Sierra Wireless Reports First Quarter 2019 Results

Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported results
for its first quarter ended March 31, 2019. All results are reported in
U.S. dollars and are prepared in accordance with United States generally
accepted accounting principles (GAAP), except as otherwise indicated
below.

Revenue for the first quarter of 2019 was $173.8 million compared to
$186.8 million in the first quarter of 2018. Our reporting segmentation
has changed from those reported at December 31, 2018 when we previously
reported three segments. Our new organizational structure clearly
delineates our Device-to-Cloud solutions activities and we now have two
reportable segments effective the first quarter of 2019: (i) the IoT
Solutions segment and (ii) the Embedded Broadband segment. We have
adjusted our comparative information.

Quarterly revenue for our two business segments was as follows: (i)
Revenue from IoT Solutions was $94.3 million in the first quarter of
2019, up 5.4% compared to $89.4 million in the first quarter of 2018
driven by strong sales of Airlink gateway products; and (ii) Revenue
from Embedded Broadband was $79.5 million in the first quarter of 2019,
down 18.4% compared to $97.4 million in the first quarter of 2018 due to
weaker demand from mobile computing and networking customers.

“We are making good progress driving improved efficiency throughout our
operations to accelerate our transformation into a leading global IoT
solutions provider,” said Kent Thexton, President and CEO of Sierra
Wireless. “At the same time, we are investing in innovative cellular
technologies and capabilities to enhance our differentiated
Device-To-Cloud offering and grow our recurring subscription-based
revenue.”

GAAP RESULTS

• Gross margin was $54.6 million, or 31.4% of revenue, in the first
  quarter of 2019 compared to $62.1 million, or 33.2% of revenue, in the
  first quarter of 2018.
• Operating expenses were $64.4 million and loss from operations was
  $9.8 million in the first quarter of 2019 compared to operating
  expenses of $72.0 million and loss from operations of $9.9 million in
  the first quarter of 2018.
• Net loss was $11.2 million, or $0.31 per diluted share, in the first
  quarter of 2019 compared to net loss of $8.4 million, or $0.23 per
  diluted share, in the first quarter of 2018.

NON-GAAP RESULTS⁽¹⁾

• Gross margin was 31.5% in the first quarter of 2019 compared to 33.4%
  in the first quarter of 2018.
• Operating expenses were $54.8 million and loss from operations was
  $0.2 million in the first quarter of 2019 compared to operating
  expenses of $58.6 million and earnings from operations of $3.8 million
  in the first quarter of 2018.
• Net loss was $0.9 million, or $0.02 per diluted share, in the first
  quarter of 2019 compared to net earnings of $3.3 million, or $0.09 per
  diluted share, in the first quarter of 2018.
• Adjusted earnings before interest, taxes, depreciation and
  amortization (“Adjusted EBITDA”) was $4.5 million in the first quarter
  of 2019 compared to $9.0 million in the first quarter of 2018.

^{(1) See “Non-GAAP Financial Measures” and “Reconciliation of GAAP
and Non-GAAP Results by Quarter” below.}

Cash and cash equivalents at the end of the first quarter of 2019 were
$74.1 million, representing a decrease of $15.0 million from the end of
the fourth quarter of 2018. The net loss from operations, combined with
working capital requirements, primarily to fund higher inventory, drove
this reduction in cash.

Accounting Standard Adoption

We adopted the new accounting standard for lease accounting (ASC 842)
effective January 1, 2019. Our first quarter 2019 financial results
reflect the adoption of this new standard.

Financial Guidance – Full Year

For the year ended December 31, 2019, we expect revenue to be flat
year-over-year and we expect Adjusted EBITDA to be approximately $35
million. We expect non-GAAP net earnings per share to be approximately
$0.30 to $0.35 for the full year 2019. See “Non-GAAP Financial Measures”
below.

This non-GAAP guidance constitutes “forward-looking statements” within
the meaning of applicable securities laws and reflects current business
indicators and expectations. These statements are based on management’s
current beliefs and assumptions, which could prove to be significantly
incorrect. Forward-looking statements, particularly those that relate to
longer periods of time, are subject to substantial known and unknown
risks and uncertainties that could cause actual events or results to
differ significantly from those expressed or implied by our
forward-looking statements, including those described in our regulatory
filings. See “Cautionary Note Regarding Forward-Looking Statements”
below.

Subsequent Event

As part of the company’s overall cost savings program, we announced
internally two initiatives on April 30^th:

i. to optimize the footprint of our design centers, we have launched a
process to reduce the size of our development team in Paris and
consolidate more of our R&D in both Canada and Asia; and

ii. to improve our administrative efficiency, we have decided to partner
with a global outsourcing leader to provide certain transaction-based
services. We expect to be fully transitioned by the end of the year.

These two initiatives will impact approximately 125 positions, including
approximately 99 in France. Once completed, we expect to incur
approximately $28 million in severance and transitional costs.

Non-GAAP Financial Measures

We disclose these non-GAAP financial measures as we believe they provide
useful information to investors and analysts to assist them in their
evaluation of our operating results and to assist in comparisons from
one period to another. Readers are cautioned that non-GAAP financial
measures do not have any standardized meaning prescribed by U.S. GAAP
and therefore may not be comparable to similar measures presented by
other companies.

