Sierra Wireless Reports Second Quarter 2005 Results.VANCOUVER Vancouver, city, Canada Vancouver, city (1991 pop. 471,844), SW British Columbia, Canada, on Burrard Inlet of the Strait of Georgia, opposite Vancouver Island and just N of the Wash. border. , British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography -- Sierra Wireless Sierra Wireless (NASDAQ: SWIR, TSX: SW) is a wireless communications equipment designer and manufacturer, founded in 1993 and currently headquartered in Richmond, BC, Canada. Sierra's products are sold through indirect channels, such as wireless operators (e.g. , Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :SW)(NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :SWIR SWIR Short Wavelength Infrared SWIR Software Inspection Report )is reporting second quarter results. Our results are reported in US dollars and are prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . "The second quarter was a strategic turning point for our business. With the decision to exit the Voq initiative and the resulting restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , we have reduced our cost structure and refocused the company on our core PC Card and embedded Inserted into. See embedded system. module business, where we have extensive experience, a well established market position and believe there is significant growth opportunity," said David Sutcliffe David Sutcliffe (born June 8, 1969 in Saskatoon, Saskatchewan, Canada) is a Canadian actor. He is best known for playing Christopher Hayden, the father of Rory Gilmore, on the CW show Gilmore Girls. , President and Chief Executive Officer. "During the quarter, we grew revenue by 9% over the first quarter and we achieved product and business development milestones associated with new PC card and embedded module products under development. We expect these initiatives to provide the foundation for our planned return to profitability." Our revenue for the three months ended June June: see month. 30, 2005 amounted to $21.9 million, gross margin was negative $5.9 million, operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were $21.2 million and net loss was $26.7 million. Our loss per share was $1.05 for the second quarter of 2005. Our balance sheet remains strong, with $105.7 million of cash and short term investments. Inventory, excluding Voq related amounts, declined during the second quarter by approximately $2.0 million. Results for the second quarter of 2005, relative to company guidance provided on April 21, 2005, excluding the impact of restructuring, other charges and legal provisions of $19.2 million, were as follows: Second quarter revenue for 2005 of $21.9 million was better than our guidance range of approximately $20.0 to $21.0 million. Gross margin was 31.2%, lower than our guidance of 34%. Operating expenses were $15.3 million, better than our guidance range of $16.0 to $16.2 million. Our net loss of $7.5 million, or loss per share of $0.30, was better than our guidance of a net loss of approximately $8.5 million, or loss per share of $0.33. Our cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was negative $12.0 million, consistent with our guidance of negative cash flow. As reported on June 7, 2005, we are exiting the Voq Professional Phone initiative, we are incurring in·cur tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. restructuring and other expenses and we have shifted some of the Voq resources to our core PC card and embedded modules business. In addition, as a result of the reduction in our business during the first half of 2005, we have implemented some non-Voq related reductions to our operating expenses and assets. Restructuring, other costs and legal provisions amounted to $19.2 million and include inventory writedowns, severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs, impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of fixed, intangible and deferred tax assets, provisions for facilities restructuring, commitments, other costs related to the restructuring and future legal costs associated with litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. matters. Of the $19.2 million related to restructuring, other charges and legal provisions, $12.8 million was charged to cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold , $4.9 