Document



MANAGEMENT’S DISCUSSION AND ANALYSIS	1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	2
OVERVIEW	4
Business Overview	4
Third Quarter Overview	5
Outlook	9
CONSOLIDATED RESULTS OF OPERATIONS	11
SEGMENTED INFORMATION	14
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS	16
LIQUIDITY AND CAPITAL RESOURCES	17
NON-GAAP FINANCIAL MEASURES	20
OFF-BALANCE SHEET ARRANGEMENTS	23
TRANSACTIONS BETWEEN RELATED PARTIES	23
CRITICAL ACCOUNTING POLICIES AND ESTIMATES	23
OUTSTANDING SHARE DATA	24
IMPACT OF ACCOUNTING PRONOUNCEMENTS AFFECTING CURRENT PERIOD	24
IMPACT OF ACCOUNTING PRONOUNCEMENTS AFFECTING FUTURE PERIODS	24
INTERNAL CONTROL OVER FINANCIAL REPORTING	25
LEGAL PROCEEDINGS	25
FINANCIAL RISK MANAGEMENT	26
RISKS AND UNCERTAINTIES	27

CONSOLIDATED FINANCIAL STATEMENTS	38

The following Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information for the three and nine months ended September 30, 2019, and up to and including November 8, 2019. This MD&A should be read together with our unaudited interim consolidated financial statements and the accompanying notes for the three and nine months periods ended September 30, 2019 and September 30, 2018, respectively, and our audited annual consolidated financial statements and the accompanying notes for the year ended December 31, 2018 (collectively, “the consolidated financial statements”). The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP” or "GAAP"). Except where otherwise specifically indicated, all amounts in this MD&A are expressed in United States dollars.

Throughout this document, references are made to certain non-GAAP financial measures that are not measures of performance under U.S. GAAP. Management believes that these non-GAAP financial measures provide useful information to investors regarding our results of operations as they provide additional measures of our performance and assist in comparisons from one period to another. These non-GAAP financial measures do not have any standardized meaning prescribed by U.S. GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. These non-GAAP financial measures are defined and reconciled to their nearest GAAP measure in “Non-GAAP Financial Measures”.

This MD&A contains certain statements and information that 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 (collectively, “forward-looking statements”) and may include statements and information relating to our Q3 2019 corporate update; financial guidance for our fiscal year 2019; expectations regarding the Company's cost savings initiatives; expectations regarding the acquisition of M2M Group and the timing thereof; our business outlook for the short and longer term; statements regarding our strategy, plans, goals, objectives, expectations and future operating performance; the Company's liquidity and capital resources; the Company's financial and operating objectives and strategies to achieve them; general economic conditions; estimates of our expenses, future revenues, non-GAAP earnings per share and capital requirements; our expectations regarding the legal proceedings we are involved in; statements with respect to the Company's estimated working capital; expectations with respect to the adoption of Internet of Things ("IoT") solutions; expectations regarding trends in the IoT market and wireless module market; expectations regarding product and price competition from other wireless device manufacturers and solution providers; our ability to implement effective control procedures; and expectations regarding the launch of fifth generation cellular embedded modules. 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.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as "outlook", “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible”, or variations thereof, or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are not promises or guarantees of future performance, they represent our current views and may change significantly. Forward-looking statements are based on a number of material assumptions, including, but not limited to, those listed below, which could prove to be significantly incorrect:

This list is not exhaustive of the factors that may affect any of our forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to below under "Risks and Uncertainties" and those referred to in our other regulatory filings with the U.S. Securities and Exchange Commission (the "SEC") in the United States and the provincial securities commissions in Canada.

To accelerate our transformation to a Device-to-Cloud IoT solutions company, we launched certain strategic and organizational structure changes in late 2018. Since then, we have designed and commenced implementation of a variety of cost reduction initiatives broadly across the Company, and organizationally, we have combined three development teams into a single research and development ("R&D") entity to improve efficiency. Similarly, we have combined product management into one centralized team. We also re-organized our Go-To-Market team with a strong focus on IoT solutions under a unified sales force to focus on leveraging our IoT device leadership position into more highly integrated Device-to-Cloud IoT solutions.

Our IoT Solutions segment is focused on integrated end-to-end IoT solutions that include recurring connectivity services, our IoT cloud platform, software and devices (cellular modules and gateways) targeted primarily at enterprises and OEMs in the IoT space. Our primary focus is on three key markets: (i) Industrial Edge for manufacturing asset monitoring; (ii) Mobile Edge for mobile manufacturing asset tracking; and (iii) Infrastructure Edge for commercial infrastructure and building monitoring. The IoT opportunities we are focusing on have a high potential for recurring connectivity services to be provided to the customer along with our cloud platform, devices and management tools. Our new IoT Solutions segment is comprised of our former IoT Services and Enterprise Solutions segments, as well as a portion of our former OEM Solutions segment.

In this segment, we provide Device-to-Cloud IoT solutions that include: (i) our global cellular connectivity services, which are subscription-based and include our flexible Smart SIM and core network platforms; (ii) our cloud platform services, which provide a secure and scalable cloud platform for deploying and managing IoT subscriptions, over-the-air updates, devices and applications; and (iii) our managed broadband cellular services, which include a combination of hardware, managed high speed connectivity and cloud services. We also provide unified data orchestration to provide enhanced data management from the edge of the network to the cloud. This service, called Octave, securely integrates edge device, network and cloud application programming interfaces into a single platform.

Our devices in this reporting segment are comprised of IoT embedded cellular wireless modules which include Low Power Wide Area technologies ("LPWA"), second generation ("2G"), third generation ("3G"), and fourth generation ("4G") Long-Term Evolution ("LTE") products. We are currently working on the development of fifth generation ("5G") cellular embedded modules for anticipated launch in 2020. We also provide 3G and 4G cellular gateways and routers that are complemented by cloud-based services and on-premise software for secure device and network management.

Our gateway solutions address a broad range of vertical market applications within the mobility, industrial and enterprise market segments. Our AirLink gateways and routers have strong brand recognition with network operators, distributors, value added resellers and end customers. Our products are known for their high reliability and technical capability in mission-critical applications. These gateways and routers leverage our expertise in wireless technologies and offer the latest capabilities in LTE networking, including FirstNet solutions as well as Wi-Fi, Bluetooth and Global Navigation Satellite System ("GNSS") technologies. We also provide our customers with AirLink Management Services through our IoT platform and have introduced new advanced reporting and analytics to our portfolio.

Our Embedded Broadband segment is comprised of our high-speed cellular embedded modules that are typically used in non-industrial applications, namely Automobile, Mobile Computing and Enterprise Networking markets. The products in this segment are typically high-speed 4G LTE and LTE-Advanced cellular modules that are ordered in larger volumes. In this segment, we have limited opportunities to provide connectivity services or fully-integrated IoT solutions to the OEM customer. We have a strong customer base in the Embedded Broadband business that is expected to transition over time from 4G LTE to 5G cellular technology.

As a leading embedded module vendor, we make it simple for our customers to embed high-speed cellular technologies and manage these devices through our IoT cloud platform. The design cycles in this business segment can range from two to three years in the Automotive market to 12 to 18 months in the Mobile Computing market. We are currently working on a number of potential 5G design opportunities with existing customers and new customers. Our portfolio also includes cloud-based remote device and data management capability, as well as support for our embedded application framework called Legato, which is an open source, Linux-based platform.

In the third quarter of 2019, compared to the same period of 2018, IoT Solutions segment revenue decreased by $2.0 million, or 2.1%, to $93.4 million due to lower Integrated IoT solutions module revenue, partially offset by stronger subscription, support and other services revenue and stronger sales of Enterprise gateway products. Within the IoT Solutions segment, excluding iTank revenue of $0.6 million, which was sold at the end of 2018, subscription, support and other services revenue was up 4.9% and within this, recurring subscription revenue was up 6.7%. Embedded Broadband segment revenue decreased by $27.4 million, or 25.3%, to $80.6 million due to weaker demand from networking, mobile computing and automotive customers.

Gross margin was 31.6% in the third quarter of 2019 compared to 33.1% in the same period of 2018, driven by unfavourable product and customer mix in our Embedded Broadband segment, partly offset by improved sales of higher margin gateways in our IoT Solutions segment. Gross margin was 31.3% in the first nine months of 2019 compared to 33.5% in the same period of 2018, driven by unfavorable product and customer mix in our Embedded Broadband segment combined with a specific provision related to a quality issue with an Asian automotive customer that we resolved in the second quarter of 2019, partly offset by improved sales of higher margin gateways in our IoT Solutions segment.

1) Consolidation of engineering resources and the transfer of certain functions to lower cost locations resulting in a significant reduction in our engineering team in Issy-Les-Moulineaux, outside of Paris, France. Following a detailed process, the majority of employees impacted by this program have been notified and we expect the program to be largely complete by the end of 2019. Our sales and customer support capability in Issy-Les-Moulineaux will remain unchanged and our teams in Toulouse and Sophia Antipolis will continue to provide key technical capability for our cloud and services offerings; and

(1) Non-GAAP financial measures exclude the impact of stock-based compensation expense and related social taxes, acquisition-related amortization, impairment, acquisition-related costs, integration costs, restructuring costs, certain other nonrecurring costs or recoveries, foreign exchange gains or losses on translation of balance sheet accounts, unrealized foreign exchange gains and losses on forward contracts and certain tax adjustments. Refer to the section titled “Non-GAAP Financial Measures” for additional details and reconciliations to the applicable U.S. GAAP financial measures.

On November 5, 2019, we signed an agreement to purchase the M2M group of companies ("M2M Group") in Australia to expand our IoT Solutions business in the Asia-Pacific region. The M2M Group is focused on connectivity services and IoT cellular devices with a strong history of IoT leadership and solid carrier relations in the region. The purchase price of $19.8 million is based on cash consideration of $18.8 million for 100% of the equity plus approximately $1.0 million for the retirement of certain obligations, subject to normal working capital adjustments. The business is an excellent strategic fit with our IoT Solutions business with slightly more than half of the M2M Group’s revenue coming from subscription-based recurring revenue. This segment of the business has been growing rapidly over the last several years. The M2M Group’s revenue in the last twelve months was US$17.9 million, of which $9.2 million was recurring subscription-based revenue. We expect the acquisition to be accretive to earnings immediately following closing in early 2020. The M2M Group has a solid platform for us to increase our IoT services and solutions in Australia and Southeast Asia. We expect the transaction to close early in January 2020, subject to the satisfaction of customary closing conditions.



