Form 20-F | o | 40-F | ý |
Yes: | o | No: | ý |
Sierra Wireless, Inc. | ||
By: | /s/ David G. McLennan | |
David G. McLennan, Chief Financial Officer and Secretary | ||
Date: November 2, 2017 |
• | Gross margin was $57.8 million, or 33.3% of revenue, in the third quarter of 2017, compared to $49.4 million, or 32.1% of revenue, in the third quarter of 2016. |
• | Operating expenses were $57.5 million and earnings from operations were $0.2 million in the third quarter of 2017, compared to operating expenses of $49.4 million and a loss from operations of $0.1 million in the third quarter of 2016. |
• | Net earnings were $1.2 million, or $0.04 per diluted share, in the third quarter of 2017, compared to a net loss of $1.8 million, or $0.06 diluted per share, in the third quarter of 2016. |
• | Gross margin was 33.4% in the third quarter of 2017, compared to 32.2% in the third quarter of 2016. |
• | Operating expenses were $48.6 million and earnings from operations were $9.3 million in the third quarter of 2017, compared to operating expenses of $43.2 million and earnings from operations of $6.3 million in the third quarter of 2016. |
• | Net earnings were $7.6 million, or $0.23 per diluted share, in the third quarter of 2017, compared to net earnings of $4.1 million, or $0.13 per diluted share, in the third quarter of 2016. |
• | Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") were $13.1 million in the third quarter of 2017, compared to $9.7 million in the third quarter of 2016. |
• | Toll-free (Canada and US): 1-877-201-0168 |
• | Alternate number: 1-647-788-4901 |
• | Conference ID: 75777631 |
Investor and Media Contact: | |
David Climie | |
Vice President, Investor Relations | |
+1 (604) 231-1137 | |
dclimie@sierrawireless.com | |
Investor Contact: | |
David G. McLennan | |
Chief Financial Officer | |
+1 (604) 231-1181 | |
investor@sierrawireless.com |
• | 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, but not limited to, 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 complete the proposed acquisition of Numerex Corp. ("Numerex"), in December 2017, to integrate Numerex's business, operations and workforce with ours and to return the Numerex business to profitable growth and realize the expected benefits of the acquisition; |
• | our ability to integrate other 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: |
• | risks related to the proposed acquisition of Numerex; |
• | competition from new or established cloud and connectivity service providers or from those with greater resources; |
• | disruption of, and demands on, our ongoing business and diversion of management's time and attention in connection with other acquisitions or divestitures; |
• | the loss of any of our significant customers; |
• | cyber-attacks or other breaches of our information technology security; |
• | difficult or uncertain global economic conditions; |
• | our financial results being subject to fluctuation; |
• | our ability to attract or retain key personnel; |
• | risks related to infringement on intellectual property rights of others; |
• | our ability to obtain necessary rights to use software or components supplied by third parties; |
• | our ability to enforce our intellectual property rights; |
• | our ability to respond to changing technology, industry standards and customer requirements; |
• | our reliance on single source suppliers for certain components used in our products; |