million to restructuring and other charges, $0.5 million to income tax expense and the provision for future legal costs of $1.0 million was charged to administration expense. We expect these actions will lower our operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. run rate, relative to our second quarter, by approximately $2.0 million per quarter. The restructuring costs related to Voq total approximately $13.5 million. In total, we are reducing our workforce from 321 employees to 270 employees. Of the 51 employees terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: , 32 left during the second quarter of 2005 and 19 are on working notice that ends during the third quarter of 2005. Results for the second quarter of 2005, compared to the second quarter of 2004, excluding the impact of restructuring, other charges and legal provisions of $19.2 million, were as follows: Second quarter revenue decreased by 57.5% to $21.9 million in 2005, from $51.6 million for the same period in 2004. Gross margin decreased to 31.2%, compared to 40.5%. Operating expenses were $15.3 million in the second quarter of 2005, compared to $13.5 million for the same period in 2004. Net loss for the second quarter of 2005 was $7.5 million, or loss per share of $0.30, compared to net earnings of $6.0 million, or diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.23, in the second quarter of 2004. Results for the second quarter of 2005, compared to the first quarter of 2005, excluding the impact of restructuring, other charges and legal provisions of $19.2 million, were as follows: Revenue for the three months ended June 30, 2005 amounted to $21.9 million, compared to $20.2 million in the first quarter of 2005. Gross margins were 31.2%, in the second quarter of 2005, compared to 35.3%, in the first quarter of 2005. Operating expenses were $15.3 million in the second quarter of 2005, compared to $15.2 million in the first quarter of 2005. Net loss was $7.5 million for the second quarter of 2005, or loss per share of $0.30, compared to net loss of $7.6 million, or loss per share of $0.30, for the first quarter of 2005. Second Quarter Highlights Included: Progress on products for CDMA (Code Division Multiple Access) A method for transmitting simultaneous signals over a shared portion of the spectrum. The foremost application of CDMA is the digital cellular phone technology from QUALCOMM that operates in the 800 MHz band and 1.9 GHz PCS band. 2000 networks and channels: - MP2 Solutions has selected the Sierra Wireless EM3420 embedded module to provide wide area wireless connectivity to CDMA 1X networks for the MRT MRT, n manual resistance technique, a treatment method used during the acute and recovery phases to relieve pain and rehabilitate the body's tissues and muscles. 300 Mobile Retail Terminal. Customers using the MRT300 device can scan, authorize To empower another with the legal right to perform an action. The Constitution authorizes Congress to regulate interstate commerce. authorize v. to officially empower someone to act. (See: authority) credit card payments, and check inventory wirelessly in real time via the EM3420 embedded module's wireless wide area network connection. - AirLink This article is about the South African airline. For other uses, see Airlink (disambiguation). Airlink is an airline based in South Africa. It is privately owned and has developed into South Africa's first feeder network aimed at linking the smaller towns, regional centers has selected the Sierra Wireless EM5625 embedded module to provide CDMA 1xEV-DO connectivity to AirLink's line of intelligent, rugged wireless modems A modem and antenna that transmits and receives over the air. Wireless modems support several technologies, including 802.11, Bluetooth, CDPD, DataTAC, Mobitex and Ricochet. There are wireless modems for laptops, handhelds and cellphones. . AirLink specializes in enabling real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. , two-way communication Two-way communication is a form of transmission in which both parties involved transmit information. Common forms of two-way communication are:
- MobileAria, a subsidiary of Delphi Corporation, has selected the Sierra Wireless EM5625 embedded module to provide CDMA 1xEV-DO connectivity for its MobileWiFi Vehicle Tracking and Control Unit. - We announced an agreement with Brightpoint Brightpoint, Inc. (NASDAQ: CELL) is a leading global communications technology firm that specializes in the distribution of wireless devices and in providing customized logistics services to the wireless industry. Middle East to distribute the AirCard(R) 775, the AirCard 555, and the AirCard 580 wireless wide area network cards, as well as the MP 775 GPS and MP 555 GPS rugged wireless modems to select markets in the Middle East. This marks our official launch in the region. - We commenced shipment of our EM5625 EVDO embedded module to customers outside of North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. during Q2. The product is currently in the carrier certification stage with major North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. carriers and we expect to begin North American shipments in Q3 2005. We believe the EM5625 will be the first EVDO module available in North America. Progress on products for GSM/GPRS/EDGE/HSDPA networks and channels: - Together with Guangdong Guangdong or Kwangtung (both: gwäng`d  ng`), province (1994 est. pop. 66,910,000), c.76,000 sq mi (196,891 sq km), S China. The capital is Guangzhou. Iscreate Technology Co. Ltd., we
announced that the Sierra Wireless AirCard 775 wireless wide area
network card is now available from Guangdong Mobile Communications
Corporation for use on the company's newly launched EDGE network in
Guangdong province Noun 1. Guangdong province - a province in southern ChinaGuangdong, Kwangtung , servicing more than 18 million customers in cities throughout the Guangdong province. Guangdong Mobile has also offered the Sierra Wireless AirCard 750 card for use on GSM/GPRS networks since 2002. - We signed a distribution agreement with Multimedia Prospect Sdn Bhd SDN BHD Sendirian Berhad (Malay equivalent to incorporated) for the Sierra Wireless AirCard 775 wireless wide area network card in Malaysia Malaysia (məlā`zhə), independent federation (2005 est. pop. 23,953,000), 128,430 sq mi (332,633 sq km), Southeast Asia. The official capital and by far the largest city is Kuala Lumpur; Putrajaya is the adminstrative capital. . The AirCard 775 card is now available in Malaysia for use on DiGi Telecommunications' EDGE and GPRS (General Packet Radio Service) The first high-speed digital data service provided by cellular carriers that used the GSM technology. GPRS added a packet-switched channel to GSM, which uses dedicated, circuit-switched channels for voice conversations. network. - Development of our new UMTS/HSDPA PC card products continues to be on track. We were the first company to provide a live demonstration of an HSDPA (High Speed Downlink Packet Access) See HSPA. PC card earlier in the year at 3GSM (Global System for Mobile Communications) A digital cellular phone technology based on TDMA that is the predominant system in Europe, but also used worldwide. Developed in the 1980s, GSM was first deployed in seven European countries in 1992. . Since then, we have continued to work closely with carriers and infrastructure providers around the world, collaborating in the areas of testing, technical and market trials. Some of the tier one carriers have selected us to supply them with HSDPA PC cards and we have received initial purchase orders. We expect to begin commercial volume shipments of UMTS/HSDPA PC cards during Q4 2005. - Earlier in the year, we reported design wins from two major laptop Same as laptop computer. laptop - portable computer OEMs for EVDO mini PCI An extension of the PCI bus used in portable computers. Designed for peripherals such as modems and network adapters, Mini PCI cards are credit-card sized modules that snap onto the motherboard; they are not inserted into slots like PC Cards. express modules. During the second quarter, we earned another design win with one of these laptop OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and customers for an HSDPA module. Financial Guidance The following guidance for the third quarter of 2005 reflects our current business indicators and expectations. Inherent in this guidance are risk factors that are described in detail in our regulatory filings. Our actual results could differ materially from those presented below. All figures are approximations based on management's current beliefs and assumptions.
