Sierra Wireless, Inc. Continues to Rebound as OEM Demand Improves
Sierra Wireless(NASDAQ: SWIR)announced strong first-quarter 2017 results Thursday after the market closed, easily beating expectations with growth in all segments. The Internet of Things specialist also offered better-than-expected forward guidance, and shares closed up nearly 15% on Friday as the market celebrated the news.
Let's take a closer look, then, at what drove Sierra Wireless' outperformance as it kicked off the new year, as well as what investors can expect from the company going forward.
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Sierra Wireless's results: The raw numbers
| Metric |
Q1 2017 |
Q1 2016 |
Year-Over-Year Growth |
|---|---|---|---|
|
Revenue |
$161.8 million |
$142.8 million |
13.3% |
|
GAAP net income (loss) |
($0.2 million) |
$0.7 million |
N/A |
|
GAAP earnings (loss) per share |
($0.01) |
$0.02 |
N/A |
Data source: Sierra Wireless.
What happened with Sierra Wireless this quarter?
- Adjusted net income -- which adds perspective by excluding items like stock-based compensation and acquisition costs -- was $7.7 million, or $0.24 per share, up from $2.6 million, or $0.08 per share in the same year-ago period.
- Both the top and bottom lines exceeded Sierra Wireless' guidance for revenue of $152 million to $161 million, and adjusted net income per share of $0.13 to $0.20.
By segment:
- OEM Solutions revenue climbed 10% year over year, to $133 million, driven by improved demand from established OEM customers and programs across multiple segments, including automotive, energy, networking, payment, and mobile computing.
- Enterprise Solutions revenue grew 44.8%, to $21.7 million, driven by revenue from new products, investments, and improved go-to-market capabilities, as well as last year's acquisition of GenX Mobile.
- Cloud and connectivity revenue increased 2.1% -- 4.4% at constant currency -- to $7.1 million, with strong new customer acquisition and a growing pipeline in digital signage, asset tracking, payment, and retail markets.
In addition:
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 85.1%, to $12.4 million.
- Acquired the assets of GlobalTop Technology's Global Navigation Satellite System (GNSS) business for $3.2 million. GNSS products generated roughly $5 million in revenue over the past year and roughly broke even on the bottom line. GNSS materially expands Sierra Wireless' cellular, Wi-Fi, and Bluetooth module portfolio aimed at key markets like asset tracking, telematics, drones, and automotive.
- Repurchased $2.8 million in shares during the quarter.
- Ended the year with cash and equivalents of $92.5 million, down from $102.8 million last quarter.
What management had to say
Sierra Wireless CEO Jason Cohenour stated:
Looking forward
For the second quarter, Sierra Wireless expects revenue of $165 million to $175 million and adjusted earnings per share of $0.24 to $0.32. These ranges include a full quarter's contribution from the newly acquired GNSS business. But even excluding that incremental revenue, Sierra Wireless' guidance would have easily topped investors' expectations for second-quarter earnings of $0.16 per share and revenue of $155.9 million.
In short, this was another exceptional quarter from Sierra Wireless as it solidifies its central role enabling the burgeoning Internet of Things trend. So with its shares up nearly 60% year to datebeforetoday's pop, but still trading well below their 2015 highs, Sierra Wireless has plenty of room to continue climbing from here.
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Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Sierra Wireless. The Motley Fool has a disclosure policy.