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Sierra Ups Revenues

VANCOUVER -- Sierra Wireless, Inc. (NASDAQ: SWIR, TSX: SW) is reporting third quarter results.

Our results are reported in US dollars and are prepared in accordance with United States generally accepted accounting principles.

"The third quarter of 2006 was a period of record new product introductions, continued channel expansion, strong OEM design win activity and technology transition," said Jason Cohenour, President and Chief Executive Officer. "As expected, we successfully navigated a technology transition with our two largest customers, Cingular and Sprint, to our next generation AirCard (R) products. While this transition put short term pressure on our top line sequential performance, we were still able to grow revenue by 91% compared to the same period of 2005. More importantly, we were able to commence shipments of our new EV-DO Rev A AirCard 595 to Sprint and our new 3.6 HSDPA AirCard 875 to Cingular. In total, we launched four new products during the third quarter - a record for the company. Since the start of the third quarter, we also secured new strategic channel positions for our AirCard products, including Orange France and another major CDMA operator in North America. As we enter the fourth quarter, we have important new products shipping to key existing customers, new strategic channels established and new OEM design wins. We believe that our strengthened market position, combined with continued market expansion, have us well positioned to drive considerable revenue growth in the fourth quarter and into 2007."

Our revenue for the three months ended September 30, 2006 amounted to $52.5 million, gross margin was $15.9 million, or 30.2% of revenue, operating expenses were $15.8 million and net earnings were $1.1 million, or diluted earnings per share of $0.04. During the third quarter of 2006, we reduced our estimate of certain royalty obligations, which was partially offset by a writedown of inventory. The net effect of these adjustments increased gross margin by $0.7 million. Excluding these adjustments, gross margin was $15.2 million, or 28.9% of revenue and net earnings were $0.4 million, or diluted earnings per share of $0.01. Our balance sheet remains strong, with $94.1 million of cash and short-term investments.

Results for the third quarter of 2006, excluding the adjustments of $0.7 million related to royalty obligations and inventory writedowns, relative to Company guidance provided on July 27, 2006 are as follows:

Third quarter revenue for 2006 of $52.5 million was better than our guidance of $51.0 million. Gross margin was 28.9% of revenue, lower than our guidance of 31.0%. Operating expenses were $15.8 million, better than our guidance of $16.9 million. Our net earnings of $0.4 million, or diluted earnings per share of $0.01, were slightly better than our guidance of break even. These results include $1.0 million of stock-based compensation expense. Excluding stock- based compensation expense, net earnings would be $1.4 million or $0.05 per share. Our cash flow, being cash flow from operations net of investments in fixed assets and intangibles, was negative $7.3 million, in line with our guidance of negative cash flow.

Results for the third quarter of 2006, compared to the third quarter of 2005 are as follows:

Third quarter revenue increased by 91% to $52.5 million in 2006, from $27.5 million for the same period in 2005. Gross margin for the third quarter of 2006 was 30.2% of revenue, compared to 34.9% for the same period in 2005. Operating expenses were $15.8 million in the third quarter of 2006, compared to $14.0 million in the same period of 2005. Net earnings were $1.1 million, or diluted earnings per share of $0.04 in the third quarter of 2006, compared to a net loss of $3.1 million, or loss per share of $0.12, in the same period of 2005. Excluding the adjustments in the third quarter of 2006 related to royalty obligations and inventory writedowns, gross margin was 28.9% and net earnings were $0.4 million, or diluted earnings per share of $0.01. Third quarter 2006 cost of goods sold and operating expenses include $0.1 million and $0.9 million, respectively, of stock-based compensation, compared to nil in the third quarter of 2005.

Results for the third quarter of 2006, compared to the second quarter of 2006 were as follows:

Revenue for the three months ended September 30, 2006 amounted to $52.5 million, compared to $55.2 million in the second quarter of 2006. Gross margins were 30.2% of revenue in the third quarter of 2006, compared to 34.1% in the second quarter of 2006. Operating expenses were $15.8 million in the third quarter of 2006, compared to $16.7 million in the second quarter of 2006. Net earnings for the third quarter of 2006 were $1.1 million, or diluted earnings per share of $0.04, compared to net earnings of $3.8 million, or diluted earnings per share of $0.15, in the second quarter of 2006. Excluding the adjustments in the third quarter of 2006 related to royalty obligations and inventory writedowns, gross margin was 28.9% and net earnings were $0.4 million, or diluted earnings per share of $0.01.

Sierra Wireless Inc. (Nasdaq: SWIR; Toronto: SW)

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