Q3 2005
Guidance
--------
Revenue $24.0 million
Gross margin 31%
Operating expenses $13.7 - $13.9 million
Net loss $(5.7) million
Loss per share $(0.22)
Cash flow from operations Negative
Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains forward-looking statements that are not promises or guarantees but are only predictions that relate to future events or our future performance or state other forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information and are subject to substantial risks and uncertainties that could cause our actual results, performance or achievements to differ materially from those expressed, anticipated or implied by the forward-looking statements. These forward-looking statements relate to, among other things, our revenue, earnings, and other financial guidance for the third quarter of fiscal 2005, plans, objectives and timing for the introduction or enhancement of our services and products, statements concerning strategies, developments, statements about future market conditions, supply conditions, channel and end customer demand conditions, projected or future revenues, gross margins, operating expenses, profits and other statements of expectations, intentions, objectives and plans that are not statements of historical facts. When used in this press release, the words "may", "plan", "expect", "believe", "intends", "anticipates", "estimates", "predicts" and similar expressions generally identify forward-looking statements. Forward-looking statements reflect our current expectations. The risks and uncertainties that may affect our actual results, performance or achievements are many and include, among others, our ability to develop, manufacture, supply and market new products that we do not produce today and that may gain commercial acceptance, our reliance on the deployment of next generation networks by major wireless operators, and increased competition. These risk factors and others are discussed in our Annual Information Form which may be found on SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review at www.sedar.com and in our other regulatory filings with the Securities and Exchange Commission in the United States and the Provincial Securities Commissions in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . These factors should be reviewed carefully and you should not place undue reliance on any forward-looking statements. Unless otherwise required by applicable securities laws, Sierra Wireless disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. About Sierra Wireless Sierra Wireless is a leader in delivering highly differentiated wireless solutions that enable our customers to improve their productivity and lifestyle. Sierra Wireless develops and markets AirCard, the industry-leading wireless PC card line for portable computers; embedded modules for OEM wireless applications and the MP line of rugged vehicle-mounted connectivity solutions For more information about Sierra Wireless, please visit www.sierrawireless.com. "AirCard" and "Voq" are trademarks of Sierra Wireless, Inc. Other product or service names mentioned herein may be the trademarks of their respective owners. Conference Call and Instant Replay We will host a conference call to review our results on July July: see month. 20, 2005 at 2:30 PM PDT PDT abbr. Pacific Daylight Time PDT Pacific Daylight Time PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico PDT , 5:30 PM EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . To participate in this conference call, please dial the following toll free number approximately ten minutes prior to the commencement of the call: 1-800-818-6210 Passcode: Not required or 1-416-641-6670 Passcode: Not required Should you be unable to participate, Instant Replay will be available for seven business days following the conference call by dialing: 1-800-558-5253 Passcode: 21249280 or 1-416-626-4100 Passcode: 21249280 We look forward to having you participate in our call.
SIERRA WIRELESS, INC.
Consolidated Statements of Operations and Deficit
(Expressed in thousands of United States
dollars, except per share amounts)
(Prepared in accordance with United States generally
accepted accounting principles (GAAP))
(Unaudited)
Three months ended Six months ended
June 30, June 30,
------- -------
2005 2004 2005 2004
--------- --------- --------- ---------
Revenue $ 21,930 $ 51,595 $ 42,110 $ 93,236
Cost of goods sold 27,852 30,680 40,907 55,519
--------- --------- --------- ---------
Gross margin (5,922) 20,915 1,203 37,717
--------- --------- --------- ---------
Expenses
Sales and marketing 4,331 4,386 8,620 8,559
Research and
development, net 7,399 5,991 14,660 10,730
Administration 3,892 2,534 6,827 4,598
Restructuring and
other charges 4,926 - 4,926 -
Amortization 679 563 1,370 1,199
--------- --------- --------- ---------
21,227 13,474 36,403 25,086
--------- --------- --------- ---------
Earnings (loss) from
operations (27,149) 7,441 (35,200) 12,631
Other income (expense) 220 (40) 755 44
--------- --------- --------- ---------
Earnings (loss) before
income taxes (26,929) 7,401 (34,445) 12,675
Income tax expense
(recovery) (222) 1,384 (144) 2,088
--------- --------- --------- ---------
Net earnings (loss) (26,707) 6,017 (34,301) 10,587
Deficit, beginning
of period (53,983) (66,739) (46,389) (71,309)
--------- --------- --------- ---------
Deficit, end of period $ (80,690) $ (60,722) $ (80,690) $ (60,722)
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings (loss) per
share for the period:
Basic $ (1.05) $ 0.24 $ (1.35) $ 0.42
Diluted $ (1.05) $ 0.23 $ (1.35) $ 0.41
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number
of shares (in thousands)
Basic 25,364 25,221 25,361 25,103
Diluted 25,364 26,248 25,361 26,138
--------- --------- --------- ---------
--------- --------- --------- ---------
SIERRA WIRELESS, INC.
