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Form 6-K SIERRA WIRELESS INC For: Mar 31

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May 8, 2015 12:28 PM EDT


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 6-K
 
Report of Foreign issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
  
For the Month of May 2015
 
(Commission File.  No 0-30718).
 
SIERRA WIRELESS, INC., A CANADIAN CORPORATION
(Translation of registrant’s name in English)
 
13811 Wireless Way
Richmond, British Columbia, Canada V6V 3A4
(Address of principal executive offices and zip code)
 
Registrant’s Telephone Number, including area code: 604-231-1100
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F:
 
 
Form 20-F
o
40-F
ý
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
 
 
Yes:
o
No:
ý

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
Sierra Wireless, Inc.
 
 
 
 
 
By:
/s/ David G. McLennan
 
 
 
 
 
David G. McLennan, Chief Financial Officer and Secretary
 
 
 
 
Date: May 8, 2015
 







Sierra Wireless Reports First Quarter 2015 Results

Q1 2015 revenue of $150.4 million; 24.1% year-over-year growth

•
Record revenue of $150.4 million, an increase of 24.1% compared to Q1 2014
•
Non-GAAP earnings from operations of $8.8 million compared to $0.7 million in Q1 2014
•
Adjusted EBITDA of $11.3 million compared to $4.1 million in Q1 2014
•
Non-GAAP EPS of $0.22 compared to $0.02 in Q1 2014


VANCOUVER, BRITISH COLUMBIA - May 7, 2015 - Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported results for its first quarter, ending March 31, 2015. 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.

“We delivered record revenue and strong year-over-year growth in profitability in the first quarter of 2015,” said Jason Cohenour, President and Chief Executive Officer. “We also significantly expanded our position in the Internet of Things value chain with the acquisition of Wireless Maingate, adding connectivity and managed services to our device-to-cloud solutions. As we continue to strengthen our device-to-cloud offering, we remain focused on profitable growth and enhancing our leadership position with strategic acquisitions.”

Revenue for the first quarter of 2015 was $150.4 million, an increase of 24.1% compared to $121.2 million in the first quarter of 2014. Revenue from OEM Solutions was $133.0 million in the first quarter of 2015, up 25.3% compared to $106.2 million in the first quarter of 2014. Revenue from Enterprise Solutions was $17.4 million in the first quarter of 2015, up 15.8% compared to $15.0 million in the first quarter of 2014.

GAAP RESULTS
•
Gross margin was $48.8 million, or 32.5% of revenue, in the first quarter of 2015, compared to $38.6 million, or 31.9% of revenue, in the first quarter of 2014.
•
Operating expenses were $46.4 million and earnings from operations were $2.5 million in the first quarter of 2015, compared to operating expenses of $45.3 million and a loss from operations of $6.7 million in the first quarter of 2014.
•
Net loss was $9.7 million, or $0.30 per diluted share, in the first quarter of 2015, compared to a net loss of $4.0 million, or $0.13 per diluted share, in the first quarter of 2014. The first quarter of 2015 included an $11.8 million after-tax foreign exchange loss associated with the translation of certain foreign denominated balances, compared to a $0.4 million foreign exchange gain in the first quarter of 2014.




NON-GAAP RESULTS
•
Gross margin was 32.6% in the first quarter of 2015, compared to 32.0% in the first quarter of 2014.
•
Operating expenses were $40.2 million and earnings from operations were $8.8 million in the first quarter of 2015, compared to operating expenses of $38.0 million and earnings from operations of $0.7 million in the first quarter of 2014.
•
Net earnings were $7.2 million, or $0.22 per diluted share, in the first quarter of 2015, compared to net earnings of $0.5 million, or $0.02 per diluted share, in the first quarter of 2014. The non-GAAP tax rate in the first quarter of 2015 was 19.8%.
•
Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") were $11.3 million in the first quarter of 2015, compared to $4.1 million in the first quarter of 2014.

Cash and cash equivalents at the end of the first quarter of 2015 were $99.6 million, representing a decrease of $107.5 million, compared to the end of the fourth quarter of 2014. The decrease was primarily due to the payment of $88.4 million (net of cash acquired), for the purchase of Wireless Maingate AB and higher working capital requirements in the quarter.

