Sierra Wireless Reports Financial Results
Monday, May 11, 2020 | Comments

Sierra Wireless reported results for its first quarter ended March 31. Revenue for the first quarter of 2020 was $157.6 million compared with $173.8 million in the first quarter of 2019, a decrease of 9.3%.

Quarterly revenue from internet of things (IoT) solutions was $78.8 million in the first quarter of 2020, a decrease of 16.4% compared with $94.3 million in the first quarter of 2019. Within this segment the company had solid year over year recurring and other service revenue growth of 17% driven by growth in connected devices and the addition of revenue from the M2M Group acquisition.

“I'm very pleased with how well our global team at Sierra Wireless has responded to the COVID-19 situation and worked quickly to adjust to this challenging environment while focusing on delivering leading IoT solutions to our customers,” said Kent Thexton, president and CEO. “Despite some pandemic-related supply chain disruptions, our Q1 revenue met our expectations and our recurring revenue win activity was robust in the first quarter.”

This growth was offset by lower hardware sales in enterprise gateway products and IoT solutions modules, and revenue from embedded broadband at $78.8 million in the first quarter of 2020 was relatively flat compared with the first quarter of 2019. This primarily reflects lower mobile computing module sales as expected, offset by stronger demand from automotive customers. Recurring and other services revenue in the first quarter was $26.8 million, representing 17% of consolidated revenue and product revenue was $130.8 million, representing 83% of consolidated revenue.

Gross margin was $43.6 million, or 27.7% of revenue, in the first quarter of 2020 compared with $54.6 million, or 31.4% of revenue, in the first quarter of 2019. Operating expenses were $65.1 million and loss from operations was $21.5 million in the first quarter of 2020 compared with operating expenses of $64.4 million and loss from operations of $9.8 million in the first quarter of 2019.

Net loss was $22.7 million in the first quarter of 2020 compared with $11.2 million in the first quarter of 2019. Short-term borrowings were $25 million at March 31 compared to $0 at Dec. 31, 2019.

Cash, cash equivalents and restricted cash at the end of the first quarter of 2020 was $72.8 million, representing a decrease of $6.3 million from the end of 2019. The decrease in cash was primarily driven by the acquisition of M2M Group, an operating loss in the quarter and capital expenditures, partially offset by short- term borrowings under Sierra’s revolving credit facility.

The company continues to experience certain supply chain disruptions relating to our component suppliers located in Malaysia, Philippines and Mexico as a result of the continuing impact of the COVID 19 pandemic. In addition, logistics supporting the transportation of goods remains a challenge because of the dramatic reduction of passenger flights globally and the insufficient capacity of cargo specialized flights.

The company did not experience significant interruption of customer demand in the first quarter of 2020. However, due to the continuing impact of the COVID-19 pandemic on its customers, Sierra said it is facing weaker-than-expected revenue projections in the second quarter of 2020, driven primarily by significant reduction in the automotive outlook. The company said it has a strong position in the automotive module market and expects recovery in this space once manufacturers restore production and launch additional connected car platforms.

The extent to which COVID-19 may impact the business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the geographic spread of the disease, the duration of the outbreak, business closures or business disruptions, public health restrictions on travel and in-person interactions, and the effectiveness of action to contain and treat the disease in the United States, Europe and the Asia-Pacific region.

As a result of near-term COVID-19 pressures on financial performance, Sierra took measures to reduce operating expenditures through initiatives such as deferring salary increases, reducing executive salaries by 10%, curtailing discretionary spending and reducing capital expenditures.

On April 30, the amount available under the company’s revolving bank credit facility was increased to $50 million, which provides an additional $20 million of liquidity. The maturity date of the facility was also extended from July 2021 to April 2023.

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