructuring charge of approximately $4.5-million.
This non-GAAP guidance reflects current business indicators and
expectations. Inherent in this guidance are risk factors that are
described in greater detail in the company's regulatory filings. Sierra Wireless's actual
results could differ materially from those presented herein. All figures
are approximations based on management's current beliefs and assumptions.
Conference call and webcast details
Sierra Wireless's president and chief executive officer, Jason Cohenour, and chief financial officer, David
McLennan, will host a conference call and webcast with analysts and
investors to review the results on Thursday, Feb. 8, 2018, at 5:30
p.m. Eastern Time (2:30 p.m. PT). A live slide presentation will be
available for viewing during the call.
To participate in this conference call, please dial the following number
approximately 10 minutes prior to the start of the call:
Toll-free (Canada and the United States) number:
1-877-201-0168
Alternative number: 1-647-788-4901
Conference ID: 5895407
The webcast will remain available for one year
following the call.
About Sierra Wireless
Inc.
Sierra Wireless is an IoT pioneer, empowering
businesses and industries to transform and thrive in the connected
economy. Sierra
Wireless has approximately 1,400 employees globally and operates R&D
(research and development) centres in North America, Europe and Asia.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS (LOSS)
(in thousands of U.S. dollars, except where otherwise stated)
Three months ended Dec. 31, 12 months ended Dec. 31,
2017 2016 2017 2016
Revenue $ 183,533 $ 163,021 $ 692,077 $ 615,607
Cost of goods sold 121,719 94,225 457,130 397,864
---------- ---------- ---------- ----------
Gross margin 61,814 68,796 234,947 217,743
---------- ---------- ---------- ----------
Expenses
Sales and marketing 20,456 17,048 75,594 64,242
Research and development 21,828 18,047 83,361 73,077
Administration 11,379 9,708 42,904 40,956
Restructuring 245 - 1,076 -
Acquisition-related and integration 4,792 376 8,195 843
Impairment - - 3,668 -
Amortization 6,073 4,372 20,508 17,277
---------- ---------- ---------- ----------
64,773 49,551 235,306 196,395
---------- ---------- ---------- ----------
Earnings (loss) from operations (2,959) 19,245 (359) 21,348
Foreign exchange gain (loss) 1,267 (3,547) 7,550 (1,736)
Other income 38 2 67 83
---------- ---------- ---------- ----------
Earnings (loss) before income taxes (1,654) 15,700 7,258 19,695
Income tax expense (recovery) 1,876 (18) 3,123 4,310
---------- ---------- ---------- ----------
Net earnings (loss) $ (3,530) $ 15,718 $ 4,135 $ 15,385
---------- ---------- ---------- ----------
Other comprehensive earnings (loss)
Foreign currency translation
adjustments, net of taxes of nil 88 (6,356) 11,950 (6,448)
---------- ---------- ---------- ----------
Comprehensive earnings (loss) $ (3,442) $ 9,362 $ 16,085 $ 8,937
---------- ---------- ---------- ----------
Net earnings (loss) per share (in dollars)
Basic $ (0.11) $ 0.49 $ 0.13 $ 0.48
Diluted $ (0.11) $ 0.49 $ 0.13 $ 0.48
We seek Safe Harbor.
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