We disclose non-GAAP financial measures as we believe they provide useful information on actual operating results 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 results exclude the impact of stock-based compensation expense and related social taxes, acquisition costs, restructuring costs, integration costs, acquisition amortization, impairment, foreign exchange gains or losses on translation of balance sheet accounts, and certain tax adjustments.

Adjusted EBITDA as defined equates to earnings (loss) from operations plus stock-based compensation expense and related social taxes, acquisition costs, restructuring costs, integration costs, impairment, and amortization. The reconciliation between our GAAP and non-GAAP results is provided in the accompanying schedules.

Financial Guidance
In the second quarter of 2015, we expect revenue to grow sequentially and on a year-over-year basis, gross margin percentage to be similar to the first quarter of 2015 and operating expenses to increase slightly compared to the first quarter of 2015. This guidance does not include any contribution from the acquisition of Accel Networks (see below). This results in the following non-GAAP guidance for the second quarter of 2015:
Q2 2015 Guidance
Consolidated
Non-GAAP
 
 
Revenue
$153.0 to $156.0 million
Earnings from operations
$8.5 to $10.0 million
Net earnings
$6.7 to $7.9 million
Earnings per share
$0.21 to $0.24 per share
This non-GAAP guidance for the second quarter of 2015 reflects current business indicators and expectations, including a continued tight component supply environment. 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.





Sierra Wireless acquires Accel Networks

Sierra Wireless has entered into a definitive agreement to purchase substantially all of the assets of Accel Networks ("Accel") for US$9.3 million in cash with the potential for an additional US$1.5 million under a performance-based earnout formula. Accel is a leading provider of 4G LTE managed connectivity services with more than 300 enterprise customers in sectors such as retail, finance, security, energy, and hospitality.  With 4G LTE providing high connectivity speeds and legacy carriers transitioning from copper-based networks, many distributed enterprises are adopting wireless connectivity. Accel’s revenue in 2014 was US$8.5 million.  The transaction is expected to close in June 2015. Following the completion of the acquisition, we expect revenue in the next 12 months of approximately $10 million and to break even on an adjusted EBITDA basis. Approximately 80 percent of Accel’s annual revenue is subscription-based and recurring. Accel was founded in 2002 and has 28 employees. Its head office is in Florida, with its primary operations center located in Georgia.

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, May 7, 2015, 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:
•
Toll-free (Canada and US): 1-877-201-0168
•
Alternate number: 1-647-788-4901
•
Conference ID: 92170371

To access the webcast, please follow the link below:
Sierra Wireless Q1 Conference Call and Webcast
The webcast will remain available at the above link for one year following the call.
To access a full copy of our Q1 2015 earnings release, please follow the link below:
http://www.sierrawireless.com/AboutUs/investorinformation.aspx
Media Contact:
Investor Contact:
Sharlene Myers
David Climie
Manager, Global Public Relations
Vice President, Investor Relations
+1 (604) 232-1445
+1 (604) 231-1137
 
 
 
David G. McLennan
 
Chief Financial Officer
 
+1 (604) 231-1181
 



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 second quarter of 2015 and our fiscal year 2015, our business outlook for the short and longer term and statements regarding our strategy, plans and future operating performance. Forward-looking statements are provided to help you understand our views of our short and longer 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 laws.
Forward-looking statements:
•
Typically include words and phrases about the future such as “outlook”, “will”, “may", “estimates”, “intends”, “believes”, “plans”, “anticipates” and “expects”.

•
Are not promises or guarantees of future performance. They represent our current views and may change significantly.

•
Are based on a number of material assumptions, including those listed below, which could prove to be significantly incorrect:
▪
Our ability to develop, manufacture and sell new products and services that meet the needs of our customers and gain commercial acceptance;
▪
Our ability to continue to sell our products and services in the expected quantities at the expected prices and expected times;
▪
Expected cost of goods sold;
▪
Expected component supply constraints;
▪
Our ability to “win” new business;
▪
Our ability to integrate acquired businesses and realize expected benefits;
▪
Expected deployment of next generation networks by wireless network operators;
▪
Our operations not being adversely disrupted by component shortages or other development, operating or regulatory risks; and
▪
Expected tax rates and foreign exchange rates.