(in thousands of U.S. dollars, except where otherwise stated)	2019									2018
	Q3			Q2			Q1			Total			Q4			Q3			Q2			Q1
Statement of Operations data:
Revenue	$	174,025		$	191,374		$	173,813		$	793,602		$	201,395		$	203,426		$	201,903		$	186,878

Gross Margin
- GAAP	$	55,043		$	58,949		$	54,630		$	264,571		$	65,895		$	67,267		$	69,309		$	62,100
- Non-GAAP⁽¹⁾	55,087			58,991			54,686			265,025			65,945			67,313			69,366			62,401

Gross Margin %
- GAAP	31.6		%	30.8		%	31.4		%	33.3		%	32.7		%	33.1		%	34.3		%	33.2		%
- Non-GAAP⁽¹⁾	31.7		%	30.8		%	31.5		%	33.4		%	32.7		%	33.1		%	34.4		%	33.4		%

Earnings (loss) from operations
- GAAP	$	(12,559	)	$	(23,271	)	$	(9,806	)	$	(18,275	)	$	(4,197	)	$	853		$	(5,055	)	$	(9,876	)
- Non-GAAP⁽¹⁾	1,795			3,428			(155		)	35,306			10,230			10,859			10,414			3,803

Adjusted EBITDA⁽¹⁾	$	6,300		$	7,922		$	4,529		$	55,881		$	15,277		$	15,988		$	15,639		$	8,977

Net earnings (loss)
- GAAP	$	(20,221	)	$	(28,176	)	$	(11,223	)	$	(24,610	)	$	(3,826	)	$	(1,037	)	$	(11,384	)	$	(8,363	)
- Non-GAAP⁽¹⁾	1,021			2,467			(854		)	32,427			8,966			10,514			9,653			3,294

Revenue by Segment:
IoT Solutions	$	93,439		$	99,145		$	94,287		$	373,937		$	95,728		$	95,487		$	93,274		$	89,448
Embedded Broadband	80,586			92,229			79,526			419,665			105,667			107,939			108,629			97,430
Revenue by Type:
Product	$	149,396		$	166,348		$	150,880		$	699,158		$	178,031		$	179,390		$	178,806		$	162,931
Subscription, support and other services	24,629			25,026			22,933			94,444			23,364			24,036			23,097			23,947
Share and per share data:
Basic net earnings (loss) per share (in dollars)
- GAAP	$	(0.56	)	$	(0.78	)	$	(0.31	)	$	(0.68	)	$	(0.11	)	$	(0.03	)	$	(0.32	)	$	(0.23	)
- Non-GAAP⁽¹⁾	$	0.03		$	0.07		$	(0.02	)	$	0.90		$	0.25		$	0.29		$	0.27		$	0.09
Diluted net earnings (loss) per share (in dollars)
- GAAP	$	(0.56	)	$	(0.78	)	$	(0.31	)	$	(0.68	)	$	(0.11	)	$	(0.03	)	$	(0.32	)	$	(0.23	)
- Non-GAAP ⁽¹⁾	$	0.03		$	0.07		$	(0.02	)	$	0.90		$	0.25		$	0.29		$	0.27		$	0.09

Common shares (in thousands)
At period-end	36,197			36,165			36,150			36,067			36,067			36,048			36,095			35,979
Weighted average - basic	36,179			36,156			36,106			36,019			36,057			36,085			36,021			35,912
Weighted average - diluted	36,179			36,156			36,106			36,019			36,057			36,085			36,021			35,912

This non-GAAP guidance constitutes "forward-looking statements" within the meaning of applicable securities laws and reflects current business indicators and expectations. These statements are based on management's current beliefs and assumptions, which could prove to be significantly incorrect. Forward-looking statements, particularly those that relate to longer periods of time, are subject to substantial known and unknown risks and uncertainties that could cause actual events or results to differ significantly from those expressed or implied by our forward-looking statements, including those described under "Cautionary Note Regarding Forward-Looking Statements" and "Risks and Uncertainties".

We believe that the market for wireless IoT solutions has strong long-term growth prospects. We anticipate strong long-term growth in the number of devices being wirelessly connected, driven by key enablers, such as lower wireless connectivity costs, faster wireless connection speeds, new wireless technologies designed specifically for the IoT, new devices and tools to simplify the development of IoT applications, and increased focus and investment from large ecosystem players. More importantly, we see emerging customer demand in many of our target verticals driven by increasing recognition of the value created by deploying IoT solutions, such as new revenue streams and cost efficiencies.



	Three months ended September 30										Nine months ended September 30
(in thousands of U.S. dollars, except where otherwise stated)	2019					2018					2019					2018
	$			% of Revenue		$			% of Revenue		$			% of Revenue		$			% of Revenue
Revenue
IoT Solutions	93,439			53.7	%	95,487			46.9	%	286,871			53.2	%	278,209			47.0	%
Embedded Broadband	80,586			46.3	%	107,939			53.1	%	252,341			46.8	%	313,998			53.0	%
	174,025			100.0	%	203,426			100.0	%	539,212			100.0	%	592,207			100.0	%
Cost of sales
IoT Solutions	58,236			33.5	%	59,428			29.2	%	180,378			33.4	%	175,258			29.6	%
Embedded Broadband	60,746			34.9	%	76,731			37.7	%	190,212			35.3	%	218,273			36.9	%
	118,982			68.4	%	136,159			66.9	%	370,590			68.7	%	393,531			66.5	%
Gross margin	55,043			31.6	%	67,267			33.1	%	168,622			31.3	%	198,676			33.5	%

Expenses
Sales and marketing	23,523			13.5	%	21,743			10.7	%	69,784			12.9	%	66,234			11.2	%
Research and development	20,550			11.8	%	22,621			11.1	%	65,458			12.1	%	71,477			12.1	%
Administration	11,937			6.9	%	14,998			7.4	%	37,227			6.9	%	47,066			7.9	%
Restructuring	6,274			3.6	%	227			0.1	%	25,851			4.8	%	4,770			0.8	%
Acquisition-related and integration	291			0.2	%	570			0.3	%	700			0.1	%	3,349			0.6	%
Amortization	5,027			2.9	%	6,255			3.1	%	15,238			2.8	%	19,858			3.4	%
	67,602			38.8	%	66,414			32.6	%	214,258			39.7	%	212,754			35.9	%
Loss from operations	(12,559		)	(7.2	)%	853			0.4	%	(45,636		)	(8.5	)%	(14,078		)	(2.4	)%
Foreign exchange loss	(2,964		)			(159		)			(2,962		)			(3,092		)
Other (expense) income	(121		)			7					(192		)			70
Earnings (loss) before income taxes	(15,644		)			701					(48,790		)			(17,100		)
Income tax expense	4,577					1,738					10,830					3,684
Net loss	(20,221		)			(1,037		)			(59,620		)			(20,784		)

Net loss per share(in dollars) - basic and diluted	$	(0.56	)			$	(0.03	)			$	(1.65	)			$	(0.58	)
Weighted average number of shares (in thousands) - basic and diluted	36,179					36,085					36,147					36,007

Administration expense decreased by $3.1 million, or 20.4%, in the third quarter of 2019 compared to the same period of 2018 mainly driven by lower consulting fees and cost reduction initiatives. Administration expense decreased by $9.8 million, or 20.9%, in the first nine months of 2019 compared to the same period of 2018. Administration expense in the first nine months of 2018 included one-time separation costs related to our former CEO's retirement, including higher stock-based compensation expense in connection with accelerated vesting of equity awards and higher consulting fees.

In the third quarter, Embedded Broadband revenue decreased by $27.4 million, or 25.3%, compared to the same period in 2018, mainly due to weaker demand from mobile computing and networking customers as we complete certain programs with these customers; and weaker industry-wide demand in Automotive, combined with expected delays in the launch of new high-volume programs. In the first nine months of 2019, Embedded Broadband revenue decreased by $61.7 million, or 19.6%, compared to the same period of 2018. This decrease was primarily due to weaker demand from mobile computing and networking customers, partially offset by a modest increase in revenue from automotive customers.

The following table highlights selected consolidated financial information for each of the eight most recent quarters that, in management’s opinion, have been prepared on a basis consistent with the audited consolidated financial statements for the year ended December 31, 2018, except as indicated in section "Impact of Accounting Pronouncements Affecting Current Period". The selected consolidated financial information presented below reflects all adjustments, consisting primarily of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of results for the interim periods. Prior quarters have been adjusted for the adoption of the new revenue standard. These results are not necessarily indicative of results for any future period. You should not rely on these results to predict future performance.



(in thousands of U.S. dollars, except where otherwise stated)	2019									2018												2017 As adjusted
	Q3			Q2			Q1			Q4			Q3			Q2			Q1			Q4
Revenue	$	174,025		$	191,374		$	173,813		$	201,395		$	203,426		$	201,903		$	186,878		$	183,533
Cost of sales	118,982			132,425			119,183			135,500			136,159			132,594			124,778			121,719
Gross margin	55,043			58,949			54,630			65,895			67,267			69,309			62,100			61,814
Gross margin %	31.6		%	30.8		%	31.4		%	32.7		%	33.1		%	34.3		%	33.2		%	33.7		%

Expenses
Sales and marketing	23,523			23,755			22,506			22,353			21,743			22,066			22,425			20,436
Research and development	20,550			22,111			22,797			22,230			22,621			24,391			24,465			21,828
Administration	11,937			12,893			12,397			14,516			14,998			19,804			12,264			11,379
Restructuring	6,274			18,180			1,397			2,345			227			952			3,591			245
Acquisition-related and integration	291			314			95			613			570			1,014			1,765			4,792
Loss on disposal of iTank business	—			—			—			2,064			—			—			—			—
Amortization	5,027			4,967			5,244			5,971			6,255			6,137			7,466			6,073
	67,602			82,220			64,436			70,092			66,414			74,364			71,976			64,753
Earnings (loss) from operations	(12,559		)	(23,271		)	(9,806		)	(4,197		)	853			(5,055		)	(9,876		)	(2,939		)
Foreign exchange gain (loss)	(2,964		)	854			(852		)	(2,378		)	(159		)	(4,048		)	1,115			1,267
Other income (expense)	(121		)	(102		)	31			(19		)	7			8			55			38
Earnings (loss) before income tax	(15,644		)	(22,519		)	(10,627		)	(6,594		)	701			(9,095		)	(8,706		)	(1,634		)
Income tax expense (recovery)	4,577			5,657			596			(2,768		)	1,738			2,289			(343		)	1,880
Net earnings (loss)	$	(20,221	)	$	(28,176	)	$	(11,223	)	$	(3,826	)	$	(1,037	)	$	(11,384	)	$	(8,363	)	$	(3,514	)
Earnings (loss) per share - in dollars
Basic	$	(0.56	)	$	(0.78	)	$	(0.31	)	$	(0.11	)	$	(0.03	)	$	(0.32	)	$	(0.23	)	$	(0.11	)
Diluted	$	(0.56	)	$	(0.78	)	$	(0.31	)	$	(0.11	)	$	(0.03	)	$	(0.32	)	$	(0.23	)	$	(0.11	)
Weighted average number of shares (in thousands)
Basic	36,179			36,156			36,106			36,057			36,085			36,021			35,912			33,136
Diluted	36,179			36,156			36,106			36,057			36,085			36,021			35,912			33,136



