Second Quarter 2021 Results Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) (the "Company", "Sierra Wireless", "we", "us", or "our") reported results for its second quarter of 2021. All results are reported in U.S. dollars and are prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP" or "GAAP"), except as otherwise indicated below.
Revenue in the second quarter of 2021 was $132.8 million, an increase of 18.9% compared to $111.7 million in the second quarter of 2020.
Quarterly revenue for our two business segments was as follows:
| | | | | (i) | | Revenue from IoT Solutions increased by 16.3% to $90.3 million compared to $77.6 million in the second quarter of 2020. The increase in revenue was primarily due to the growth in LPWA and mobile broadband modules as well as IoT connectivity. |
| | | | | (ii) | | Revenue from Enterprise Solutions increased by 24.6% to $42.5 million compared to $34.1 million in the second quarter of 2020. The increase was primarily due to improved sales of our enterprise gateway products. |
“Revenue in the Second Quarter improved year over year and sequentially, non-GAAP operating expenses remained flat with the prior quarter, and Adjusted EBITDA improved,” said Phil Brace, President and CEO. “I look forward to bringing my operational and strategic experience to Sierra Wireless as we focus on profitable growth.”
Product revenue increased 15.1% year over year to $97.6 million, representing 73.5% of consolidated revenue in the quarter. Connectivity, software, and services revenue increased 30.8% year over year to $35.2 million, representing 26.5% of consolidated revenue. Monthly recurring revenue ("MRR"1) was $11.4 million in June, a year over year increase of 25.3%.
In accordance with U.S. GAAP, the results of operations of the Automotive Business are reported as discontinued operations in our consolidated statements of operations and comprehensive loss for the three and six month periods ended June 30, 2021 and 2020.
Non-U.S. GAAP financial measures referred to in this news release are labeled as a "non-GAAP measure" or are designated as such with an asterisk (*). Please see "Non-GAAP Financial Measures" for explanations of why the Company uses these non-GAAP measures and "Reconciliation of GAAP and Non-GAAP Results by Quarter" for reconciliation to the most comparable U.S. GAAP financial measures.
1 MRR is defined as the monthly subscription revenue including usage fees from current subscribers. MRR is a key performance metric to measure our performance and growth in our recurring revenue, both to help investors better understand and assess the performance of our business and also because our mix of revenue generated from recurring sources has increased in recent years. MRR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. MRR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. MRR is not a forecast.
Second Quarter 2021 Financial Highlights
- Gross margin was 34.8% in the second quarter of 2021 compared to 36.7% in the second quarter of 2020. The decrease was primarily impacted by increased component costs. IoT Solutions gross margin was 27.0% in the second quarter of 2021 compared to 29.7% in the second quarter of 2020, and Enterprise Solutions gross margin was 51.3% in the second quarter of 2021 compared to 52.7% in the second quarter of 2020.
- Operating expenses were $55.6 million in the second quarter of 2021 compared to $61.1 million in the second quarter of 2020. The decrease reflects the cost efficiency initiatives undertaken over the last twelve months.
- Net loss from continuing operations was $10.0 million in the second quarter of 2021 compared to $17.3 million in the second quarter of 2020 due to lower operating expenses and higher revenue.
- Adjusted net loss from continuing operations* was $1.1 million, or loss of $0.03 per share, in the second quarter of 2021 compared to $13.0 million, or loss of $0.36 per share, in the second quarter of 2020.
- Adjusted EBITDA* was $4.3 million in the second quarter of 2021 compared to a loss of $8.7 million in the second quarter of 2020.
Cash Position
Cash and cash equivalents and restricted cash at the end of the second quarter of 2021 were $118.5 million compared to $112.2 million at the end of the first quarter of 2021, an increase of $6.3 million. The increase in cash was primarily driven by cash flows from operating activities, partially offset by capital expenditures.
Financial Guidance
The impact of the COVID-19 pandemic on our global business continues to remain uncertain. While we continue to experience and evaluate the effects on our business, the overall severity and duration of adverse impacts related to COVID-19 on our business, financial condition, cash flows, and operating results for 2021 and beyond cannot be reasonably estimated at this time.
Demand for our products remains very strong. However, we are experiencing production interruptions due to COVID-19 cases at a contract manufacturing facility in Vietnam. This is impacting our ability to build and ship cellular embedded modules and gateways to our customers in the third quarter of 2021. While limited production has resumed at the Vietnam facility and we are currently building our resilience by ramping up multiple locations, including our new Mexico site for gateways and routers, the ongoing impact of these interruptions is highly uncertain. This is expected to have a material negative impact on our financial condition and results of operations, including production capacity, revenue, gross margin percentage, gross margin dollars, profit, and cash in the third quarter of 2021. Given these uncertain conditions, we will not be providing guidance for the third quarter of 2021.