•
Are subject to substantial known and unknown material risks and uncertainties. Many factors could cause our actual results, achievements and developments in our business to differ significantly from those expressed or implied by our forward-looking statements, including without limitation, the following factors. 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:
▪
Actual sales volumes or prices for our products and services may be lower than we expect for any reason including, without limitation, continuing uncertain economic conditions, price and product competition, different product mix, the loss of any of our significant customers, or competition from new or established wireless communication companies;
▪
Higher than anticipated costs; disruption of, and demands on, our ongoing business; and diversion of management's time and attention in connection with acquisitions or divestitures;
▪
The cost of products sold may be higher than planned or necessary component supplies may not be available, may be delayed or may not be available on commercially reasonable terms;
▪
We may be unable to enforce our intellectual property rights or may be subject to litigation that has an adverse outcome;



▪
The development and timing of the introduction of our new products may be later than we expect or may be indefinitely delayed;
▪
Transition periods associated with the migration to new technologies may be longer than we expect; and
▪
Unanticipated costs associated with litigation or settlements associated with intellectual property matters.


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 950 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 (LOSS)
(In thousands of U.S. dollars, except where otherwise stated)
(unaudited)
 
Three months ended March 31,
 
2015

 
2014

Revenue
$
150,406

 
$
121,163

Cost of goods sold
101,570

 
82,566

Gross margin
48,836

 
38,597

 
 
 
 
Expenses
 
 
 
Sales and marketing
13,145

 
12,366

Research and development
19,092

 
20,017

Administration
10,420

 
9,333

Acquisition and integration
1,103

 
970

Amortization
2,602

 
2,583

 
46,362

 
45,269

Earnings (loss) from operations
2,474

 
(6,672
)
Foreign exchange gain (loss)
(11,893
)
 
392

Other income
105

 
26

Loss before income taxes
(9,314
)
 
(6,254
)
Income tax expense (recovery)
339

 
(2,249
)
Net loss
$
(9,653
)
 
$
(4,005
)
Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustments, net of taxes of $nil
(3,518
)
 
20

Comprehensive loss
$
(13,171
)
 
$
(3,985
)
Basic and diluted net loss per share (in dollars)
$
(0.30
)
 
$
(0.13
)
Weighted average number of shares outstanding (in thousands)
 
 
 
Basic and diluted
31,983

 
31,235






SIERRA WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except where otherwise stated)
(unaudited)
 
March 31, 2015

 
December 31, 2014

Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
99,555

 
$
207,062

Accounts receivable, net of allowance for doubtful accounts of $2,404 (December 31, 2014 - $2,275)
128,469

 
106,799

Inventories
19,104

 
17,445

Deferred income taxes
4,778

 
4,779

Prepaids and other
6,707

 
7,826

 
258,613

 
343,911

Property and equipment
20,319

 
20,717

Intangible assets
79,597

 
37,893

Goodwill
141,222

 
103,966

Deferred income taxes
3,560

 
3,898

Other assets
4,455

 
4,979

 
$
507,766

 
$
515,364

 
 
 
 
Liabilities
 
 
 
Current liabilities
 
 
 
Accounts payable and accrued liabilities
$
122,164

 
$
128,196

Deferred revenue and credits
3,813

 
3,245

 
125,977

 
131,441

Long-term obligations
27,864

 
26,608

Deferred income taxes
6,661

 
453

 
160,502

 
158,502

Equity
 
 
 
Shareholders’ equity
 
 
 
Common stock: no par value; unlimited shares authorized; issued and
outstanding 32,132,653 shares (December 31, 2014 - 31,868,541 shares)
343,649

 
339,640

Preferred stock: no par value; unlimited shares authorized;
issued and outstanding: nil shares
—

 
—

Treasury stock: at cost 4,190 shares (December 31, 2014 – 342,645 shares)
(80
)
 
(6,236
)
Additional paid-in capital
20,317

 
26,909

Retained earnings (deficit)
(7,139
)
 
2,514

Accumulated other comprehensive loss
(9,483
)
 
(5,965
)
 
347,264

 
356,862

 
$
507,766

 
$
515,364






SIERRA WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
 
Three months ended March 31,
 
2015

 
2014

Cash flows provided by (used in):
 
 
 
Operating activities
 
 
 
Net loss
$
(9,653
)
 
$
(4,005
)
Items not requiring (providing) cash
 
 
 