(in thousands of U.S. dollars)	Three months ended September 30									Nine months ended September 30
	2019			2018			Change			2019			2018			Change
Cash flows provided (used) before changes in non-cash working capital:	$	(353	)	$	13,395		$	(13,748	)	$	(12,355	)	$	27,034		$	(39,389	)
Changes in non-cash working capital
Accounts receivable	19,811			(5,070		)	24,881			37,809			(6,762		)	44,571
Inventories	(4,357		)	2,114			(6,471		)	(9,976		)	1,325			(11,301		)
Prepaid expense and other	(1,982		)	1,396			(3,378		)	(7,500		)	(4,322		)	(3,178		)
Accounts payable and accrued liabilities	(7,102		)	(9,401		)	2,299			497			9,025			(8,528		)
Deferred revenue	1,961			193			1,768			4,679			(1,496		)	6,175
	8,331			(10,768		)	19,099			25,509			(2,230		)	27,739
Cash flows provided by (used in):
Operating activities	7,978			2,627			5,351			13,154			24,804			(11,650		)

Investing activities	(5,254		)	(5,082		)	(172		)	(14,194		)	(15,505		)	1,311
Proceeds from sale of iTank business	—			—			—			500			—			500
Capital expenditures and increase in intangible assets	(5,257		)	(5,096		)	(161		)	(14,781		)	(15,581		)	800

Financing activities	(200		)	(3,350		)	3,150			(1,259		)	(4,099		)	2,840
Issue of common shares	160			1,257			(1,097		)	327			2,535			(2,208		)
Repurchase of common shares for cancellation	—			(3,120		)	3,120			—			(3,120		)	3,120
Purchase of treasury shares for RSU distribution	(59		)	(1,085		)	1,026			(326		)	(1,085		)	759
Taxes paid related to net settlement of equity awards	(110		)	(334		)	224			(855		)	(1,788		)	933
Payment for contingent consideration	—			—			—			—			(130		)	130

Free Cash Flow ⁽¹⁾	$	2,721		$	(2,469	)	$	5,190		$	(1,627	)	$	9,223		$	(10,850	)

Cash provided by operating activities increased by $5.4 million to $8.0 million in the third quarter of 2019, compared to the same period in 2018 mainly due to higher collections in accounts receivable, offset by lower profitability and higher working capital requirements for accounts payable and inventories. In the third quarter of 2019, we sold and de-recognized approximately $34.2 million of trade accounts receivable and collected and remitted to CIBC approximately $34.8 million under our receivable purchase agreement, which is reflected in cash flows provided by operating activities. See "Accounts Receivable Purchase Agreement" below for details.

Our near-term cash requirements are primarily related to funding our operations, including restructuring expenditures, inventory and other working capital items, capital expenditures and other obligations summarized in the table below. Cash may also be used to finance acquisitions of businesses in line with our strategy and share repurchases. We continue to believe our cash and cash equivalents balance of $86.9 million at September 30, 2019, undrawn availability under our revolving credit facility, receivable purchase facility, and cash generated from operations will be sufficient to fund our expected working capital, capital expenditure, restructuring and acquisition requirements for at least the next twelve months based on current business plans. However, we cannot be certain that our actual cash requirements will not be greater than we currently expect.

The following table presents the aggregate amount of future cash outflows for contractual obligations as of September 30, 2019.



Payments due by period (in thousands of U.S. dollars)	Total		2019		2020		2021		2022		2023		Thereafter
Operating lease obligations	$	30,631	$	2,134	$	8,010	$	6,759	$	4,838	$	3,010	$	5,880
Finance lease obligations	726		59		396		252		8		8		3
Purchase obligations - Contract Manufacturers⁽¹⁾	137,734		137,734		—		—		—		—		—
Purchase obligations - Mobile Network Operators ⁽²⁾	7,535		2,019		3,744		1,319		453		—		—
Purchase obligation - Cloud Computing Service ⁽³⁾	3,523		331		1,321		1,321		550		—		—
Other long-term liabilities	440		51		16		12		361		—		—
Total⁽⁴⁾	$	180,589	$	142,328	$	13,487	$	9,663	$	6,210	$	3,018	$	5,883

On August 1, 2018, we received approval from the Toronto Stock Exchange ("TSX") of our Notice of Intention to make a Normal Course Issuer Bid ("NCIB"). Pursuant to the NCIB, we were permitted to purchase for cancellation up to 3,580,668 of our common shares, or approximately 9.9% of common shares outstanding as of the date of the announcement, representing 10% of the public float. The NCIB commenced on August 8, 2018 and terminated on August 7, 2019. During the three and nine months ended September 30, 2019, we did not repurchase any common shares. We repurchased and canceled a total of 161,500 common shares at an average price of 19.32 per share under the NCIB.

We have a committed $30 million senior secured revolving credit facility (the "Revolving Facility") with the Canadian Imperial Bank of Commerce ("CIBC") as sole lender and as Administrative Agent. The Revolving Facility is secured by a pledge against substantially all of our assets and includes an accordion feature, which permits the Company to increase the aggregate revolving loan commitments thereunder on an uncommitted basis subject to certain conditions. The Revolving Facility matures on July 31, 2021 and will be used for general corporate purposes, including, but not limited to, capital expenditures, working capital requirements and/or certain acquisitions permitted under the Revolving Facility. As at September 30, 2019, there were no borrowings under the Revolving Facility.

On June 26, 2019, we entered into an uncommitted Receivables Purchase Agreement (the “RPA”) with CIBC to improve our liquidity during high working capital periods. Under the RPA, up to $75.0 million of Receivables may be sold and remain outstanding at any time. Eligible trade receivables are sold at 100% face value less discount with a 10% limited recourse to us arising from certain repurchase events. The RPA is on an uncommitted basis with no expiry date and carries a discount rate of CDOR (for purchased receivables in Canadian dollars) and LIBOR (for purchased receivables in U.S. dollars) plus an applicable margin. After the sale, we do not retain any interests in the Receivables, but continue to service and collect, in an administrative capacity, the outstanding receivables on behalf of CIBC.

Our consolidated financial statements are prepared in accordance with U.S. GAAP on a basis consistent for all periods presented. In addition to results reported in accordance with U.S. GAAP, we use non-GAAP financial measures as supplemental indicators of our operating performance. The term “non-GAAP financial measure” is used to refer to a numerical measure of a company’s historical or future financial performance, financial position or cash flows that: (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP in a company’s statement of earnings, balance sheet or statement of cash flows; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.

Adjusted EBITDA is defined as net earnings (loss) plus stock-based compensation expense and related social taxes, acquisition-related and integration costs, restructuring cost, impairment, certain other non-recurring 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 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 fund future capital expenditures.

The following table provides a reconciliation of the non-GAAP financial measures to our U.S. GAAP results:



(in thousands of U.S. dollars, except where otherwise stated)	2019									2018
	Q3			Q2			Q1			Total			Q4			Q3			Q2			Q1

Gross margin - GAAP	$	55,043		$	58,949		$	54,630		$	264,571		$	65,895		$	67,267		$	69,309		$	62,100
Stock-based compensation and related social taxes	44			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	$	55,087		$	58,991		$	54,686		$	265,025		$	65,945		$	67,313		$	69,366		$	62,401

Earnings (loss) from operations - GAAP	$	(12,559	)	$	(23,271	)	$	(9,806	)	$	(18,275	)	$	(4,197	)	$	853		$	(5,055	)	$	(9,876	)
Stock-based compensation and related social taxes	3,876			4,102			3,414			13,006			2,743			3,473			3,950			2,840
Acquisition-related and integration	291			314			95			3,962			613			570			1,014			1,765
Restructuring	6,274			18,180			1,397			7,115			2,345			227			952			3,591
Other nonrecurring costs	279			662			1,167			11,485			4,761			1,583			5,141			—
Realized losses on hedge contracts	24			(183		)	(109		)	(562		)	(296		)	(201		)	(14		)	(51		)
Acquisition-related amortization	3,610			3,624			3,687			18,575			4,261			4,354			4,426			5,534
Earnings (loss) from operations - Non-GAAP	$	1,795		$	3,428		$	(155	)	$	35,306		$	10,230		$	10,859		$	10,414		$	3,803

Net loss - GAAP	$	(20,221	)	$	(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)	10,720			23,258			6,073			35,568			10,462			5,853			11,057			8,196
Amortization	8,115			8,118			8,371			39,150			9,308			9,483			9,651			10,708
Interest and other, net	121			102			(31		)	(51		)	19			(7		)	(8		)	(55		)
Foreign exchange loss (gain)	2,988			(1,037		)	743			4,908			2,082			(42		)	4,034			(1,166		)
Income tax expense (recovery)	4,577			5,657			596			916			(2,768		)	1,738			2,289			(343		)
Adjusted EBITDA	6,300			7,922			4,529			55,881			15,277			15,988			15,639			8,977
Amortization (exclude acquisition-related amortization)	(4,505		)	(4,494		)	(4,684		)	(20,575		)	(5,047		)	(5,129		)	(5,225		)	(5,174		)
Interest and other, net	(121		)	(102		)	31			51			(19		)	7			8			55
Income tax expense - Non-GAAP	(653		)	(859		)	(730		)	(2,930		)	(1,245		)	(352		)	(769		)	(564		)
Net earnings (loss) - Non-GAAP	$	1,021		$	2,467		$	(854	)	$	32,427		$	8,966		$	10,514		$	9,653		$	3,294

Diluted net earnings (loss) per share
GAAP - (in dollars per share)	$	(0.56	)	$	(0.78	)	$	(0.31	)	$	(0.68	)	$	(0.11	)	$	(0.03	)	$	(0.32	)	$	(0.23	)
Non-GAAP - (in dollars per share)	$	0.03		$	0.07		$	(0.02	)	$	0.90		$	0.25		$	0.29		$	0.27		$	0.09

We prepare our consolidated financial statements in accordance with U.S. GAAP and we make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosure of contingent liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to business combinations, revenue recognition, adequacy of allowance for doubtful accounts, adequacy of inventory reserve, valuation of goodwill and intangible assets, leases, income taxes, useful lives of assets, adequacy of warranty reserve, royalty obligations, contingencies, stock-based compensation, and fair value measurement. We base our estimates on historical experience, anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from our estimates.