• | failures of our products or services due to design flaws and errors, component quality issues, manufacturing defects or other quality issues; |
• | our dependence on a limited number of third party manufacturers; |
• | unanticipated costs associated with litigation or settlements; |
• | our dependence on wireless network carriers to offer and promote acceptable wireless service programs; |
• | risks related to contractual disputes with counterparties; |
• | risks related to governmental regulation; |
• | risks related to the transmission, use and disclosure of user data and personal information; and |
• | risks inherent in foreign jurisdictions. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | $ | 173,241 | $ | 153,560 | $ | 508,544 | $ | 452,586 | |||||||
Cost of goods sold | 115,466 | 104,192 | 335,411 | 303,639 | |||||||||||
Gross margin | 57,775 | 49,368 | 173,133 | 148,947 | |||||||||||
Expenses | |||||||||||||||
Sales and marketing | 18,127 | 15,519 | 55,138 | 47,194 | |||||||||||
Research and development | 21,525 | 18,015 | 61,533 | 55,030 | |||||||||||
Administration | 10,560 | 11,435 | 31,525 | 31,248 | |||||||||||
Restructuring | 199 | — | 831 | — | |||||||||||
Acquisition-related and integration | 2,077 | 34 | 3,403 | 467 | |||||||||||
Impairment | — | — | 3,668 | — | |||||||||||
Amortization | 5,049 | 4,418 | 14,435 | 12,905 | |||||||||||
57,537 | 49,421 | 170,533 | 146,844 | ||||||||||||
Earnings (loss) from operations | 238 | (53 | ) | 2,600 | 2,103 | ||||||||||
Foreign exchange gain | 1,667 | 590 | 6,283 | 1,811 | |||||||||||
Other income | 32 | 23 | 29 | 81 | |||||||||||
Earnings before income taxes | 1,937 | 560 | 8,912 | 3,995 | |||||||||||
Income tax expense | 710 | 2,329 | 1,247 | 4,328 | |||||||||||
Net earnings (loss) | $ | 1,227 | $ | (1,769 | ) | $ | 7,665 | $ | (333 | ) | |||||
Other comprehensive earnings (loss): | |||||||||||||||
Foreign currency translation adjustments, net of taxes of $nil | 3,822 | (973 | ) | 11,862 | (92 | ) | |||||||||
Comprehensive earnings (loss) | $ | 5,049 | $ | (2,742 | ) | $ | 19,527 | $ | (425 | ) | |||||
Net earnings (loss) per share (in dollars) | |||||||||||||||
Basic | $ | 0.04 | $ | (0.06 | ) | $ | 0.24 | $ | (0.01 | ) | |||||
Diluted | 0.04 | (0.06 | ) | 0.23 | (0.01 | ) | |||||||||
Weighted average number of shares outstanding (in thousands) | |||||||||||||||
Basic | 32,200 | 32,043 | 32,093 | 32,055 | |||||||||||
Diluted | 32,735 | 32,043 | 32,665 | 32,055 |
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 74,206 | $ | 102,772 | |||
Accounts receivable, net of allowance for doubtful accounts of $1,883 (December 31, 2016 - $2,486) | 148,134 | 143,798 | |||||
Inventories | 56,987 | 40,913 | |||||
Prepaids and other | 6,463 | 6,530 | |||||
285,790 | 294,013 | ||||||
Property and equipment | 36,566 | 34,180 | |||||
Intangible assets | 67,298 | 74,863 | |||||
Goodwill | 167,062 | 154,114 | |||||
Deferred income taxes | 16,954 | 16,039 | |||||
Other assets | 10,419 | 5,250 | |||||
$ | 584,089 | $ | 578,459 | ||||
Liabilities | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | $ | 144,902 | $ | 167,500 | |||
Deferred revenue and credits | 3,666 | 5,263 | |||||
148,568 | 172,763 | ||||||
Long-term obligations | 34,035 | 32,654 | |||||
Deferred income taxes | 11,493 | 11,458 | |||||
194,096 | 216,875 | ||||||
Equity | |||||||
Shareholders’ equity | |||||||