Amortization
5,131

 
6,483

Stock-based compensation
2,297

 
2,251

Deferred income taxes
—

 
2,966

Loss (gain) on disposal of property and equipment
1

 
(14
)
Unrealized foreign exchange loss
6,219

 
14

Other
(30
)
 
—

Changes in non-cash working capital
 
 
 
Accounts receivable
(22,277
)
 
860

Inventories
(2,594
)
 
139

Prepaid expenses and other
1,641

 
5,098

Accounts payable and accrued liabilities
(3,143
)
 
(17,238
)
Deferred revenue and credits
458

 
52

Cash flows used in operating activities
(21,950
)
 
(3,394
)
Investing activities
 
 
 
Additions to property and equipment
(1,911
)
 
(1,430
)
Proceeds from sale of property and equipment
—

 
37

Increase in intangible assets
(233
)
 
(527
)
Acquisition of Wireless Maingate, net of cash acquired
(88,449
)
 
—

Acquisition of In Motion Technology, net of cash acquired
—

 
(22,578
)
Net change in short-term investments
—

 
2,470

Increase in other assets
—

 
(2,748
)
Cash flows used in investing activities
(90,593
)
 
(24,776
)
Financing activities
 
 
 
Issuance of common shares
2,145

 
2,725

Purchase of treasury shares for RSU distribution
(797
)
 
—

Taxes paid related to net settlement of equity awards
(1,742
)
 
(501
)
Excess tax benefits from equity awards
1,670

 
—

Decrease in other long-term obligations
(74
)
 
(112
)
Cash flows provided by (used in) financing activities
1,202

 
2,112

Effect of foreign exchange rate changes on cash and cash equivalents
3,834

 
(19
)
Cash and cash equivalents, decrease in the period
(107,507
)
 
(26,077
)
Cash and cash equivalents, beginning of period
207,062

 
177,416

Cash and cash equivalents, end of period
$
99,555

 
$
151,339






SIERRA WIRELESS, INC. 

RECONCILIATION OF GAAP AND NON-GAAP RESULTS 


(in thousands of U.S. dollars, except where otherwise stated)
 
2015
 
 
2014
 
 
Q1
 
 
Total
Q4
Q3
Q2
Q1
 
 
 
 
 
 
 
 
 
 
 
 
Gross margin - GAAP
 
$
48,836

 
 
$
178,979

$
50,006

$
47,055

$
43,321

$
38,597

 
Stock-based compensation and related social taxes
 
248

 
 
555

131

134

130

160

 
Gross margin - Non-GAAP
 
$
49,084

 
 
$
179,534

$
50,137

$
47,189

$
43,451

$
38,757

 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) from operations - GAAP
 
$
2,474

 
 
$
(6,594
)
$
3,399

$
2,943

$
(6,264
)
$
(6,672
)
 
Stock-based compensation and related social taxes
 
2,600

 
 
10,464

2,432

2,402

2,326

3,304

 
Acquisition and integration
 
1,103

 
 
2,670

1,273

356

71

970

 
Restructuring
 
—

 
 
1,598

540

71

987

—

 
Impairment
 
—

 
 
3,756

—

—

3,756

—

 
Acquisition related amortization
 
2,669

 
 
10,900

2,389

2,609

2,784

3,118

 
Earnings from operations - Non-GAAP
 
$
8,846

 
 
$
22,794

$
10,033

$
8,381

$
3,660

$
720

 
Amortization (excluding acquisition related amortization)
 
2,462

 
 
12,617

2,699

3,400

3,153

3,365

 
Adjusted EBITDA
 
$
11,308

 
 
$
35,411

$
12,732

$
11,781

$
6,813

$
4,085

 
 
 
 
 
 
 
 
 
 
 
 
Net earnings (loss) - GAAP
 
$
(9,653
)
 
 
$
(16,853
)
$
(1,701
)
$
(2,904
)
$
(8,243
)
$
(4,005
)
 
Stock-based compensation and related social taxes, restructuring, impairment, acquisition, integration, and acquisition related amortization, net of tax
 
6,372

 
 
29,337

6,618

5,414

9,916

7,389

 
Unrealized foreign exchange loss (gain)
 
11,835

 
 
12,285

3,798

7,953

916

(382
)
 
Income tax adjustments
 
(1,372
)
 
 
(4,921
)
378

(2,781
)
1

(2,519
)
 
