Form 20-F | o | 40-F | ý |
Yes: | o | No: | ý |
Yes: | o | No: | ý |
Sierra Wireless, Inc. | ||
By: | /s/ David G. McLennan | |
David G. McLennan, Chief Financial Officer and Secretary | ||
Date: August 2, 2019 |
• | Gross margin was $58.9 million, or 30.8% of revenue, in the second quarter of 2019 compared to |
• | Restructuring expense was $18.2 million compared to $1.0 million in the second quarter of 2018. |
• | Operating expenses were $82.2 million and loss from operations was $23.3 million in the second quarter of 2019 compared to operating expenses of $74.4 million and loss from operations of $5.1 million in the second quarter of 2018. |
• | Net loss was $28.2 million, or $0.78 per diluted share, in the second quarter of 2019 compared to net loss of $11.4 million, or $0.32 per diluted share, in the second quarter of 2018. |
• | Gross margin was 30.8% in the second quarter of 2019 compared to 34.4% in the second quarter of 2018. |
• | Operating expenses were $55.6 million and earnings from operations was $3.4 million in the second quarter of 2019 compared to operating expenses of $59.0 million and earnings from operations of $10.4 million in the second quarter of 2018. |
• | Net earnings were $2.5 million, or $0.07 per diluted share, in the second quarter of 2019 compared to net earnings of $9.7 million, or $0.27 per diluted share, in the second quarter of 2018. |
• | Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") were $7.9 million in the second quarter of 2019 compared to $15.6 million in the second quarter of 2018. |
• | Typically include words and phrases about the future such as "outlook", "will", "may", “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible”, or variations thereof. |
• | 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 macro-economic business conditions; |
• | expected cost of sales; |
• | 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 other developments, operating, cyber security, litigation, or regulatory risks; and |
• | expected tax and foreign exchange rates. |
• | Are based on our management's current expectations and we caution investors that forward-looking statements, particularly those that relate to longer periods of time, 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: |
• | competition from new or established competitors or from those with greater resources; |
• | the loss of, or significant demand fluctuations from, any of our significant customers; |
• | our business transformation initiatives may result in disruptions to our business and may not achieve the anticipated benefits; |
• | our ability to attract or retain key personnel and the impact of organizational change on our business; |
• | our ability to respond to changing technology, industry standards and customer requirements; |
• | failures of our products or services due to design flaws and errors, component quality issues, manufacturing defects, network service interruptions, cyber-security vulnerabilities or other quality issues; |
• | deterioration in macro-economic conditions and resulting reduced demand for our products and services; |
• | cyber-attacks or other breaches of our information technology security; |
