EX-99.1 2 a2017q3pressrelease.htm 2017 Q3 PRESS RELEASE Exhibit

swilogoa20.jpg

Sierra Wireless Reports Third Quarter 2017 Results

Revenue increases 12.8% year-over-year to $173.2 million in the third quarter of 2017


VANCOUVER, BRITISH COLUMBIA - November 2, 2017 - Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported results for its third quarter ending September 30, 2017. 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.

“In the third quarter of 2017, we delivered strong revenue and profitability growth on a year-over-year basis, driven by performance improvements in each of our three business segments,” said Jason Cohenour, President and CEO.  “We continue to strengthen our leadership position in the Internet of Things with technology innovations, new product launches, new customer wins and strategic acquisitions."

Revenue for the third quarter of 2017 was $173.2 million, an increase of 12.8% compared to $153.6 million in the third quarter of 2016. Revenue from OEM Solutions was $138.5 million in the third quarter of 2017, up 8.4% compared to $127.8 million in the third quarter of 2016. Revenue from Enterprise Solutions was $26.3 million in the third quarter of 2017, up 38.8% compared to $18.9 million in the third quarter of 2016. Revenue from Cloud and Connectivity Services was $8.4 million in the third quarter of 2017, up 23.0% compared to $6.9 million in the third quarter of 2016.

GAAP RESULTS
•
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.

NON-GAAP RESULTS
•
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.

Cash and cash equivalents at the end of the third quarter of 2017 were $74.2 million, representing a decrease of $14.8 million compared to the end of the second quarter of 2017. The decrease in cash was primarily due to high working capital requirements.




Acquisition
On August 2, 2017, we entered into a definitive merger agreement (the "Merger Agreement") to acquire Numerex Corp. ("Numerex") in a stock-for-stock merger transaction (the "Transaction"). Under the terms of the Merger Agreement, Numerex stockholders will receive a fixed exchange ratio of 0.18 common shares of Sierra Wireless for each share of Numerex common stock. Concurrent with closing, Numerex's debt of approximately $20 million and other obligations of approximately $4 million will be repaid with cash. We expect the acquisition to expand our position as a leading global IoT pure-play and significantly increase our subscription-based recurring services revenue. On October 23, 2017, the Transaction was granted early termination of the waiting period pursuant to the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976. On October 30, 2017, the U.S. Securities and Exchange Commission declared our Registration Statement on Form F-4 (containing the proxy statement/prospectus relating to the Transaction) effective under the U.S. Securities Act of 1933 and the proxy statement/prospectus was mailed to Numerex’s stockholders shortly thereafter. The special meeting of Numerex stockholders to consider and vote on the approval of the Transaction has been scheduled for December 6, 2017. The Transaction is expected to close in December 2017, subject to the receipt of Numerex stockholder approval, certain regulatory approvals, and satisfaction of other customary closing conditions.

Financial Guidance
For the fourth quarter of 2017, we expect revenue to be in the range of $172 million to $180 million and non-GAAP earnings per share to be in the range of $0.21 to $0.29.

This Non-GAAP guidance reflects current business indicators and expectations. 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.

Non-GAAP Financial Measures
We disclose non-GAAP financial measures as we believe they provide useful information on actual operating performance 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 gross margin excludes the impact of stock-based compensation expense and related social taxes and certain other nonrecurring costs or recoveries.

Non-GAAP earnings (loss) from operations excludes the impact of stock-based compensation expense and related social taxes, amortization related to acquisitions, acquisition-related and integration expense, restructuring expense, impairment and certain other nonrecurring costs or recoveries.

In addition to the above, Non-GAAP net earnings (loss) and non-GAAP earnings (loss) per share exclude the impact of foreign exchange gains or losses on translation of certain balance sheet accounts, unrealized foreign exchange gains or losses on forward contracts and certain tax adjustments.

We use the above-noted non-GAAP financial measures for planning purposes and to allow us to assess the performance of our business before including the impacts of the items noted above as they affect the comparability of our financial results. These non-GAAP measures are reviewed regularly by management and the Board of Directors as part of the ongoing internal assessment of our operating performance. We also use non-GAAP earnings from operations as one component in determining short-term incentive compensation for management employees.

Adjusted EBITDA is defined as net earnings (loss) plus stock-based compensation expense and related social taxes, acquisition-related and integration expense, restructuring expense, impairment, certain other nonrecurring costs or recoveries, amortization, foreign exchange gains or losses on translation of certain balance sheet accounts,



unrealized foreign exchange gains or losses on forward contracts, interest and income tax expense. Adjusted EBITDA is a metric used by investors and analysts for valuation purposes and we believe that it is an important indicator of our operating performance and our ability to generate liquidity through operating cash flow that will fund future working capital needs and capital expenditures.

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, November 2, 2017, at 6:00 PM Eastern Time (3:00 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: 75777631

To access the webcast, please follow the link below:
Sierra Wireless Q3 2017 Conference Call and Webcast
If the above link does not work, please copy and paste the following URL into your browser:
http://event.on24.com/r.htm?e=1494794&s=1&k=14795ECFA155598D365EF53424FC9A09
The webcast will remain available at the above link for one year following the call.
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
 

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 fourth quarter of 2017 and our fiscal year 2017, our business outlook for the short and longer term, statements regarding our strategy, plans and future operating performance. Forward-looking statements are provided to help you understand our views of our short and long 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, 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.


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. Customers start with Sierra because 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 1,100 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 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







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







SIERRA WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
 
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






SIERRA WIRELESS, INC. 

RECONCILIATION OF GAAP AND NON-GAAP RESULTS BY QUARTER

(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

 
 
 
 
 
 
 
 
 
 
 
 
 
 




SIERRA WIRELESS, INC. 

SEGMENTED RESULTS 
(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
%
 
 
 
 
 
 
 
 
 
 
 
 
(1) Q1 2016 Enterprise Solutions results include a $1.9 million recovery from a legal settlement with a supplier related to a quality issue with a component used in some of our gateway products. Excluding this recovery, GAAP and Non-GAAP gross margin percentage would have been 52.4% and 52.5%, respectively.
(2) Q2 2016 OEM Solutions results include a $1.7 million recovery from certain legal costs pursuant to a favorable arbitration decision on a contract dispute with an intellectual property licensor. Excluding this recovery, GAAP and Non-GAAP gross margin percentage would have been 29.6% and 29.7%, respectively. Q2 2016 Enterprise Solutions results also include a $0.2 million recovery from this arbitration decision. Excluding this recovery, GAAP and Non-GAAP gross margin percentage would have been 52.7% and 52.8%, respectively.




(3) Q4 2016 OEM Solutions and Enterprise Solutions GAAP gross margins include a favorable impact of $12.9 million and $1.5 million, respectively, of a change in estimate on accrued royalty obligations. This is comprised of two components, an amount of $11.7 million and $1.3 million, respectively, related to a one-time reduction effective October 1, 2016 (excluded from non-GAAP gross margin), and a $1.2 million and $0.2 million, respectively, favorable impact related to royalties accrued on the products sold in Q4, 2016 (included in non-GAAP gross margin).