At inception of a contract, we apply judgment in assessing whether a contract is or contains a lease. This assessment involves determining whether we have control over the identified asset for a period of time in exchange for consideration. Operating leases are included in Operating lease right-of-use assets, Accounts payable and accrued liabilities, and Operating lease liabilities in our Consolidated Balance Sheets. Finance leases are included in Property and equipment, Accounts payable and accrued liabilities, and Long-term obligations in our Consolidated Balance Sheets.

Right-of-use assets represent our right to use an underlying asset for the lease term. Lease liabilities represent our obligation to make lease payments arising from the lease. We recognize operating lease right-of-use assets and liabilities at commencement date based on the present value of lease payments over the lease term. We use the incremental borrowing rate as the discount rate for leases as the rates implicit in our leases are not readily determinable. Our incremental borrowing rate is estimated to approximate the interest on a collateralized basis with similar terms and payments and in economic environments where the leased asset is located. The operating lease right-of-use asset also includes any prepaid lease payments, initial direct costs and lease incentives. Our lease terms include non-cancelable periods and include options to renew the lease when it is reasonably certain that we will exercise that option.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, Topic 842). This update is to improve transparency and comparability among organizations by requiring lessees to recognize right-of-use assets and lease liabilities on the balance sheet and requiring additional disclosure about leasing arrangements. The standard is effective for fiscal years beginning after December 15, 2018. We adopted the standard effective January 1, 2019, applying the optional transition method permitted under ASU 2018-11, which relieves entities from restating comparative financial statements, allowing entities to apply and adopt the new lease standard as at the effective date, rather than as of the first date of the earliest period presented. We elected the package of practical expedients provided under the guidance, which applies to expired or existing leases and allows us not to reassess whether a contract contains a lease, the lease classification, and any initial direct costs incurred. We also elected the practical expedient to expense short term leases (12 months or less) on a straight-line basis over the lease term, and to not separate the lease and non-lease components for all of our leases. Refer to Note 12 Leases of our interim financial statements.

Upon adoption of Topic 842 effective January 1, 2019, we recognized operating lease liabilities of $31.5 million and corresponding right-of-use assets of $27.0 million. The $4.5 million difference between operating lease liabilities and right-of-use assets recognized is due to deferred rent and exit cost accruals recorded under prior lease accounting standards. Topic 842 requires such balances to be reclassified against right-of-use assets at transition. In future periods such balances will not be presented separately. Our accounting for finance leases remains substantially unchanged.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). This update will replace the incurred loss impairment methodology for credit losses on financial instruments with a methodology that requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted. We will adopt the new standard in the first quarter of 2020. We are currently assessing the impact of the new standard on on our financial statements.

In January 2017, FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This new guidance simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new guidance, entities will perform goodwill impairment tests by comparing fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The standard is effective after December 15, 2019. We will adopt this standard in the first quarter of 2020. After the adoption of this standard, which will be applied prospectively, we will follow a one-step model for goodwill impairment. We do not anticipate this pronouncement to have a significant impact on our consolidated financial statements.

We did not make any significant changes in our internal control over financial reporting during the three and nine months ended September 30, 2019 that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of certain events occurring. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

In January 2017, Koninklijke KPN N.V. filed a patent infringement lawsuit in the United States District Court for the District of Delaware asserting patent infringement by us and our U.S. subsidiary. The lawsuit makes certain allegations concerning the alleged use of data transmission error checking technology in our wireless products. In March 2018, the Court granted our motion for judgment on the pleadings that the plaintiff’s patent is invalid. The plaintiff has appealed this invalidity ruling to the Federal Circuit, and a decision following oral argument is pending. In District Court, we are continuing to pursue our counterclaims alleging that the plaintiff has breached its commitments to standard setting organizations. A summary judgement hearing has occurred, and a decision of the court is pending. In April 2019, the United States Patent and Trial Appeal Board rendered its final decision in our petition for Inter Partes Review of the patent-in-suit, and the instituted claims were not proved to be unpatentable. We have appealed this decision to the Federal Circuit. A trial date has not yet been scheduled for this lawsuit.

In January 2012, a patent holding company, M2M Solutions LLC ("M2M Solutions"), filed a patent infringement lawsuit in the United States District Court for the District of Delaware asserting patent infringement by us, one of our US subsidiaries, and our competitors. The lawsuit makes certain allegations concerning the AirPrime embedded wireless module products, related AirLink products and related services sold by us for use in machine-to-machine ("M2M") communication applications. The claim construction order has determined one of the two patents-in-suit to be indefinite and therefore invalid. The lawsuit was dismissed with prejudice in April 2016. In August 2014, M2M Solutions filed a second patent infringement lawsuit against us in the same court with respect to a recently-issued patent held by M2M Solutions (US Patent No. 8,648,717), which patent is a continuation of one of the patents-in-suit in the original lawsuit filed against us by M2M Solutions. In March 2017, the United States Patent and Trial Appeal Board issued its decisions in the instituted proceedings, invalidating all independent claims and several dependent claims in the single patent-in-suit. In June 2017, Blackbird Tech LLC ("Blackbird") was joined as a plaintiff in the lawsuit. In September 2018, the court denied a motion to dismiss the lawsuit. The plaintiff has been granted leave to identify additional asserted claims and accused products with respect to the patent-in-suit. The lawsuit is currently in the discovery stage, and a claim construction hearing was held in October 2019. Trial for our co-defendant has been scheduled for December 2020, and trial in our case has been scheduled for January 2021.

In June 2019, Sisvel International S.A. and 3G Licensing S.A. (together, “Sisvel”), filed patent infringement lawsuits in the United States District Court for the District of Delaware against one or more of our customers alleging patent infringement with respect to a portfolio of 12 patents purportedly owned by Sisvel and obtained from Nokia Corporation (5 patents) and Blackberry, Ltd. (7 patents), that Sisvel alleges relate to technology for cellular communications networks including, but not limited to 2G, 3G and 4G/LTE. The allegations have been made in

To manage our foreign currency risks, we enter into foreign currency forward contracts and options contracts to reduce our exposure to future foreign exchange fluctuations. Foreign currency forward and options contracts are recorded in Accounts receivable or Account payable and accrued liabilities. As of September 30, 2019, we had foreign currency forward contracts totaling $21.6 million Canadian dollars with an average forward rate of 1.3354, maturing between October 2019 to June 2020. As at September 30, 2019, we did not have foreign currency options contracts outstanding.

If we are unable to compete effectively with our competitors' pricing strategies, technological advances and other initiatives, we may lose customer orders and market share and we may need to reduce the price of our products and services, resulting in reduced revenue and reduced gross margins. In addition, new market entrants or alliances between customers and suppliers could emerge to disrupt the markets in which we operate through disintermediation of our modules business or other means. There can be no assurance that we will be able to compete successfully and withstand competitive pressures.

We sell our products and services to OEMs, enterprises, government agencies, distributors, resellers and network operators, and we are occasionally party to sales agreements with customers comprising a significant portion of our revenue. Accordingly, our business and future success depends on our ability to maintain and build on existing relationships and develop new relationships with OEMs, enterprises, government agencies, distributors, resellers and network operators. If certain of our significant customers, for any reason, discontinue their relationship with us, reduce or postpone current or expected purchase orders for products, reduce or postpone initiation or usage of our services or suffer from business loss, our revenues and profitability could decline materially.

Quarterly variations in operating results or any of the other factors listed above, changes in financial estimates by securities analysts, failure to meet any guidance provided by us or any change in guidance provided by us, or other events or factors may result in wide fluctuations in the market price of our common shares. Broad market fluctuations or any failure of our operating results in a particular quarter to meet market expectations may adversely affect the market price of our common shares. Over the past several years, following volatility in the market price of a company's securities, class action litigation has often been commenced against the affected company. Any litigation of this type brought against us could result in substantial costs which could materially and adversely affect our business, financial position, results of operation or cash flows.

The Company is currently undertaking steps to transform the business in order to provide better alignment with our Device-to-Cloud strategy and drive greater automation and efficiency. Key initiatives include implementing a new go-to-market operating model, introduction of integrated online customer experience, consolidation of engineering sites, outsourcing of a select group of general and administration activities, optimization of terms with our third party manufacturers and re-organizing the product team to combine responsibilities for both devices and services. These changes will involve departure of skilled personnel, employees changing roles, adding new talent, realignment of teams, on-boarding of new partners, additional costs and working capital investments. Successfully executing these changes will be a significant factor in enabling future revenue growth.

The anticipated benefits of these transformations may not be obtained if circumstances prevent us from taking advantage of the strategic and business opportunities that we expect they may afford us. As the transformation proceeds, there will be impact on costs and liquidity. Further, there could be a higher rate of organizational and business process change and our operations may not be able to recalibrate business processes in a timely and efficient manner thereby impacting the effectiveness of certain business processes, our ability to design, develop and commercially launch new products and services in a timely manner, and the delivery of our products and services to our customers. Our employees may not fully understand the plans to change the business and therefore staff morale and engagement may deteriorate as we implement the changes to our organization.

The wireless communications industry is subject to rapid technological change, including evolving industry standards, frequent new product inventions, constant improvements in performance characteristics and short product life cycles. Our business and future success will depend, in part, on our ability to accurately predict and anticipate evolving wireless technology standards and develop products and services that keep pace with the continuing changes in technology, evolving industry standards and changing customer and end-user preferences and requirements. Our products embody complex technology that may not meet those standards, preferences and requirements. Our ability to design, develop and commercially launch new products and services depends on a number of factors including, but not limited to, the following:

In addition, wireless communications service providers require that wireless data systems deployed on their networks comply with their own standards, which may differ from the standards of other providers. We may be unable to successfully address these developments on a timely basis or at all. Our failure to respond quickly and cost-effectively to new standards through the development of new products or enhancements to existing products could cause us to be unable to recover significant research and development expenses and reduce our revenues.