• | risks related to the transmission, use and disclosure of user data and personal information; |
• | our financial results being subject to fluctuation; |
• | disruption of, and demands on, our ongoing business and diversion of management's time and attention in connection with acquisitions or divestitures; |
• | 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 reliance on single source suppliers for certain components used in our products; |
• | our dependence on a limited number of third party manufacturers; |
• | unanticipated costs associated with litigation or settlements; |
• | our dependence on mobile network operators to promote and offer acceptable wireless data services; |
• | risks related to contractual disputes with counterparties; |
• | risks related to governmental regulation; |
• | risks inherent in foreign jurisdictions; and |
• | risks related to tariffs or other trade restrictions. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue | |||||||||||||||
IoT Solutions | $ | 99,145 | $ | 93,274 | $ | 193,432 | $ | 182,722 | |||||||
Embedded Broadband | 92,229 | 108,629 | 171,755 | 206,059 | |||||||||||
191,374 | 201,903 | 365,187 | 388,781 | ||||||||||||
Cost of sales | |||||||||||||||
IoT Solutions | 62,334 | 58,992 | 122,142 | 115,830 | |||||||||||
Embedded Broadband | 70,091 | 73,602 | 129,466 | 141,542 | |||||||||||
132,425 | 132,594 | 251,608 | 257,372 | ||||||||||||
Gross margin | 58,949 | 69,309 | 113,579 | 131,409 | |||||||||||
Expenses | |||||||||||||||
Sales and marketing | 23,755 | 22,066 | 46,261 | 44,491 | |||||||||||
Research and development | 22,111 | 24,391 | 44,908 | 48,856 | |||||||||||
Administration | 12,893 | 19,804 | 25,290 | 32,068 | |||||||||||
Restructuring | 18,180 | 952 | 19,577 | 4,543 | |||||||||||
Acquisition-related and integration | 314 | 1,014 | 409 | 2,779 | |||||||||||
Amortization | 4,967 | 6,137 | 10,211 | 13,603 | |||||||||||
82,220 | 74,364 | 146,656 | 146,340 | ||||||||||||
Loss from operations | (23,271 | ) | (5,055 | ) | (33,077 | ) | (14,931 | ) | |||||||
Foreign exchange gain (loss) | 854 | (4,048 | ) | 2 | (2,933 | ) | |||||||||
Other (expense) income | (102 | ) | 8 | (71 | ) | 63 | |||||||||
Loss before income taxes | (22,519 | ) | (9,095 | ) | (33,146 | ) | (17,801 | ) | |||||||
Income tax expense | 5,657 | 2,289 | 6,253 | 1,946 | |||||||||||
Net loss | $ | (28,176 | ) | $ | (11,384 | ) | $ | (39,399 | ) | $ | (19,747 | ) | |||
Other comprehensive gain (loss): | |||||||||||||||
Foreign currency translation adjustments, net of taxes of $nil | 95 | (6,474 | ) | (3,520 | ) | (7,241 | ) | ||||||||
Comprehensive loss | $ | (28,081 | ) | $ | (17,858 | ) | $ | (42,919 | ) | $ | (26,988 | ) | |||
Net loss per share (in dollars) | |||||||||||||||
Basic | $ | (0.78 | ) | $ | (0.32 | ) | $ | (1.09 | ) | $ | (0.55 | ) | |||
Diluted | (0.78 | ) | (0.32 | ) | (1.09 | ) | (0.55 | ) | |||||||
Weighted average number of shares outstanding (in thousands) | |||||||||||||||
Basic | 36,156 | 36,021 | 36,131 | 35,967 | |||||||||||
Diluted | 36,156 | 36,021 | 36,131 | 35,967 |
June 30, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 84,769 | $ | 89,076 | |||
Restricted cash | 221 | 221 | |||||