Net earnings - Non-GAAP
 
$
7,182

 
 
$
19,848

$
9,093

$
7,682

$
2,590

$
483

 
 
 
 
 
 
 
 
 
 
 
 
Diluted net earnings (loss) per share
 
 
 
 
 
 
 
 
 
 
GAAP - (in dollars)
 
$
(0.30
)
 
 
$
(0.53
)
$
(0.05
)
$
(0.09
)
$
(0.26
)
$
(0.13
)
 
Non-GAAP - (in dollars)
 
$
0.22

 
 
$
0.63

$
0.29

$
0.24

$
0.08

$
0.02

 
 
 
 
 
 
 
 
 
 
 
 









Q1 2015 RECONCILIATION OF GAAP AND NON-GAAP RESULTS 

 
 
 
Acquisition & Integration
Stock-based Compensation & Related Social Taxes
Foreign Exchange Loss
Tax Adjustments
 
(In thousands of U.S. dollars, except where otherwise stated)
GAAP
Acquisition Related Amortization
Non GAAP
Q1 2015
Q1 2015
 
 
 
 
 
 
 
 
Revenue
150,406

 
 
 
 
 
150,406

Cost of goods sold
101,570

 
 
248

 
 
101,322

Gross margin
48,836

—

—

(248
)
—

—

49,084

GM%
32.5
%
 
 
 
 
 
32.6
%
 
 
 
 
 
 
 
 
Sales and marketing
13,145

 
 
587

 
 
12,558

Research and development
19,092

888

 
420

 
 
17,784

Administration
10,420

 
 
1,345

 
 
9,075

Acquisition and integration
1,103

 
1,103

 
 
 
—

Amortization
2,602

1,781

 
 
 
 
821

Total operating expenses
46,362

2,669

1,103

2,352

—

—

40,238

 
 
 
 
 
 
 
 
Earnings (loss) from operations
2,474

(2,669
)
(1,103
)
(2,600
)
—

—

8,846

 
 
 
 
 
 
 
 
Foreign exchange loss
(11,893
)
 
 
 
(11,893
)
 
—

Other income
105

 
 
 
 
 
105

Total other income (expense)
(11,788
)
—

—

—

(11,893
)
—

105

 
 
 
 
 
 
 
 
Earnings (loss) before income taxes
(9,314
)
(2,669
)
(1,103
)
(2,600
)
(11,893
)
—

8,951

 
 
 
 
 
 
 
 
Income tax expense (recovery)
339

 
 
 
(58
)
(1,372
)
1,769

 
 
 
 
 
 
 
 
Net earnings (loss)
(9,653
)
(2,669
)
(1,103
)
(2,600
)
(11,835
)
1,372

7,182

 
 
 
 
 
 
 
 
Diluted earnings (loss) per share
(0.30
)
 
 
 
 
 
0.22

 
 
 
 
 
 
 
 
Weighted average diluted shares
31,983

 
 
 
 
 
31,983

 
 
 
 
 
 
 
 





SIERRA WIRELESS, INC. 

SEGMENTED RESULTS
 
 
(In thousands of U.S. dollars, except where otherwise stated)
 
2015
2014
 
 
Q1
Total
Q4
Q3
Q2
Q1
 
OEM Solutions
 
 
 
 
 
 
 
 
Revenue
 
$
133,040

$
476,650

$
129,580

$
124,329

$
116,579

$
106,162

 
Cost of goods sold
 
93,079

336,133

90,136

87,453

82,910

75,634

 
Gross margin
 
$
39,961

$
140,517

$
39,444

$
36,876

$
33,669

$
30,528

 
Gross margin %
 
30.0
%
29.5
%
30.4
%
29.7
%
28.9
%
28.8
%
 
 
 
 
 
 
 
 
 
 
Enterprise Solutions
 
 
 
 
 
 
 
 
Revenue
 
$
17,366

$
71,873

$
19,498

$
18,941

$
18,433

$
15,001

 
Cost of goods sold
 
8,491

33,411

8,936

8,762

8,781

6,932

 
Gross margin
 
$
8,875

$
38,462

$
10,562

$
10,179

$
9,652

$
8,069

 
Gross margin %
 
51.1
%
53.5
%
54.2
%
53.7
%
52.4
%
53.8
%
 
 
 
 
 
 
 
 
 
 





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