Our products are comprised of hardware and software that is technologically complex, and we are reliant on third parties to provide important components for our products. It is possible that our products and IoT services may contain undetected errors, defects or cyber-security vulnerabilities. In addition, certain components in our products provided by a third party supplier may have been affected by a Global Positioning System ("GPS") week number rollover event which occurred on November 3, 2019. If our customers have not deployed the supplier-

provided software update or an alternate remedy prior to the GSP week number rollover event, or such update or remedy is not effective to address the rollover; then, the customer’s application may not function correctly to the extent it is reliant on the GPS time, date or location data generated from such component. As a result, our products or IoT services may be rejected by our customers or may not operate as intended, our services may be unavailable to our customers leading to loss of business, loss of revenue, additional development and customer service costs, unanticipated warranty claims, payment of monetary damages under contractual provisions and damage to our reputation.

In addition, our IoT services, including information systems and telecommunications infrastructure, could be disrupted by technological failures or cyber-attacks which could result in the inability of our customers to receive our services for an indeterminate period of time. Third parties seeking unauthorized access to our products may attempt to take advantage of the fact that we do not have a direct relationship with, and therefore may not know the identity of certain end users of our products, and these end users may not upgrade their software, apply security patches or otherwise monitor steps we take to address any cyber-security vulnerabilities. Any disruption to our services, such as failure of our network operations centers to function as required, or extended periods of reduced levels of service could cause us to lose customers or revenue, result in delays or cancellations of future implementations of our products and services, result in failure to attract customers, require customer service or repair work that would involve substantial costs, result in loss of customer data, result in litigation, payment of monetary damages under contractual provisions and distract management from operating our business.

A significant portion of our business is in the United States, Europe and the Asia-Pacific region and we are particularly exposed to the downturns and current uncertainties that impact the wireless communications industry in those economies. Economic uncertainty may cause an increased level of commercial and consumer delinquencies, lack of consumer confidence resulting in delayed purchases or reduced volumes by our customers, credit tightening by lenders, increased market volatility, fluctuations in foreign exchange rates and widespread reduction of business activity generally. To the extent that we experience further economic uncertainty, or deterioration in one of our large markets in the United States, Europe or the Asia-Pacific region, the resulting economic pressure on our customers may cause them to end their relationship with us, reduce or postpone current or expected orders for our products or services, or suffer from business failure, resulting in a material adverse impact to our revenues, profitability, cash flow and bad debt expense.

Our success depends in large part on the skills and experience of our executive officers and other key employees. Competition for highly skilled management, technical, research and development and other key employees is intense in the wireless communications industry. We may not be able to retain our current executive officers or key employees and may not be able to hire and transition in a timely manner experienced and highly qualified additional executive officers and key employees as needed to achieve our business objectives. The loss of key employees or deterioration in overall employee morale and engagement as a result of organizational change could have an adverse impact on our growth, operations and profitability.

We rely on certain internal processes, infrastructure and information technology systems, including infrastructure and systems operated by third parties to efficiently operate our business in a secure manner. The inability to continue to enhance or prevent a failure of these internal processes, infrastructure or information technology systems could negatively impact our ability to operate our business. Our IoT services depend on very high levels of network reliability and availability in order to provide our customers with the ability to continuously monitor and receive data from their devices.

Cyber-attacks or other breaches of network or IT systems security may cause disruptions to our operations including the ability to provide connectivity, device management and other cloud-based services to our customers. Our industry is prone to cyber-attacks by third parties seeking unauthorized access to our data or our customers' data, or by third parties seeking to exploit our technology and devices to conduct denial of service attacks. The prevalence and sophistication of these types of threats are increasing and our frequently evolving security measures may not be sufficient to prevent the damage that such threats can inflict on our assets and information. The theft, unauthorized use or publication of our intellectual property and/or confidential business information could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives and/or otherwise adversely affect our business. Our security measures may also be breached due to employee error, malfeasance, system errors or vulnerabilities, including vulnerabilities of our vendors, suppliers, their products or otherwise. To the extent that any security breach results in inappropriate disclosure of our customers' confidential information or disruption of service to our customers, we may incur liability, be subject to legal action and suffer damage to our reputation. Our insurance may not be adequate to fully reimburse us for these costs and losses.

The interpretation of privacy and data protection laws in a number of jurisdictions is unclear and in a state of flux. There is a risk that these laws may be interpreted and applied in conflicting ways from country to country. Complying with these varying international requirements could cause us to incur additional costs and change our business practices. In addition, because our products and services are sold and used worldwide, certain foreign jurisdictions may claim that we are required to comply with their laws, even where we have no local entity, employees, or infrastructure.

We could be adversely affected if legislation or regulations are expanded to require changes in our products, services or business practices, if governmental authorities in the jurisdictions in which we do business interpret or implement their legislation or regulations in ways that negatively affect our business or if end users allege that their personal information was misappropriated because of a defect or vulnerability in our products or services. If we are required to allocate significant resources to modify our products, services or our existing security procedures for the personal information that our products and services transmit, our business, results of operations and financial condition may be adversely affected. The European Union General Data Protection Regulation ("GDPR"), which is designed to harmonize data privacy laws across Europe, became effective on May 25, 2018. We have made and continue to make improvements to our systems and processes to ensure that we are compliant with the GDPR. The development and maintenance of these measures combined with ongoing monitoring of changes may result in increased costs and may impact our ability to sell our products and services.

As business circumstances dictate, we may also decide to divest assets, technologies or businesses. In a divestiture, we may not be successful in identifying or managing the risks commonly encountered, including: higher than anticipated costs; disruption of, and demands on, our ongoing business; diversion of management's time and attention; claims or litigation from the counterparties; adverse effects on existing business relationships with suppliers and customers and employee issues. These risks or any other problems encountered in connection with a divestiture of assets, technologies or businesses, if realized, could reduce shareholder value.

The industry has many participants that own, or claim to own, proprietary intellectual property. We license technology, intellectual property and software from third parties for use in our products and may be required to license additional technology, intellectual property and software in the future. In some cases, these licenses provide us with certain pass-through rights for the use of other third-party intellectual property, which pass-through rights may be unilaterally adjusted, limited or removed under the terms of such licenses. Some licensors have instituted policies limiting the products they will cover under their licenses to end products only, which limits our ability to obtain new licenses from such licensors, where required, for our wireless embedded module products. There is no assurance that we will be able to maintain our third-party licenses or obtain new licenses when required and this inability could materially adversely affect our business and operating results and the quality and functionality of our products.

In the past we have received, and in the future, we are likely to continue to receive, assertions or claims from third parties alleging that our products violate or infringe their intellectual property rights. We may be subject to these claims directly or through indemnities against these claims which we have provided to certain customers and other third parties. Our component suppliers and technology licensors do not typically indemnify us against these claims and therefore we do not have recourse against them in the event a claim is asserted against us or a customer we have indemnified. This potential liability, if realized, could materially adversely affect our operating results and financial condition.

Activity in the wireless communications area by third parties, particularly those with tenuous claims, is prevalent. In the past, patent claims have been brought against us by third parties whose primary (or sole) business purpose is to acquire patents and other intellectual property rights, and not to manufacture and sell products and services. These entities aggressively pursue patent litigation, resulting in increased litigation costs for us. Infringement of intellectual property can be difficult to verify and litigation may be necessary to establish if we have infringed the intellectual property rights of others. In many cases, these third parties are companies with substantially greater resources than us, and they may choose to pursue complex litigation to a greater degree than we could. Regardless of whether these infringement claims have merit or not, we may be subject to the following:

Our intellectual property is important to our success. We rely on a combination of patent protection, copyrights, trademarks, trade secrets, licenses, non-disclosure agreements and other contractual agreements to protect our intellectual property. Third parties may attempt to copy aspects of our products and technology or obtain information we regard as proprietary without our authorization. If we are unable to protect our intellectual property against unauthorized use by others it could have an adverse effect on our competitive position. Our strategies to deter misappropriation could be inadequate due to the following risks:

From time to time, certain components used in our products have been, and may continue to be, in short supply. Such shortages in allocation of components may result in a delay in filling orders from our customers, which may adversely affect our business. In addition, our products are comprised of components, some of which are procured from single source suppliers, including where we have licensed certain software embedded in a component. Our single source suppliers may experience damage or interruption in their operations due to unforeseen events, become insolvent or bankrupt, or experience claims of infringement, all of which could delay or stop their shipment of components to us, which may adversely affect our business, operating results and financial condition. If there is a shortage of any such components and we cannot obtain an appropriate substitute from an alternate supplier of components, we may not be able to deliver sufficient quantities of our products to our customers. If such shortages occur, we may lose business or customers and our operating results and financial condition may be materially adversely affected.

We outsource the manufacturing of our products to several contract manufacturers and depend on these manufacturers to meet our needs in a timely and satisfactory manner at a reasonable cost. Third party manufacturers, or other third parties to which such third-party manufacturers in turn outsource our manufacturing requirements, may not be able to satisfy our manufacturing requirements on a timely basis, including by failing to meet scheduled production and delivery deadlines or to meet our product quality requirements or the product quality requirements of our customers. Insufficient supply or an interruption or stoppage of supply from such third-party manufacturers or our inability to obtain additional or substitute manufacturers when and if needed, and on a cost-effective basis, could have a material adverse effect on our business, results of operations and financial condition. Our reliance on third party manufacturers subjects us to a number of risks, including but not limited to the following:

Under our manufacturing agreements, in many cases we are required to place binding purchase orders with our manufacturers well in advance of our receipt of binding purchase orders from our customers. In these situations, we consider our customers' good faith, non-binding forecasts of demand for our products. As a result, if the number of actual products ordered by our customers is materially different from the number of products we have instructed our manufacturer to build (and to purchase the required components to complete such build instruction), then, if too many components have been purchased by our manufacturer, we may be required to purchase such excess component inventory, or, if an insufficient number of components have been purchased by our manufacturer, we may not be in a position to meet all of our customers' requirements. If we are unable to successfully manage our inventory levels and respond to our customers' purchase orders based on their forecasted quantities, our business, operating results and financial condition could be adversely affected.

In addition to being subject to litigation in the ordinary course of business, we may be subject to class actions, derivative actions and other securities litigation and investigations. We expect that this type of litigation will be time consuming, expensive and will distract us from the conduct of our daily business. It is possible that we will be required to pay substantial judgments, settlements or other penalties and incur expenses that could have a material adverse effect on our operating results, liquidity or financial position. Expenses incurred in connection with these lawsuits, which include substantial fees of lawyers and other professional advisors and our obligations to indemnify officers and directors who may be parties to such actions, could materially adversely affect our reputation, operating results, liquidity or financial position. Furthermore, we do not know with certainty if any of this type of litigation and resulting expenses will be fully or even partially covered by our insurance. In addition, these lawsuits may cause our insurance premiums to increase in future periods.