Common stock: no par value; unlimited shares authorized; issued and outstanding: 32,219,652 shares (December 31, 2016 - 31,859,960 shares) | 349,598 | 342,450 | |||||
Preferred stock: no par value; unlimited shares authorized; issued and outstanding: nil shares | — | — | |||||
Treasury stock: at cost: 225,440 shares (December 31, 2016 – 355,471 shares) | (3,256 | ) | (5,134 | ) | |||
Additional paid-in capital | 25,786 | 24,976 | |||||
Retained earnings | 20,429 | 13,718 | |||||
Accumulated other comprehensive loss | (2,564 | ) | (14,426 | ) | |||
389,993 | 361,584 | ||||||
$ | 584,089 | $ | 578,459 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Cash flows provided by (used in): | |||||||||||||||
Operating activities | |||||||||||||||
Net earnings (loss) | $ | 1,227 | $ | (1,769 | ) | $ | 7,665 | $ | (333 | ) | |||||
Items not requiring (providing) cash | |||||||||||||||
Amortization | 7,548 | 6,577 | 21,739 | 18,851 | |||||||||||
Stock-based compensation | 2,769 | 1,847 | 7,472 | 5,784 | |||||||||||
Deferred income taxes | (36 | ) | — | (1,340 | ) | — | |||||||||
Impairment | — | — | 3,668 | — | |||||||||||
Unrealized foreign exchange (gain) loss | (2,202 | ) | 120 | (8,046 | ) | (1,423 | ) | ||||||||
Other | (43 | ) | (93 | ) | (225 | ) | (204 | ) | |||||||
Changes in non-cash working capital | |||||||||||||||
Accounts receivable | (12,819 | ) | 7,144 | 749 | (4,190 | ) | |||||||||
Inventories | 9,047 | (2,213 | ) | (14,193 | ) | 10,964 | |||||||||
Prepaids and other | (215 | ) | 3,514 | (4,753 | ) | 3,455 | |||||||||
Accounts payable and accrued liabilities | (16,977 | ) | 7,763 | (25,559 | ) | 13,462 | |||||||||
Deferred revenue and credits | (343 | ) | 1,705 | (1,643 | ) | 958 | |||||||||
Cash flows provided by (used in) operating activities | (12,044 | ) | 24,595 | (14,466 | ) | 47,324 | |||||||||
Investing activities | |||||||||||||||
Additions to property and equipment | (2,939 | ) | (4,540 | ) | (10,879 | ) | (12,810 | ) | |||||||
Additions to intangible assets | (288 | ) | (201 | ) | (1,385 | ) | (737 | ) | |||||||
Proceeds from sale of property and equipment | — | — | 27 | 3 | |||||||||||
Acquisition of GNSS business | — | — | (3,145 | ) | — | ||||||||||
Acquisition of GenX Mobile Incorporated, net of cash acquired | — | (5,900 | ) | — | (5,900 | ) | |||||||||
Cash flows used in investing activities | (3,227 | ) | (10,641 | ) | (15,382 | ) | (19,444 | ) | |||||||
Financing activities | |||||||||||||||
Issuance of common shares | 363 | 98 | 5,285 | 1,569 | |||||||||||
Repurchase of common shares for cancellation | — | — | (2,779 | ) | (6,206 | ) | |||||||||
Purchase of treasury shares for RSU distribution | — | — | — | (4,214 | ) | ||||||||||
Taxes paid related to net settlement of equity awards | (7 | ) | (13 | ) | (1,096 | ) | (790 | ) | |||||||
Payment for contingent consideration | (161 | ) | — | (1,397 | ) | (16 | ) | ||||||||
Decrease in other long-term obligations | (106 | ) | (152 | ) | (340 | ) | (290 | ) | |||||||
Cash flows provided by (used in) financing activities | 89 | (67 | ) | (327 | ) | (9,947 | ) | ||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | 376 | (266 | ) | 1,609 | 185 | ||||||||||
Cash and cash equivalents, increase (decrease) in the period | (14,806 | ) | 13,621 | (28,566 | ) | 18,118 | |||||||||
Cash and cash equivalents, beginning of period | 89,012 | 98,433 | 102,772 | 93,936 | |||||||||||
Cash and cash equivalents, end of period | $ | 74,206 | $ | 112,054 | $ | 74,206 | $ | 112,054 |
