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Sierra Sustains Its Momentum, Approves a Huge Share Repurchase Plan

Cityscape from above with wireless connected lines

Sierra Wireless (NASDAQ: SWIR) announced second-quarter 2018 results on Thursday after the market closed, including increasing contributions from its two most profitable businesses, a hefty share repurchase authorization, and encouraging forward guidance.

Let's dig in, then, to see how Sierra Wireless finished the first half of the year, and what investors should expect in the coming months.

Cityscape from above with wireless connected lines


Sierra Wireless' results: The raw numbers

Metric Q2 2018 Q2 2017 Year-Over-Year Growth
Revenue $201.9 million $173.4 million 16.4%
GAAP net income (loss) ($11.4 million) $6.8 million N/A
GAAP earnings (loss) per share ($0.32) $0.21 N/A


What happened with Sierra Wireless this quarter?

  • On an adjusted (non- GAAP ) basis -- which excludes stock-based compensation and acquisition costs -- net income was $9.7 million, or $0.27 per share.
  • By comparison, Sierra Wireless' guidance provided in May called for revenue of $195 million to $203 million, and adjusted earnings per share of $0.17 to $0.25.
  • Product revenue grew 9.4% year over year to $178.8 million, while services and other revenue jumped 130.4% to $23.1 million.
  • By segment:
    • OEM Solutions revenue grew 4.5% to $150.9 million.
    • Enterprise Solutions revenue increased 31.1% to $28.4 million.
    • Internet of Things (IoT) services revenue more than tripled to $22.6 million, driven by both contributions from Sierra Wireless' acquisition of Numerex and organic subscriber growth.

  • Adjusted EBITDA grew 4.7% to $15.6 million.
  • In late May, the company announced the retirement of CEO Jason Cohenour. Board chairman Kent Thexton will serve as interim CEO as the company searches for a permanent replacement.
  • Sierra Wireless also announced a Normal Course Issuer Bid -- essentially a repurchase program in the Canadian stock market -- for up to 3.58 million shares, or 10% of the company's public float .

What management had to say

"In the second quarter of 2018, we delivered solid revenue and adjusted EBITDA growth on a year-over-year and sequential basis," Thexton said, adding:

Our two fastest growing and highest margin businesses -- namely Enterprise Solutions and IoT Services -- represented 25% of total revenue in Q2 and we continued to strengthen our position as a leader in device-to-cloud IoT solutions.

Looking forward

For the third quarter of 2018, Sierra Wireless expects revenue of $198 million to $207 million, and adjusted earnings per share of $0.22 to $0.30. Once again, the midpoint of both ranges stands above consensus predictions for third-quarter earnings of $0.25 per share on revenue of $199 million.

In the end, this was a straightforward quarterly beat as Sierra Wireless continues to grow where it counts, and the prospect of reducing its float by 10% serves as a massive vote of confidence in its future. With shares up 18.5% in response, it's apparent the market agrees.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Sierra Wireless. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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