Accounts receivable, net of allowance for doubtful accounts of $3,574 (December 31, 2018 – $2,968) | 151,219 | 171,725 | |||||
Inventories | 56,327 | 50,779 | |||||
Prepaids and other | 16,476 | 11,703 | |||||
309,012 | 323,504 | ||||||
Property and equipment | 39,489 | 39,842 | |||||
Operating lease right-of-use assets | 26,114 | — | |||||
Intangible assets | 77,545 | 84,890 | |||||
Goodwill | 208,752 | 211,074 | |||||
Deferred income taxes | 6,802 | 11,751 | |||||
Other assets | 13,383 | 12,855 | |||||
$ | 681,097 | $ | 683,916 | ||||
Liabilities | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | $ | 195,091 | $ | 184,220 | |||
Deferred revenue | 8,719 | 6,213 | |||||
203,810 | 190,433 | ||||||
Long-term obligations | 40,267 | 43,250 | |||||
Operating lease liabilities | 23,546 | — | |||||
Deferred income taxes | 5,848 | 6,103 | |||||
273,471 | 239,786 | ||||||
Equity | |||||||
Shareholders’ equity | |||||||
Common stock: no par value; unlimited shares authorized; issued and outstanding: 36,165,096 shares (December 31, 2018 – 36,067,415 shares) | 434,316 | 432,552 | |||||
Preferred stock: no par value; unlimited shares authorized; issued and outstanding: nil shares | — | — | |||||
Treasury stock: at cost; 17,892 shares (December 31, 2018 – 119,584 shares) | (229 | ) | (1,965 | ) | |||
Additional paid-in capital | 33,899 | 30,984 | |||||
Retained deficit | (47,694 | ) | (8,295 | ) | |||
Accumulated other comprehensive loss | (12,666 | ) | (9,146 | ) | |||
407,626 | 444,130 | ||||||
$ | 681,097 | $ | 683,916 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Cash flows provided by (used in): | |||||||||||||||
Operating activities | |||||||||||||||
Net loss | $ | (28,176 | ) | $ | (11,384 | ) | $ | (39,399 | ) | $ | (19,747 | ) | |||
Items not requiring (providing) cash | |||||||||||||||
Amortization | 8,118 | 9,651 | 16,489 | 20,359 | |||||||||||
Stock-based compensation | 4,102 | 4,237 | 7,260 | 7,051 | |||||||||||
Deferred income taxes | 4,961 | 1,014 | 5,038 | 1,082 | |||||||||||
Unrealized foreign exchange (gain) loss | (2,230 | ) | 5,887 | (1,976 | ) | 4,325 | |||||||||
Other | 478 | 130 | 586 | 569 | |||||||||||
Changes in non-cash working capital | |||||||||||||||
Accounts receivable | 1,184 | (4,449 | ) | 17,998 | (1,692 | ) | |||||||||
Inventories | 1,116 | (7,413 | ) | (5,619 | ) | (789 | ) | ||||||||
Prepaids and other | 2,129 | (154 | ) | (5,518 | ) | (5,718 | ) | ||||||||
Accounts payable and accrued liabilities | 22,765 | 16,440 | 7,599 | 18,426 | |||||||||||
Deferred revenue | 1,347 | (2,638 | ) | 2,718 | (1,689 | ) | |||||||||
Cash flows provided by operating activities | 15,794 | 11,321 | 5,176 | 22,177 | |||||||||||
Investing activities | |||||||||||||||
Additions to property and equipment | (4,273 | ) | (4,935 | ) | (8,131 | ) | (8,999 | ) | |||||||
Additions to intangible assets | (905 | ) | (641 | ) | (1,393 | ) | (1,486 | ) | |||||||
Proceeds from sale of property and equipment | 27 | 45 | 84 | 62 | |||||||||||
Proceeds from sale of iTank business | — | — | 500 | — | |||||||||||
Cash flows used in investing activities | (5,151 | ) | (5,531 | ) | (8,940 | ) | (10,423 | ) | |||||||
Financing activities | |||||||||||||||
Issuance of common shares | 73 | 607 | 167 | 1,278 | |||||||||||