Our products and our wireless connectivity services can only be used over wireless data networks operated by third parties. Our business and future growth depends, in part, on the successful deployment by mobile network operators of next generation wireless data networks and appropriate pricing of wireless data services. We also depend on successful strategic relationships with our mobile network operator partners and our operating results and financial condition could be harmed if they increase the price of their services or experience operational issues with their networks. In certain cases, our mobile network operator partners may also offer services that compete with our IoT services business.

Our products and services are subject to certain mandatory regulatory approvals in the United States, Canada, the European Union, the Asia-Pacific region and other regions in which we operate. For example, in the United States the Federal Communications Commission regulates many aspects of communications devices. In Canada, similar regulations are administered by the Ministry of Industry, through Industry Canada. European Union directives provide comparable regulatory guidance in Europe. Although we have obtained all the necessary Federal Communications Commission, Industry Canada and other required approvals for the products we currently sell, we may not receive approvals for future products on a timely basis, or at all. In addition, regulatory requirements may change, or we may not be able to receive regulatory approvals from countries in which we may desire to sell products in the future. If we fail to comply with the applicable regulatory requirements, we may be subject to regulatory and civil liability, additional costs (including fines), reputational harm, and in severe cases, we may be prevented from selling our products in certain jurisdictions.

We may also incur additional expenses or experience difficulties selling our products associated with complying with the SEC rules and reporting requirements related to conflict minerals. In August 2012, the SEC adopted new disclosure requirements implementing Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 for manufacturers of products containing certain minerals that may originate from the Democratic Republic of Congo and adjoining countries. As a result, since 2013 we have been required to conduct certain country of origin and due diligence procedures to meet the SEC reporting requirements. The impact of the regulations may limit the sourcing and availability, or may increase the costs, of some of the metals used in the manufacture of our products. Also, since our supply chain is complex, we may be unable to sufficiently verify the origins for all metals used in our products through our supplier due diligence procedures. As governments change in any of the markets in which we operate, there could be further uncertainties with respect to certain of our regulatory obligations in the near term, including with respect to fiscal and trade-related matters.

Sales outside North America represented approximately 57% and 60% of our revenues in the three and nine months ended September 30, 2019, compared to 60% and 61%, respectively, in the same periods in 2018. We maintain offices in a number of foreign jurisdictions. We have limited experience conducting business in some of the jurisdictions outside North America and we may not be aware of all the factors that may affect our business in foreign jurisdictions. We are subject to a number of risks associated with our international business operations that may increase liabilities, costs, lengthen sales cycles and require significant management attention. These risks include:

The United States and other countries have recently levied tariffs and taxes on certain goods manufactured in China and other jurisdictions. General trade tensions between the U.S. and China have been escalating in 2018 and throughout 2019. Certain of our components that we source from suppliers in China and import into the U.S. are included in the announced and implemented tariffs. At this point, we do not expect these tariffs to have a material impact on our business or results of operations. However, our business may be impacted by retaliatory trade measures taken by China or other countries in response to existing or future tariffs. If the U.S. were to impose additional tariffs on components that we or our suppliers source from China, our costs of such components would increase and our gross margins may decrease. We may also incur additional operating costs from our efforts to mitigate the impact of tariffs on our customers and our operations.



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Revenue (note 5)
IoT Solutions	$	93,439		$	95,487		$	286,871		$	278,209
Embedded Broadband	80,586			107,939			252,341			313,998
	174,025			203,426			539,212			592,207
Cost of sales
IoT Solutions	58,236			59,428			180,378			175,258
Embedded Broadband	60,746			76,731			190,212			218,273
	118,982			136,159			370,590			393,531
Gross margin	55,043			67,267			168,622			198,676
Expenses
Sales and marketing	23,523			21,743			69,784			66,234
Research and development	20,550			22,621			65,458			71,477
Administration	11,937			14,998			37,227			47,066
Restructuring (note 6)	6,274			227			25,851			4,770
Acquisition-related and integration	291			570			700			3,349
Amortization	5,027			6,255			15,238			19,858
	67,602			66,414			214,258			212,754
Earnings (loss) from operations	(12,559		)	853			(45,636		)	(14,078		)
Foreign exchange loss	(2,964		)	(159		)	(2,962		)	(3,092		)
Other (expense) income	(121		)	7			(192		)	70
Earnings (loss) before income taxes	(15,644		)	701			(48,790		)	(17,100		)
Income tax expense (note 7)	4,577			1,738			10,830			3,684
Net loss	$	(20,221	)	$	(1,037	)	$	(59,620	)	$	(20,784	)
Other comprehensive gain (loss):
Foreign currency translation adjustments, net of taxes of $nil	(3,727		)	322			(7,247		)	(6,919		)
Comprehensive loss	$	(23,948	)	$	(715	)	$	(66,867	)	$	(27,703	)

Net loss per share (in dollars) (note 9)
Basic	$	(0.56	)	$	(0.03	)	$	(1.65	)	$	(0.58	)
Diluted	(0.56		)	(0.03		)	(1.65		)	(0.58		)
Weighted average number of shares outstanding (in thousands) (note 9)
Basic	36,179			36,085			36,147			36,007
Diluted	36,179			36,085			36,147			36,007

(unaudited)



	September 30, 2019			December 31, 2018
Assets
Current assets
Cash and cash equivalents	$	86,900		$	89,076
Restricted cash	221			221
Accounts receivable, net of allowance for doubtful accounts of $3,561 (December 31, 2018 - $2,968) (note 17d)	130,349			171,725
Inventories (note 10)	60,230			50,779
Prepaids and other (note 11)	18,160			11,703
	295,860			323,504
Property and equipment, net	38,887			39,842
Operating lease right-of-use assets (note 12)	24,091			—
Intangible assets, net	72,493			84,890
Goodwill	203,806			211,074
Deferred income taxes	2,901			11,751
Other assets	13,536			12,855
	$	651,574		$	683,916
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 13)	$	186,020		$	184,220
Deferred revenue	9,433			6,213
	195,453			190,433
Long-term obligations (note 14)	42,587			43,250
Operating lease liabilities (note 12)	20,444			—
Deferred income taxes	5,552			6,103
	264,036			239,786
Equity
Shareholders’ equity
Common stock: no par value; unlimited shares authorized; issued and outstanding: 36,197,137 shares (December 31, 2018 - 36,067,415 shares)	434,925			432,552
Preferred stock: no par value; unlimited shares authorized; issued and outstanding: nil shares	—			—
Treasury stock: at cost; 9,612 shares (December 31, 2018 – 119,584 shares)	(114		)	(1,965		)
Additional paid-in capital	37,035			30,984
Retained deficit	(67,915		)	(8,295		)
Accumulated other comprehensive loss (note 15)	(16,393		)	(9,146		)
	387,538			444,130
	$	651,574		$	683,916

(unaudited)



Three and nine months ended September 30, 2019
	Common Stock			Treasury Stock
	# of shares	$		# of shares		$				Additional paid-in capital			Retained deficit			Accumulated other comprehensive loss			Total
Balance as at December 31, 2018	36,067,415	$	432,552	119,584		$	(1,965	)		$	30,984		$	(8,295	)	$	(9,146	)	$	444,130

Stock option exercises (note 8)	9,045	136		—		—				(42		)	—			—			94
Stock-based compensation (note 8)	—	—		—		—				3,158			—			—			3,158
Distribution of vested RSUs	73,839	1,366		(112,612	)	1,847			1,847	(3,883		)	—			—			(670		)
Net loss	—	—		—		—				—			(11,223		)	—			(11,223		)
Foreign currency translation adjustments, net of tax	—	—		—		—				—			—			(3,615		)	(3,615		)
Balance as at March 31, 2019	36,150,299	$	434,054	6,972		$	(118	)		$	30,217		$	(19,518	)	$	(12,761	)	$	431,874

Stock option exercises (note 8)	6,971	102		—		—				(29		)	—			—			73
Stock-based compensation (note 8)	—	—		—		—				4,102			—			—			4,102
Purchase of treasury shares for RSU distribution	—	—		20,000		(267		)		—			—			—			(267		)
Distribution of vested RSUs	7,826	160		(9,080	)	156				(391		)	—			—			(75		)
Net loss	—	—		—		—				—			(28,176		)	—			(28,176		)
Foreign currency translation adjustments, net of tax	—	—		—		—				—			—			95			95
Balance as at June 30, 2019	36,165,096	$	434,316	17,892		$	(229	)		$	33,899		$	(47,694	)	$	(12,666	)	$	407,626

Stock option exercises (note 8)	15,353	224		—		—				(64		)	—			—			160
Stock-based compensation (note 8)	—	—		—		—				3,869			—			—			3,869
Purchase of treasury shares for RSU distribution	—	—		5,400		(59		)		—			—			—			(59		)
Distribution of vested RSUs	16,688	385		(13,680	)	174				(669		)	—			—			(110		)
Net loss	—	—		—		—				—			(20,221		)	—			(20,221		)
Foreign currency translation adjustments, net of tax	—	—		—		—				—			—			(3,727		)	(3,727		)
Balance as at September 30, 2019	36,197,137	$	434,925	9,612		$	(114	)		$	37,035		$	(67,915	)	$	(16,393	)	$	387,538



Three and nine months ended September 30, 2018
	Common Stock					Treasury Stock
	# of shares		$			# of shares		$			Additional paid-in capital			Retained earnings (deficit)			Accumulated other comprehensive loss			Total
Balance as at December 31, 2017 As adjusted	35,861,510		$	427,748		222,639		$	(3,216	)	$	27,962		$	17,502		$	(2,476	)	$	467,520

Stock option exercises	61,395		938			—		—			(266		)	—			—			672
Stock-based compensation	—		—			—		—			2,814			—			—			2,814
Distribution of vested RSUs	56,163		1,404			(150,288	)	2,162			(4,231		)	—			—			(665		)
Net loss	—		—			—		—			—			(8,363		)	—			(8,363		)
Foreign currency translation adjustments, net of tax	—		—			—		—			—			—			(767		)	(767		)
Balance as at March 31, 2018	35,979,068		$	430,090		72,351		$	(1,054	)	$	26,279		$	9,139		$	(3,243	)	$	461,211

