Sierra Wireless (SWIR) Misses Q4 EPS by 5c, Revenues Beat

Sierra Wireless (NASDAQ: SWIR) reported Q4 EPS of ($0.31), $0.05 worse than the analyst estimate of ($0.26). Revenue for the quarter came in at $120.48 million versus the consensus estimate of $116.23 million.

Fourth Quarter 2020 Financial Highlights

• Gross margin was 36.0% in the fourth quarter of 2020 as compared to 35.8% in the fourth quarter of 2019. The modest increase was driven by changes in product and customer mix in our Embedded Broadband and IoT Solutions segment.
  • IoT Solutions gross margin was 38.5% in the fourth quarter of 2020 as compared to 37.0% in the fourth quarter of 2019 due to higher volume in connected devices.
  • Embedded Broadband margin was 29.3% in the fourth quarter of 2020 as compared to 32.5% in the fourth quarter of 2019 due to lower volume in higher-margin mobile computing and networking sales from design losses of two higher-margin mobile computing customers discussed above.
• Operating expenses, excluding the Automotive Business, were $65.7 million in the fourth quarter of 2020 as compared to $61.9 million in the fourth quarter of 2019. In the fourth quarter of 2020, we recorded COVID-19 related government grants of $1.0 million.
• Net loss from continuing operations was $11.2 million in the fourth quarter of 2020 as compared to $15.3 million in the fourth quarter of 2019 due higher tax recovery and foreign exchange gain, partially offset by higher restructuring and administration expenses.
• Adjusted net loss from continuing operations* was $7.0 million, or loss of $0.19 per share, which was in-line with the same comparative period in 2019.
• Adjusted EBITDA* was a loss of $2.9 million in the fourth quarter of 2020 as compared to a loss of $3.2 million in the fourth quarter of 2019.
• During the fourth quarter of 2020, we repaid short-term borrowings and long-term debt for a total of $34.4 million.

“Our revenue continued to improve in the Fourth Quarter of 2020 with 6.3% sequential revenue growth to $120.5 million and overall gross margins improving to 36%. Our business transformation is proceeding well as shown by our third consecutive quarter of sequential revenue growth led by our Q4 Recurring and other services revenue of $32.6 million which increased 9.4% sequentially and 25.1% year on year. We are winning in the market with our Solutions offering and our Recurring and other services revenue is now at 27.1% of total revenue,” said Kent Thexton, President and CEO. “We completed the divestiture of our Automotive product line in November and ended the year with a strong balance sheet with $171.4 million in cash and no debt.”

Financial Guidance

The impact of the COVID-19 pandemic on our global business continues to remain uncertain. While we continue to evaluate the effects of COVID-19 on our business, the overall severity and duration of adverse impacts related to COVID-19 on our business, financial condition, cash flows and/or results of operations for the first quarter 2021 and beyond cannot be reasonably estimated at this time. The ultimate size of the impact of the COVID-19 pandemic on our business will depend on future developments which cannot be currently predicted.

Regarding the First Quarter of 2021, we expect our revenue to be in-line with Street consensus of $109.9 million. There is strong demand for our products and services in the First Quarter and we have secured hardware orders and recurring revenue that is approximately 15% above Street Consensus for Q1’21. However, we are facing a very tight global supply chain environment that is constraining our ability to source components and fully deliver to this level of demand.

For earnings history and earnings-related data on Sierra Wireless (SWIR) click here.

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