Purchase of treasury shares for RSU distribution | (267 | ) | — | (267 | ) | — | |||||||||
Taxes paid related to net settlement of equity awards | (75 | ) | (789 | ) | (745 | ) | (1,454 | ) | |||||||
Payment for contingent consideration | — | (130 | ) | — | (130 | ) | |||||||||
Decrease in other long-term obligations | (73 | ) | (244 | ) | (214 | ) | (443 | ) | |||||||
Cash flows used in financing activities | (342 | ) | (556 | ) | (1,059 | ) | (749 | ) | |||||||
Effect of foreign exchange rate changes on cash and cash equivalents | 325 | (2,411 | ) | 516 | (2,597 | ) | |||||||||
Cash, cash equivalents and restricted cash, increase (decrease) in the period | 10,626 | 2,823 | (4,307 | ) | 8,408 | ||||||||||
Cash, cash equivalents and restricted cash, beginning of period | 74,364 | 70,809 | 89,297 | 65,224 | |||||||||||
Cash, cash equivalents and restricted cash, end of period | $ | 84,990 | $ | 73,632 | $ | 84,990 | $ | 73,632 |
(in thousands of U.S. dollars, except where otherwise stated) | 2019 | 2018 | ||||||||||||||||||||||
Q2 | Q1 | Total | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
Gross margin - GAAP | $ | 58,949 | $ | 54,630 | $ | 264,571 | $ | 65,895 | $ | 67,267 | $ | 69,309 | $ | 62,100 | ||||||||||
Stock-based compensation and related social taxes | 44 | 59 | 479 | 58 | 57 | 57 | 307 | |||||||||||||||||
Realized losses on hedge contracts | (2 | ) | (3 | ) | (30 | ) | (13 | ) | (11 | ) | — | (6 | ) | |||||||||||
Other nonrecurring costs | — | — | 5 | 5 | — | — | — | |||||||||||||||||
Gross margin - Non-GAAP | $ | 58,991 | $ | 54,686 | $ | 265,025 | $ | 65,945 | $ | 67,313 | $ | 69,366 | $ | 62,401 | ||||||||||
Earnings (loss) from operations - GAAP | $ | (23,271 | ) | $ | (9,806 | ) | $ | (18,275 | ) | $ | (4,197 | ) | $ | 853 | $ | (5,055 | ) | $ | (9,876 | ) | ||||
Stock-based compensation and related social taxes | 4,102 | 3,414 | 13,006 | 2,743 | 3,473 | 3,950 | 2,840 | |||||||||||||||||
Acquisition-related and integration | 314 | 95 | 3,962 | 613 | 570 | 1,014 | 1,765 | |||||||||||||||||
Restructuring | 18,180 | 1,397 | 7,115 | 2,345 | 227 | 952 | 3,591 | |||||||||||||||||
Other nonrecurring costs | 662 | 1,167 | 11,485 | 4,761 | 1,583 | 5,141 | — | |||||||||||||||||
Realized losses on hedge contracts | (183 | ) | (109 | ) | (562 | ) | (296 | ) | (201 | ) | (14 | ) | (51 | ) | ||||||||||
Acquisition-related amortization | 3,624 | 3,687 | 18,575 | 4,261 | 4,354 | 4,426 | 5,534 | |||||||||||||||||
Earnings (loss) from operations - Non-GAAP | $ | 3,428 | $ | (155 | ) | $ | 35,306 | $ | 10,230 | $ | 10,859 | $ | 10,414 | $ | 3,803 | |||||||||
Net earnings (loss) - GAAP | $ | (28,176 | ) | $ | (11,223 | ) | $ | (24,610 | ) | $ | (3,826 | ) | $ | (1,037 | ) | $ | (11,384 | ) | $ | (8,363 | ) | |||
Stock-based compensation and related social taxes, restructuring, impairment, acquisition-related, integration and other non-recurring costs (recoveries) | 23,258 | 6,073 | 35,568 | 10,462 | 5,853 | 11,057 | 8,196 | |||||||||||||||||
Amortization | 8,118 | 8,371 | 39,150 | 9,308 | 9,483 | 9,651 | 10,708 | |||||||||||||||||
Interest and other, net | 102 | (31 | ) | (51 | ) | 19 | (7 | ) | (8 | ) | (55 | ) | ||||||||||||
Foreign exchange loss (gain) | (1,037 | ) | 743 | 4,908 | 2,082 | (42 | ) | 4,034 | (1,166 | ) | ||||||||||||||