Consolidated Balance Sheets
(Expressed in thousands of United States dollars)
(Prepared in accordance with United States GAAP)
June 30, December 31,
2005 2004
------------- -----------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 48,050 $ 131,846
Short-term investments 57,665 -
Accounts receivable, net of
allowance for doubtful accounts
of $1,769 (2004 - $2,468) 17,014 22,506
Inventories 10,393 11,090
Prepaid expenses 3,399 5,021
--------- --------
136,521 170,463
Fixed assets 10,907 10,044
Intangible assets 11,288 14,208
Goodwill 19,227 19,227
Deferred income taxes - 500
Other assets 1,142 1,152
--------- --------
$ 179,085 $ 215,594
--------- --------
--------- --------
Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable $ 6,062 $ 4,122
Accrued liabilities 29,581 33,890
Deferred revenue and credits 751 461
Current portion of long-term
liabilities 748 758
Current portion of obligations
under capital lease 522 664
--------- --------
37,664 39,895
Long-term liabilities 1,985 1,747
Obligations under capital lease 78 287
Shareholders' equity:
Share capital 218,840 218,805
Additional paid-in capital 440 440
Warrants 1,538 1,538
Deficit (80,690) (46,389)
Accumulated other
comprehensive loss (770) (729)
--------- --------
139,358 173,665
--------- --------
$ 179,085 $ 215,594
--------- --------
--------- --------
SIERRA WIRELESS, INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of United States dollars)
(Prepared in accordance with United States GAAP)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
------- -------
2005 2004 2005 2004
--------- --------- --------- ---------
Cash flows from
operating activities:
Net earnings (loss)
for the period $ (26,707) $ 6,017 $ (34,301) $ 10,587
Adjustments to
reconcile net
earnings (loss) to net
cash provided by
operating activities
Amortization 2,188 1,538 4,308 3,168
Loss (gain) on disposal (41) 9 (41) (5)
Non-cash restructuring
and other charges 13,040 - 13,040 -
Changes in operating
assets and liabilities
Accounts receivable (1,432) (6,438) 5,492 (7,436)
Inventories 743 (839) (6,858) (1,424)
Prepaid expenses 184 (3,780) 696 (3,513)
Accounts payable 1,755 3,203 1,940 (129)
Accrued liabilities (1,822) 8,550 (4,299) 12,472
Deferred revenue and
credits 87 (78) 290 (227)
--------- --------- --------- ---------
Net cash provided by
(used in) operating
activities (12,005) 8,182 (19,733) 13,493
Cash flows from investing
activities:
Proceeds on disposal 45 5 45 5
Purchase of fixed
assets (2,134) (2,031) (4,590) (3,534)
Increase in intangible
assets (505) (351) (1,013) (1,597)
Purchase of long-term
investments - (4,358) - (21,369)
Proceeds on disposal of
long-term investments - 42,969 - 46,186
Purchase of short-term
investments (31,844) (13,933) (57,706) (21,159)
Proceeds on maturity
of short-term
investments - 12,472 - 20,364
--------- --------- --------- ---------
Net cash provided by
(used in) investing
activities (34,438) 34,773 (63,264) 18,896
Cash flows from
financing activities:
Issue of common shares 13 1,021 35 4,215
Repayment of long-term
liabilities (418) (445) (834) (830)
--------- --------- --------- ---------
Net cash provided by
(used in) financing
activities (405) 576 (799) 3,385
--------- --------- --------- ---------
Net increase (decrease)
in cash and cash
equivalents (46,848) 43,531 (83,796) 35,774
Cash and cash
equivalents, beginning
of period 94,898 62,601 131,846 70,358
--------- --------- --------- ---------
Cash and cash
equivalents, end of
period $ 48,050 $ 106,132 $ 48,050 $ 106,132
--------- --------- --------- ---------
--------- --------- --------- ---------
Sierra Wireless, Inc. (TSX:SW) (NASDAQ:SWIR) |
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