Stock option exercises	55,055		805			—		—			(199		)	—			—			606
Stock-based compensation	—		—			—		—			4,237			—			—			4,237
Distribution of vested RSUs	60,504		1,098			(35,926	)	517			(2,404		)	—			—			(789		)
Net loss	—		—			—		—			—			(11,384		)	—			(11,384		)
Foreign currency translation adjustments, net of tax	—		—			—		—			—			—			(6,474		)	(6,474		)
Balance as at June 30, 2018	36,094,627		$	431,993		36,425		$	(537	)	$	27,913		$	(2,245	)	$	(9,717	)	$	447,407

Common share cancellation	(161,500	)	(1,933		)	—		—			—			(1,187		)	—			(3,120		)
Stock option exercises	95,667		1,737			—		—			(480		)	—			—			1,257
Stock-based compensation	—		—			—		—			3,266			—			—			3,266
Purchase of treasury shares for RSU distribution	—		—			55,000		(1,085		)	—			—			—			(1,085		)
Distribution of vested RSUs	19,139		414			(49,359	)	868			(1,616		)	—			—			(334		)
Net loss	—		—			—		—			—			(1,037		)	—			(1,037		)
Foreign currency translation adjustments, net of tax	—		—			—		—			—			—			322			322
Balance as at September 30, 2018	36,047,933		$	432,211		42,066		$	(754	)	$	29,083		$	(4,469	)	$	(9,395	)	$	446,676



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Cash flows provided by (used in):
Operating activities
Net loss	$	(20,221	)	$	(1,037	)	$	(59,620	)	$	(20,784	)
Items not requiring (providing) cash
Amortization	8,115			9,483			24,604			29,842
Stock-based compensation (note 8)	3,869			3,266			11,129			10,317
Deferred income taxes	3,766			1,378			8,804			2,460
Unrealized foreign exchange loss	4,056			653			2,080			4,978
Other	62			(348		)	648			221
Changes in non-cash working capital
Accounts receivable	19,811			(5,070		)	37,809			(6,762		)
Inventories	(4,357		)	2,114			(9,976		)	1,325
Prepaids and other	(1,982		)	1,396			(7,500		)	(4,322		)
Accounts payable and accrued liabilities	(7,102		)	(9,401		)	497			9,025
Deferred revenue	1,961			193			4,679			(1,496		)
Cash flows provided by operating activities	7,978			2,627			13,154			24,804
Investing activities
Additions to property and equipment	(3,672		)	(4,789		)	(11,803		)	(13,788		)
Additions to intangible assets	(1,585		)	(307		)	(2,978		)	(1,793		)
Proceeds from sale of property and equipment	3			14			87			76
Proceeds from sale of iTank business (note 4)	—			—			500			—
Cash flows used in investing activities	(5,254		)	(5,082		)	(14,194		)	(15,505		)
Financing activities
Issuance of common shares	160			1,257			327			2,535
Repurchase of common shares for cancellation	—			(3,120		)	—			(3,120		)
Purchase of treasury shares for RSU distribution	(59		)	(1,085		)	(326		)	(1,085		)
Taxes paid related to net settlement of equity awards	(110		)	(334		)	(855		)	(1,788		)
Payment for contingent consideration	—			—			—			(130		)
Decrease in other long-term obligations	(191		)	(68		)	(405		)	(511		)
Cash flows used in financing activities	(200		)	(3,350		)	(1,259		)	(4,099		)
Effect of foreign exchange rate changes on cash and cash equivalents	(393		)	(146		)	123			(2,743		)
Cash, cash equivalents and restricted cash, increase (decrease) in the period	2,131			(5,951		)	(2,176		)	2,457
Cash, cash equivalents and restricted cash, beginning of period	84,990			73,632			89,297			65,224
Cash, cash equivalents and restricted cash, end of period	$	87,121		$	67,681		$	87,121		$	67,681

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”), on a basis consistent with those followed in the December 31, 2018 audited annual consolidated financial statements except as indicated in note 2 and note 3. These unaudited interim consolidated financial statements do not include all information and note disclosures required by U.S. GAAP for annual financial statements, and therefore should be read in conjunction with the December 31, 2018 audited consolidated financial statements and the notes thereto. The accompanying interim financial information reflects all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of results for the interim period.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, Topic 842). This update is to improve transparency and comparability among organizations by requiring lessees to recognize right-of-use assets and lease liabilities on the balance sheet and requiring additional disclosure about leasing arrangements. The standard is effective for fiscal years beginning after December 15, 2018. We adopted the standard effective January 1, 2019, applying the optional transition method permitted under ASU 2018-11, which relieves entities from restating comparative financial statements, allowing entities to apply and adopt the new lease standard as at the effective date, rather than as of the first date of the earliest period presented. We elected the package of practical expedients provided under the guidance, which applies to expired or existing leases and allows the Company not to reassess whether a contract contains a lease, the lease classification, and any initial direct costs incurred. We also elected the practical expedient to expense short term leases (12 months or less) on a straight-line basis over the lease term, and to not separate the lease and non-lease components for all of our leases. Refer to Note 12 Leases.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). This update will replace the incurred loss impairment methodology for credit losses on financial instruments with a methodology that requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted. The Company will adopt the new standard in its first quarter of 2020. We are currently assessing the impact of the new standard on our financial statements.

In January 2017, FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This new guidance simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new guidance, entities will perform goodwill impairment tests by comparing fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The standard is effective after December 15, 2019. The Company will adopt this standard in the first quarter of 2020. After the adoption of this standard, which will be applied prospectively, we will follow a one-step model for goodwill impairment. We do not anticipate this pronouncement to have a significant impact on our consolidated financial statements.

At inception of a contract, we apply judgment in assessing whether a contract is or contains a lease. This assessment involves determining whether we have control over the identified asset for a period of time in exchange for consideration. Operating leases are included in Operating lease right-of-use assets, Accounts payable and accrued liabilities, and Operating lease liabilities in our consolidated balance sheets. Finance leases are included in Property and equipment, Accounts payable and accrued liabilities, and Long-term obligations in our consolidated balance sheets.

On December 31, 2018, we completed the sale of substantially all of the assets and liabilities of our remote tank monitoring business ("iTank") for total proceeds of $6.0 million, as it was not deemed to be either a core business or part of our strategic focus. The Company received $5.0 million in cash consideration at closing with the remaining $1.0 million held in escrow. The amount in escrow was to be held up to 12 months with $0.8 million contingent on meeting certain milestone events and the remaining $0.2 million to secure the purchaser's rights of indemnification under the asset sale agreement. Prior to the disposal, iTank was part of our IoT Solutions reporting segment.

Our Embedded Broadband segment is comprised of our high-speed cellular embedded modules that are typically used in non-industrial applications, namely Automobile, Mobile Computing and Enterprise Networking markets. The products in this segment are typically high-speed fourth generation ("4G") Long- Term Evolution ("LTE") and LTE-Advanced cellular modules. In this segment, we do not have the opportunity to provide connectivity services or fully-integrated IoT solutions to the OEM customer. Our Embedded Broadband business is expected to transition over time from 4G LTE to fifth generation ("5G") technology.

These two initiatives have impacted approximately 128 positions of which 97 positions were in France. During the three months ended September 30, 2019, we recorded $2.7 million in severance and $3.6 million in transitional costs related to these two initiatives (nine months ended September 30, 2019 - $17.7 million in severance and $6.6 million in transitional costs). The outstanding liability of $13.5 million as at September 30, 2019 relating to these initiatives is included in Accounts payable and accrued liabilities and is expected to be paid by the end of January 2020.

In 2019, we continued with certain organizational structure changes within various locations and functions of the Company that we initiated during November 2018, including the realignment of our sales resources into a single sales organization to enable a unified approach to sales. This resulted in $nil and $1.5 million in severance and other related costs during the three and nine months ended September 30, 2019, respectively. As at September 30, 2019, we have substantially completed this initiative and incurred total cost of $3.7 million. The outstanding liability of $0.2 million as at September 30, 2019 is included in Accounts payable and accrued liabilities and is expected to be paid by the end of December 2019.

In the first quarter of 2018, we commenced various initiatives focused on capturing synergies related to the integration of Numerex Corp. into the existing operations and efficiency gains in other areas of the business. During the three and nine months ended September 30, 2019, we recorded $nil and $0.1 million, respectively, in severance and other related costs associated with this initiative (three and nine months ended September 30, 2018 - $0.2 million and $4.8 million, respectively). As at September 30, 2019, we have incurred total costs of $5.0 million related to this initiative and do not expect to incur any additional costs. As at September 30, 2019, there was no liability outstanding related to this initiative.



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Balance, beginning of period	$	17,508		$	1,067		$	2,486		$	540
Expensed in period	6,274			227			25,851			4,770
Disbursements	(9,416		)	(331		)	(14,136		)	(4,291		)
Foreign exchange	(670		)	3			(505		)	(53		)
	$	13,696		$	966		$	13,696		$	966

Classification:
Accounts payable and accrued liabilities	13,696			966			13,696			966
	$	13,696		$	966		$	13,696		$	966

By restructuring initiative:
February 2017	$	—		$	75		$	—		$	75
March 2018	—			891			—			891
November 2018	195			—			195			—
April 2019	13,501			—			13,501			—
	$	13,696		$	966		$	13,696		$	966

Under the terms of our Stock Option Plan (the “Plan”), our Board of Directors may grant options to employees, officers and directors. The maximum number of shares issuable pursuant to the Plan is the lesser of 8.1% of the number of issued and outstanding common shares from time to time or 7,000,000 common shares. In addition, the maximum number of shares issuable pursuant to the Plan, together with any shares issuable pursuant to other security-based compensation arrangements, shall not exceed 8.1% of the number of issued and outstanding common shares from time to time. Based on the number of shares outstanding as at September 30, 2019, stock options exercisable into 1,026,032 common shares are available for future allocation under the Plan.

There is no dividend yield because we do not pay, and do not plan to pay, cash dividends on our common shares. The expected stock price volatility is based on the historical volatility of our daily stock closing prices over a period equal to the expected life of each option grant. The risk-free interest rate is based on yields from risk-free instruments with a term equal to the expected term of the options being valued. The expected life of options represents the period of time that the options are expected to be outstanding based on historical data of option holder exercise and termination behavior. Forfeitures are accounted for in compensation expense as they occur.



