SWIR

Sierra Wireless, Inc. (SWIR)

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Exchange: NASDAQ
Industry: Technology
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Sierra Wireless (SWIR)
Q2 2006 Earnings Conference Call
July 27, 2006, 5:30 pm ET

Executives

Jason Cohenour - CEO
Dave McLennan - CFO

Analysts

John Bucher - BMO Capital Markets
Dev Bhangui- Haywood Securities
Jeff Kvaal - Lehman Brothers
Deepak Chopra - National Financial Bank
Amit Kapur - Piper Jaffray
Erik Zamkoff - Morgan Joseph
Gus Papageorgiou - Scotia Capital
Amy Nam - JP Morgan
John Bright - Avondale Partners

Presentation

Operator

Thank you for standing by. Welcome to the Sierra Wireless, Inc. second quarter 2006 results conference call. (Operator Instructions) I will now turn it over to Mr. Jason Cohenour, President and CEO. Please go ahead sir.

Jason Cohenour

Thanks, Shawna, and welcome to everybody on the call. With me on the call today is Dave McLennan, our CFO. Today we'll be covering Q2 results for the Company and also discussing guidance for the second half. Our agenda is as follows: Dave will read the forward-looking statements disclaimer; I'll do a business update; Dave will cover off our Q2 financial performance, our Q3 financial guidance, as well as an indication on Q4; I'll then summarize and we'll open the line for questions.

Dave McLennan

Thanks, Jason, and good afternoon, everyone. I will start with our forward-looking statement disclaimer, which is as follows:

Certain statements on this conference call that are not based on historical facts constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws. These forward-looking statements are not promises or guarantees of future performance, but are only predictions that relate to future events, conditions or circumstances, or our future results, performance, achievements, or developments, and are subject to substantial known and unknown risks, assumptions, uncertainties and other factors that could cause our actual results, performance, achievements or developments in our business or in our industry to differ materially from those expressed, anticipated or implied by such forward-looking statements.

Forward-looking statements include all financial guidance for the third and fourth quarters of 2006, disclosure regarding possible events, conditions, circumstances or results of operations that are based on assumptions about future economic conditions, courses of action, and other future events. We caution you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made.

These forward-looking statements appear in a number of different places and can be identified by words such as may, estimates, projects, expects, intends, believes, plans, anticipates or their negatives or other comparable words. Forward-looking statements include statements regarding the outlook for our future operations, plans and timing for the introduction or enhancement of our services and products, statements concerning strategies or developments, statements about future market conditions, supply conditions and customer demand conditions, channel inventory and sell-through, revenue, gross margin, operating expenses, profits, forecast of future costs and expenditures, the outcome of legal proceedings and other expectations, intentions and plans that are not historical fact.

The risk factors and uncertainties that may affect our actual results, performance, achievements or developments are many and include, among others, our ability to develop, manufacture, supply and market new products that we do not produce today that meet the needs of customers and gain commercial acceptance, our reliance on the deployment of next-generation networks by nature wireless operators, the continuous commitment of our customers and increased competition.

These risk factors and others are discussed in our annual Information form, which may be found on SEDAR and our other regulatory filings with the Securities Exchange Commission in the United States and the Provincial Securities Commission in Canada. Many of these factors and uncertainties are beyond the control of the Company; consequently, all forward-looking statements are qualified by this cautionary statement and there can be no assurance that actual results, performance, achievements or developments anticipated by the Company will be realized.

Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions and the Company does not undertake any obligation to update the forward-looking statements to the assumptions related to these plans, estimates projections, beliefs and opinions change.

And with that, Jason, I'll turn it back to you for the business update.

Jason Cohenour

Thanks, Dave. Second quarter of 2006 represented our fourth consecutive quarter of strong operational execution, improved financial metrics and excellent growth. Intense focus on our core business of wide-area wireless for mobile computing has driven a remarkable business recovery, following our restructuring one year ago and has helped us to continue to strengthen our market position.

During the second quarter, we grew our sales of HSDPA AirCards considerably. We continued strong shipments of our AirCard 580 for EV-DO networks. We executed purchase arrangements with major wireless operators for our next generation AirCard products. We continued to improve our channel position in Europe, including the selection of our AirCard 850 by a major operator group.

We grew our embedded modules business by 74% over Q1. We added three more laptop OEMs to our roster of customers, bringing our total to eight, further bolstering our leadership position in this potentially high-growth sector. We also continued to carefully reinvest in our business and to further strengthen our strategic position to drive future growth.

Our Q2 revenue increased 22% over the first quarter of 2006 and 152% over the second quarter of 2005. Our revenue of $55.2 million represents record second quarter sales. Our strong revenue growth also helped us to drive better than expected net earnings of $3.8 million.

We are very pleased with our Q2 results and also recognize that continued hard work and strong execution is required before we achieve the goals we have set for ourselves in terms of product line strength, market position and sustained financial results.

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