Income tax expense (recovery) | 5,657 | 596 | 916 | (2,768 | ) | 1,738 | 2,289 | (343 | ) | |||||||||||||||
Adjusted EBITDA | 7,922 | 4,529 | 55,881 | 15,277 | 15,988 | 15,639 | 8,977 | |||||||||||||||||
Amortization (exclude acquisition-related amortization) | (4,494 | ) | (4,684 | ) | (20,575 | ) | (5,047 | ) | (5,129 | ) | (5,225 | ) | (5,174 | ) | ||||||||||
Interest and other, net | (102 | ) | 31 | 51 | (19 | ) | 7 | 8 | 55 | |||||||||||||||
Income tax expense - Non-GAAP | (859 | ) | (730 | ) | (2,930 | ) | (1,245 | ) | (352 | ) | (769 | ) | (564 | ) | ||||||||||
Net earnings (loss) - Non-GAAP | $ | 2,467 | $ | (854 | ) | $ | 32,427 | $ | 8,966 | $ | 10,514 | $ | 9,653 | $ | 3,294 | |||||||||
Diluted net earnings (loss) per share | ||||||||||||||||||||||||
GAAP - (in dollars per share) | $ | (0.78 | ) | $ | (0.31 | ) | $ | (0.68 | ) | $ | (0.11 | ) | $ | (0.03 | ) | $ | (0.32 | ) | $ | (0.23 | ) | |||
Non-GAAP - (in dollars per share) | $ | 0.07 | $ | (0.02 | ) | $ | 0.90 | $ | 0.25 | $ | 0.29 | $ | 0.27 | $ | 0.09 | |||||||||
(In thousands of U.S. dollars, except where otherwise stated) | 2019 | 2018 | |||||||||||||||||||||
Q2 | Q1 | Total | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||
IoT Solutions | |||||||||||||||||||||||
Revenue | $ | 99,145 | $ | 94,287 | $ | 373,937 | $ | 95,728 | $ | 95,487 | $ | 93,274 | $ | 89,448 | |||||||||
Gross margin | |||||||||||||||||||||||
- GAAP | $ | 36,811 | $ | 34,479 | $ | 139,602 | $ | 36,651 | $ | 36,059 | $ | 34,282 | $ | 32,610 | |||||||||
- Non-GAAP | $ | 36,833 | $ | 34,510 | $ | 139,818 | $ | 36,675 | $ | 36,081 | $ | 34,308 | $ | 32,754 | |||||||||
Gross margin % | |||||||||||||||||||||||
- GAAP | 37.1 | % | 36.6 | % | 37.3 | % | 38.3 | % | 37.8 | % | 36.8 | % | 36.5 | % | |||||||||
- Non-GAAP | 37.2 | % | 36.6 | % | 37.4 | % | 38.3 | % | 37.8 | % | 36.8 | % | 36.6 | % | |||||||||
Embedded Broadband | |||||||||||||||||||||||
Revenue | $ | 92,229 | $ | 79,526 | $ | 419,665 | $ | 105,667 | $ | 107,939 | $ | 108,629 | $ | 97,430 | |||||||||
Gross margin | |||||||||||||||||||||||
- GAAP | $ | 22,138 | $ | 20,151 | $ | 124,969 | $ | 29,244 | $ | 31,208 | $ | 35,027 | $ | 29,490 | |||||||||
- Non-GAAP | $ | 22,158 | $ | 20,176 | $ | 125,207 | $ | 29,270 | $ | 31,232 | $ | 35,058 | $ | 29,647 | |||||||||
Gross margin % | |||||||||||||||||||||||
- GAAP | 24.0 | % | 25.3 | % | 29.8 | % | 27.7 | % | 28.9 | % | 32.2 | % | 30.3 | % | |||||||||
- Non-GAAP | 24.0 | % | 25.4 | % | 29.8 | % | 27.7 | % | 28.9 | % | 32.3 | % | 30.4 | % | |||||||||
Total | |||||||||||||||||||||||
Revenue | $ | 191,374 | $ | 173,813 | $ | 793,602 | $ | 201,395 | $ | 203,426 | $ | 201,903 | $ | 186,878 | |||||||||
Gross margin | |||||||||||||||||||||||
- GAAP | $ | 58,949 | $ | 54,630 | $ | 264,571 | $ | 65,895 | $ | 67,267 | $ | 69,309 | $ | 62,100 | |||||||||
- Non-GAAP | $ | 58,991 | $ | 54,686 | $ | 265,025 | $ | 65,945 | $ | 67,313 | $ | 69,366 | $ | 62,401 | |||||||||
Gross margin % | |||||||||||||||||||||||
- GAAP | 30.8 | % | 31.4 | % | 33.3 | % | 32.7 | % | 33.1 | % | 34.3 | % | 33.2 | % | |||||||||
- Non-GAAP | 30.8 | % | 31.5 | % | 33.4 | % | 32.7 | % | 33.1 | % | 34.4 | % | 33.4 | % | |||||||||