(in thousands of U.S. dollars, except where otherwise stated) | 2017 | 2016 | ||||||||||||||||||||||||||
Q3 | Q2 | Q1 | Total | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||
Gross margin - GAAP | $ | 57,775 | $ | 59,697 | $ | 55,661 | $ | 217,743 | $ | 68,796 | $ | 49,368 | $ | 52,764 | $ | 46,815 | ||||||||||||
Stock-based compensation and related social taxes | 123 | 108 | 108 | 420 | 99 | 108 | 107 | 106 | ||||||||||||||||||||
Realized gains (losses) on hedge contracts | 12 | — | — | — | — | — | — | — | ||||||||||||||||||||
Other nonrecurring costs (recoveries) | — | — | — | (13,045 | ) | (13,045 | ) | — | — | — | ||||||||||||||||||
Gross margin - Non-GAAP | $ | 57,910 | $ | 59,805 | $ | 55,769 | $ | 205,118 | $ | 55,850 | $ | 49,476 | $ | 52,871 | $ | 46,921 | ||||||||||||
Earnings (loss) from operations - GAAP | $ | 238 | $ | 3,849 | $ | (1,487 | ) | $ | 21,348 | $ | 19,245 | $ | (53 | ) | $ | 3,411 | $ | (1,255 | ) | |||||||||
Stock-based compensation and related social taxes | 2,780 | 2,577 | 2,148 | 7,596 | 1,845 | 1,856 | 1,902 | 1,993 | ||||||||||||||||||||
Acquisition-related and integration | 2,077 | 875 | 451 | 843 | 376 | 34 | 59 | 374 | ||||||||||||||||||||
Restructuring | 199 | 259 | 373 | — | — | — | — | — | ||||||||||||||||||||
Other nonrecurring costs (recoveries) | — | 42 | 276 | (11,762 | ) | (13,045 | ) | 1,283 | — | — | ||||||||||||||||||
Realized gains (losses) on hedge contracts | 210 | — | — | — | — | — | — | — | ||||||||||||||||||||
Impairment | — | — | 3,668 | — | — | — | — | — | ||||||||||||||||||||
Acquisition-related amortization | 3,845 | 3,694 | 3,641 | 12,102 | 3,308 | 3,206 | 3,058 | 2,530 | ||||||||||||||||||||
Earnings from operations - Non-GAAP | $ | 9,349 | $ | 11,296 | $ | 9,070 | $ | 30,127 | $ | 11,729 | $ | 6,326 | $ | 8,430 | $ | 3,642 | ||||||||||||
Net earnings (loss) - GAAP | $ | 1,227 | $ | 6,649 | $ | (211 | ) | $ | 15,385 | $ | 15,718 | $ | (1,769 | ) | $ | 718 | $ | 718 | ||||||||||
Stock-based compensation and related social taxes, restructuring, impairment, acquisition-related, integration and other nonrecurring costs (recoveries) | 5,056 | 3,753 | 6,916 | (3,323 | ) | (10,824 | ) | 3,173 | 1,961 | 2,367 | ||||||||||||||||||
Amortization | 7,548 | 7,194 | 6,997 | 25,894 | 7,043 | 6,577 | 6,706 | 5,568 | ||||||||||||||||||||
Interest and other, net | (32 | ) | 12 | (9 | ) | (83 | ) | (2 | ) | (23 | ) | (32 | ) | (26 | ) | |||||||||||||
Foreign exchange loss (gain) | (1,457 | ) | (3,517 | ) | (1,099 | ) | 1,736 | 3,547 | (590 | ) | 1,071 | (2,292 | ) | |||||||||||||||
Income tax expense (recovery) | 710 | 705 | (168 | ) | 4,310 | (18 | ) | 2,329 | 1,654 | 345 | ||||||||||||||||||
Adjusted EBITDA | 13,052 | 14,796 | 12,426 | 43,919 | 15,464 | 9,697 | 12,078 | 6,680 | ||||||||||||||||||||
Amortization (exclude acquisition-related amortization) | (3,703 | ) | (3,500 | ) | (3,356 | ) | (13,792 | ) | (3,735 | ) | (3,371 | ) | (3,648 | ) | (3,038 | ) | ||||||||||||
Interest and other, net | 32 | (12 | ) | 9 | 83 | 2 | 23 | 32 | 26 | |||||||||||||||||||
Income tax expense - Non-GAAP | (1,791 | ) | (1,591 | ) | (1,418 | ) | (8,241 | ) | (2,900 | ) | (2,208 | ) | (2,086 | ) | (1,047 | ) | ||||||||||||
Net earnings - Non-GAAP | $ | 7,590 | $ | 9,693 | $ | 7,661 | $ | 21,969 | $ | 8,831 | $ | 4,141 | $ | 6,376 | $ | 2,621 | ||||||||||||
Diluted net earnings (loss) per share | ||||||||||||||||||||||||||||