	Three months ended September 30,				Nine months ended September 30,
Number of RSUs	2019		2018		2019		2018
Outstanding, beginning of period	1,897,987		886,935		1,046,275		876,741
Granted	39,573		74,045		1,159,294		518,930
Vested / settled	(40,035	)	(85,598	)	(296,373	)	(476,187	)
Forfeited	(39,186	)	(1,822	)	(50,857	)	(45,924	)
Outstanding, end of period	1,858,339		873,560		1,858,339		873,560

Outstanding – vested and not settled	146,655		126,763		146,655		126,763
Outstanding – unvested	1,711,684		746,797		1,711,684		746,797
Outstanding, end of period	1,858,339		873,560		1,858,339		873,560

We have two market based restricted share unit plans: one for U.S. employees and one for all non-U.S. employees, and a treasury based restricted share unit plan (collectively, the “RSPs”). The RSPs support our growth and profitability objectives by providing long-term incentives to certain executives and other key employees and also encourage our objective of employee share ownership through the granting of RSUs. There is no exercise price or monetary payment required from the employees upon the grant of an RSU or upon the subsequent delivery of our common shares (or, in certain jurisdictions, cash in lieu at the option of the Company) to settle vested RSUs. The form and timing of settlement is subject to local laws.

The maximum number of shares issuable pursuant to outstanding awards under the treasury based restricted share unit plan ("Treasury Plan") is 3.7% of the number of issued and outstanding shares and the maximum number of shares issuable pursuant to all of our security-based compensation arrangements is 8.1% of the number of issued and outstanding shares. Based on the number of shares outstanding as at September 30, 2019, 271,000 share units are available for future allocation under the Treasury Plan. With respect to the two market based RSPs, independent trustees purchase Sierra Wireless common shares over the facilities of the Toronto Stock Exchange ("TSX") and Nasdaq, which are used to settle vested RSUs. The existing trust funds are variable interest entities and are included in these consolidated financial statements as treasury shares held for RSU distribution.

In February 2019, the Board of Directors approved the issuance of PSUs that are measured against an internal performance benchmark based on achieving service revenue targets or cost savings initiatives as well as PSUs measured against a benchmark index. The fair value of the PSUs that are measured against an internal performance benchmark based on achieving service revenue targets or cost savings initiatives is the Company's stock price on the date of grant. The fair value of the PSUs that are measured against a benchmark index at date of grant is determined using the Monte Carlo simulation model. These outstanding PSUs have a performance-based three year cliff-vesting criteria measured against a benchmark index, service revenue or cost savings targets and the associated performance conditions are probable of being achieved.

Supplemental Balance Sheet information related to leases was as follows:



	September 30, 2019
Operating Leases
Operating lease right-of-use assets	$	24,091

Accounts payable and accrued liabilities	$	8,114
Operating lease liabilities	20,444
Total operating lease liabilities	$	28,558

Finance Leases
Property and equipment, gross	$	1,603
Accumulated depreciation	(1,350		)
Property and equipment, net	$	253

Accounts payable and accrued liabilities	$	412
Long-term obligations	300
Total finance lease liabilities	$	712

Weighted Average Remaining Lease Term
Operating leases
Finance leases	4.4
	1.8
Weighted Average Discount Rate
Operating leases	2.8		%
Finance leases	3.5		%



	September 30, 2019		December 31, 2018
Trade payables and accruals	$	85,431	$	95,701
Inventory commitment reserve	1,988		843
Accrued royalties	11,681		14,348
Accrued payroll and related liabilities	18,485		18,115
Professional services	3,380		6,702
Taxes payable (including sales taxes)	4,360		4,957
Product warranties (note 18 (a)(iii))	7,994		7,914
Sales credits	8,388		7,055
Restructuring liability (note 6)	13,696		2,486
Operating lease liabilities (note 12)	8,114		—
Finance lease liabilities (note 12)	412		533
Other	22,091		25,566
	$	186,020	$	184,220

On August 1, 2018, we received approval from the TSX of our Notice of Intention to make a Normal Course Issuer Bid ("NCIB"). Pursuant to the NCIB, we were permitted to purchase for cancellation up to 3,580,668 of our common shares, or approximately 9.9% of the common shares outstanding as of the date of the announcement, representing 10% of the public float. The NCIB commenced on August 8, 2018 and terminated on August 7, 2019. During the three and nine months ended September 30, 2019, we did not repurchase any common shares. We repurchased and canceled a total of 161,500 common shares at an average price of 19.32 per share under the NCIB.

On June 26, 2019, the Company entered into an uncommitted Receivables Purchase Agreement (the “RPA”) with CIBC, as Purchaser, to improve its liquidity during high working capital periods. Under the RPA, the Company may offer to sell certain eligible accounts receivable (the “Receivables”) to CIBC, which may accept such offer, and purchase the offered Receivables. Under the RPA, up to $75.0 million of Receivables may be sold and remain outstanding at any time. Eligible trade receivables are sold at 100% face value less discount with a 10% limited recourse to the Company arising from certain repurchase events. The RPA is on an uncommitted basis with no expiry date and carries a discount rate of CDOR (for purchased receivables in CAD) and LIBOR (for purchased receivables in USD) plus an applicable margin. After the sale, the Company does not retain any interests in the Receivables, but continues to service and collect, in an administrative capacity, the outstanding receivables on behalf of CIBC.

We are from time to time involved in litigation, certain other claims and arbitration matters arising in the ordinary course of our business. We accrue for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. These accruals are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and technical experts and other information and events pertaining to a particular matter. To the extent there is a reasonable possibility (within the meaning of ASC 450, Contingencies) that the losses could exceed the amounts already accrued for those cases for which an estimate can be made, management believes that the amount of any such additional loss would not be material to our results of operations or financial condition.

In some instances, we are unable to reasonably estimate any potential loss or range of loss. The nature and progression of litigation can make it difficult to predict the impact a particular lawsuit will have on the Company. For instance, in the case of patent litigation, there are many reasons why we cannot make these assessments, including, among others, one or more of the following: in the early stage of a proceeding, the claimant is not required to specifically identify the manner in which the patent has allegedly been infringed; damages sought that are unspecified, unsupportable, unexplained or uncertain; discovery not having been started or being incomplete; the complexity of the facts that are in dispute (e.g., the analysis of the patent and a comparison to the activities of the Company is a labor-intensive and highly technical process); the difficulty of assessing novel claims; the parties not having engaged in any meaningful settlement discussions; the possibility that other parties may share in any ultimate liability; and the often slow pace of patent litigation.

We are required to apply judgment with respect to any potential loss or range of loss in connection with litigation. While we believe we have meritorious defenses to the claims asserted against us in our currently outstanding litigation, and intend to defend ourselves vigorously in all cases, in light of the inherent uncertainties in litigation there can be no assurance that the ultimate resolution of these matters will not significantly exceed the reserves currently accrued by us for those cases for which an estimate can be made. Losses in connection with any litigation for which we are not presently able to reasonably estimate any potential loss or range of loss could be material to our results of operations and financial condition.

wireless products. In March 2018, the Court granted our motion for judgment on the pleadings that the plaintiff’s patent is invalid. The plaintiff has appealed this invalidity ruling to the Federal Circuit, and a decision following oral argument is pending. In District Court, we are continuing to pursue our counterclaims alleging that the plaintiff has breached its commitments to standard setting organizations. A summary judgement hearing has occurred, and a decision of the court is pending. In April 2019, the United States Patent and Trial Appeal Board rendered its final decision in our petition for Inter Partes Review of the patent-in-suit, and the instituted claims were not proved to be unpatentable. We have appealed this decision to the Federal Circuit. A trial date has not yet been scheduled for this lawsuit.



	Sierra Wireless, Inc.

	By:	/s/ David G. McLennan

		David G. McLennan, Chief Financial Officer and Secretary

Date: November 8, 2019



(in thousands of U.S. dollars, except where otherwise stated)									% change
	Q3, 2019		Q3, 2018		Q3 YTD, 2019		Q3 YTD, 2018		Q3, 2019 vs Q3, 2018		Q3 YTD, 2019 vs Q3 YTD, 2018
Revenue	80,586		107,939		252,341		313,998		(25.3	)%	(19.6	)%
Cost of sales	60,746		76,731		190,212		218,273		(20.8	)%	(12.9	)%
Gross margin	19,840		31,208		62,129		95,725		(36.4	)%	(35.1	)%
Gross margin %	24.6	%	28.9	%	24.6	%	30.5	%



	2019						2018
(in thousands of U.S. dollars)	Sep 30		Jun 30		Mar 31		Dec 31		Sep 30		Jun 30		Mar 31
Cash and cash equivalents	$	86,900	$	84,769	$	74,143	$	89,076	$	67,460	$	73,411	$	70,588
Unused committed credit facility	30,000		30,000		30,000		30,000		30,000		10,000		10,000
Total	$	116,900	$	114,769	$	104,143	$	119,076	$	97,460	$	83,411	$	80,588



	September 30, 2019		December 31, 2018		Change

Contract assets	$	1,539	$	1,953	$	(414	)
Deferred revenue - current	9,433		6,213		3,220
Deferred revenue - noncurrent	7,728		6,317		1,411



	IoT Solutions		Embedded Broadband		Total

Three months ended September 30, 2019
Americas	$	59,717	$	17,776	$	77,493
Europe, Middle East and Africa	17,459		16,751		34,210
Asia-Pacific	16,263		46,059		62,322
	$	93,439	$	80,586	$	174,025

Three months ended September 30, 2018
Americas	$	53,227	$	28,599	$	81,826
Europe, Middle East and Africa	17,793		22,322		40,115
Asia-Pacific	24,467		57,018		81,485
	$	95,487	$	107,939	$	203,426


•	our ability to continue to sell our products and services in the expected quantities at the expected prices and expected times;


•	our ability to effect and to realize the anticipated benefits of our business transformation initiatives, and the timing thereof;


•	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 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


•	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 respond to changing technology, industry standards and customer requirements;



Form 20-F	o	40-F	ý



Yes:	o	No:	ý



Yes:	o	No:	ý


•	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;


•	our ability to attract or retain key personnel and the impact of organizational change on our business;


•	cyber-attacks or other breaches of our information technology security;


•	risks related to the transmission, use and disclosure of user data and personal information;


•	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 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 tariffs or other trade restrictions; and


•	risks that the acquisition of M2M Group may fail to realize the expected benefits.


•	Revenue was $174.0 million compared to $203.4 million in the third quarter of 2018.


•	Gross margin was 31.6% compared to 33.1% in the third quarter of 2018.


•	Restructuring expense was $6.3 million compared to $0.2 million in the third quarter of 2018.


•	Loss from operations was $12.6 million compared to earnings from operations of $0.9 million in the third quarter of 2018.


•	Net loss was $20.2 million, or $0.56 per diluted share, compared to $1.0 million, or $0.03 per diluted share, in the third quarter of 2018.