GAAP - (in dollars per share) | $ | 0.04 | $ | 0.20 | $ | (0.01 | ) | $ | 0.48 | $ | 0.49 | $ | (0.06 | ) | $ | 0.02 | $ | 0.02 | ||||||||||
Non-GAAP - (in dollars per share) | $ | 0.23 | $ | 0.30 | $ | 0.24 | $ | 0.68 | $ | 0.27 | $ | 0.13 | $ | 0.20 | $ | 0.08 | ||||||||||||
(In thousands of U.S. dollars, except where otherwise stated) | 2017 | 2016 | ||||||||||||||||||||||||
Q3 | Q2 | Q1 | Total | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||
OEM Solutions | ||||||||||||||||||||||||||
Revenue | $ | 138,531 | $ | 144,561 | $ | 133,000 | $ | 516,517 | $ | 135,211 | $ | 127,765 | $ | 132,667 | $ | 120,874 | ||||||||||
Gross margin (2) (3) | ||||||||||||||||||||||||||
- GAAP | $ | 41,161 | $ | 46,323 | $ | 42,078 | $ | 166,596 | $ | 54,110 | $ | 37,191 | $ | 41,005 | $ | 34,290 | ||||||||||
- Non-GAAP | $ | 41,268 | $ | 46,413 | $ | 42,167 | $ | 154,988 | $ | 42,232 | $ | 37,280 | $ | 41,096 | $ | 34,380 | ||||||||||
Gross margin % (2) (3) | ||||||||||||||||||||||||||
- GAAP | 29.7 | % | 32.0 | % | 31.6 | % | 32.3 | % | 40.0 | % | 29.1 | % | 30.9 | % | 28.4 | % | ||||||||||
- Non-GAAP | 29.8 | % | 32.1 | % | 31.7 | % | 30.0 | % | 31.2 | % | 29.2 | % | 31.0 | % | 28.4 | % | ||||||||||
Enterprise Solutions | ||||||||||||||||||||||||||
Revenue | $ | 26,277 | $ | 21,661 | $ | 21,718 | $ | 71,486 | $ | 20,976 | $ | 18,938 | $ | 16,577 | $ | 14,995 | ||||||||||
Gross margin (1) (2) (3) | ||||||||||||||||||||||||||
- GAAP | $ | 12,631 | $ | 10,276 | $ | 10,485 | $ | 39,949 | $ | 12,002 | $ | 9,273 | $ | 8,922 | $ | 9,752 | ||||||||||
- Non-GAAP | $ | 12,652 | $ | 10,289 | $ | 10,500 | $ | 38,913 | $ | 10,930 | $ | 9,286 | $ | 8,934 | $ | 9,763 | ||||||||||
Gross margin % (1) (2) (3) | ||||||||||||||||||||||||||
- GAAP | 48.1 | % | 47.4 | % | 48.3 | % | 55.9 | % | 57.2 | % | 49.0 | % | 53.8 | % | 65.0 | % | ||||||||||
- Non-GAAP | 48.1 | % | 47.5 | % | 48.3 | % | 54.4 | % | 52.1 | % | 49.0 | % | 53.9 | % | 65.1 | % | ||||||||||
Cloud and Connectivity Services | ||||||||||||||||||||||||||
Revenue | $ | 8,433 | $ | 7,288 | $ | 7,075 | $ | 27,604 | $ | 6,834 | $ | 6,857 | $ | 6,985 | $ | 6,928 | ||||||||||
Gross margin | ||||||||||||||||||||||||||
- GAAP | $ | 3,983 | $ | 3,098 | $ | 3,098 | $ | 11,198 | $ | 2,684 | $ | 2,904 | $ | 2,837 | $ | 2,773 | ||||||||||
- Non-GAAP | $ | 3,990 | $ | 3,103 | $ | 3,102 | $ | 11,217 | $ | 2,688 | $ | 2,910 | $ | 2,841 | $ | 2,778 | ||||||||||
Gross margin % | ||||||||||||||||||||||||||
- GAAP | 47.2 | % | 42.5 | % | 43.8 | % | 40.6 | % | 39.3 | % | 42.4 | % | 40.6 | % | 40.0 | % | ||||||||||
- Non-GAAP | 47.3 | % | 42.6 | % | 43.8 | % | 40.6 | % | 39.3 | % | 42.4 | % | 40.7 | % | 40.1 | % | ||||||||||
Total | ||||||||||||||||||||||||||
Revenue | $ | 173,241 | $ | 173,510 | $ | 161,793 | $ | 615,607 | $ | 163,021 | $ | 153,560 | $ | 156,229 | $ | 142,797 | ||||||||||
Gross margin | ||||||||||||||||||||||||||
- GAAP | $ | 57,775 | $ | 59,697 | $ | 55,661 | $ | 217,743 | $ | 68,796 | $ | 49,368 | $ | 52,764 | $ | 46,815 | ||||||||||
- Non-GAAP | $ | 57,910 | $ | 59,805 | $ | 55,769 | $ | 205,118 | $ | 55,850 | $ | 49,476 | $ | 52,871 | $ | 46,921 | ||||||||||
Gross margin % | ||||||||||||||||||||||||||
- GAAP | 33.3 | % | 34.4 | % | 34.4 | % | 35.4 | % | 42.2 | % | 32.1 | % | 33.8 | % | 32.8 | % | ||||||||||
- Non-GAAP | 33.4 | % | 34.5 | % | 34.5 | % | 33.3 | % | 34.3 | % | 32.2 | % | 33.8 | % | 32.9 | % | ||||||||||