Non-GAAP gross margin excludes the impact of stock-based compensation
expense and related social taxes and certain other nonrecurring costs or
recoveries.

Non-GAAP earnings (loss) from operations includes allocation of realized
gains or losses on forward contracts and excludes the impact of
stock-based compensation expense and related social taxes,
acquisition-related amortization, acquisition-related and integration
costs, restructuring costs, impairment and certain other non-recurring
costs or recoveries.

Non-GAAP income tax expense includes certain tax adjustments and taxes
on acquisition-related amortization, acquisition-related and integration
costs, restructuring costs, other non-recurring costs and foreign
exchange.

In addition to the above, Non-GAAP net earnings (loss) and non-GAAP net
earnings (loss) per share exclude the impact of foreign exchange gains
or losses on translation of certain balance sheet accounts, foreign
exchange gains or losses on forward contracts and certain tax
adjustments.

We use the above-noted non-GAAP financial measures for planning purposes
and to allow us to assess the performance of our business before
including the impacts of the items noted above as they affect the
comparability of our financial results. These non-GAAP measures are
reviewed regularly by management and the Board of Directors as part of
the ongoing internal assessment of our operating performance. We also
use non-GAAP earnings from operations as one component in determining
short-term incentive compensation for management employees.

Adjusted EBITDA is defined as net earnings (loss) plus stock-based
compensation expense and related social taxes, acquisition-related and
integration costs, restructuring cost, impairment, certain other
nonrecurring costs or recoveries, amortization, foreign exchange gains
or losses on translation of certain balance sheet accounts, unrealized
foreign exchange gains or losses on forward contracts, interest and
income tax expense. Adjusted EBITDA is a metric used by investors and
analysts for valuation purposes and is an important indicator of our
operating performance and our ability to generate liquidity through
operating cash flow that will fund future working capital needs and fund
future capital expenditures.

Conference call and webcast details

Sierra Wireless President and CEO, Kent Thexton, and CFO, David
McLennan, will host a conference call and webcast with analysts and
investors to review the results on Thursday, May 9, 2019, at 5:30 PM
Eastern Time (2:30 PM PT). A live slide presentation will be available
for viewing during the call from the link provided below.

To participate in this conference call, please dial the following number
approximately ten minutes prior to the start of the call:

• Toll-free (Canada and US): 1-877-201-0168
• Alternate number: 1-647-788-4901
• Conference ID: 9060546

To access the webcast, please follow the link below:

Sierra
Wireless Q1 2019 Conference Call and Webcast

If the above link does not work, please copy and paste the following URL
into your browser:

http://event.on24.com/r.htm?e=1956137&s=1&k=378F474A63B205DDA60A9C021FBD9C9F

The webcast will remain available at the above link for one year
following the call.

Cautionary Note Regarding Forward-Looking Statements

Certain statements and information in this press release are not based
on historical facts and constitute forward-looking statements or
forward-looking information within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995 and Canadian securities laws
(“forward-looking statements”) and may include statements and
information relating to our Q1 2019 corporate update; financial guidance
for our fiscal year 2019, expectations regarding the Company’s cost
savings initiatives, our business outlook for the short and longer term,
statements regarding our strategy, plans, goals, objectives,
expectations and future operating performance; the Company’s liquidity
and capital resources; the Company’s financial and operating objectives
and strategies to achieve them; general economic conditions; estimates
of our expenses, future revenues, non-GAAP earnings per share and
capital requirements; our expectations regarding the legal proceedings
we are involved in; statements with respect to the Company’s estimated
working capital; expectations with respect to the adoption of IoT
solutions; expectations regarding trends in the IoT market and wireless
module market; expectations regarding product and price competition from
other wireless device manufacturers and solution providers; and our
ability to implement effective control procedures. Forward-looking
statements are provided to help you understand our views of our short
and long term plans, expectations and prospects. We caution you that
forward-looking statements may not be appropriate for other purposes. We
do not intend to update or revise our forward-looking statements unless
we are required to do so by securities laws.

Forward-looking statements:

• Typically include words and phrases about the future such as
  “outlook”, “will”, “may”, “expects”, “is expected”, “anticipates”,
  “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”,
  “strategy”, “goals”, “objectives”, “potential”, “possible”, or
  variations thereof.
• Are not promises or guarantees of future performance. They represent
  our current views and may change significantly.
• Are based on a number of material assumptions, including, but not
  limited to, those listed below, which could prove to be significantly
  incorrect:
  • our ability to develop, manufacture and sell new products and
    services that meet the needs of our customers and gain commercial
    acceptance;
  • our ability to continue to sell our products and services in
    the expected quantities at the expected prices and expected times;
  • expected macro-economic business conditions;
  • expected cost of sales;
  • expected component supply constraints;
  • our ability to win new business;
  • our ability to fully integrate the business, operations and
    workforce of Numerex Corp. (“Numerex”) and to return the Numerex
    business to profitable growth and realize the expected benefits of
    the acquisition;
  • our ability to integrate other acquired businesses and realize
    expected benefits;
  • expected deployment of next generation networks by wireless
    network operators;
  • our operations not being adversely disrupted by other
    developments, operating, cyber security, litigation, or regulatory
    risks; and
  • expected tax and foreign exchange rates.
• Are based on our management’s current expectations and we caution
  investors that forward-looking statements, particularly those that
  relate to longer periods of time, are subject to substantial known and
  unknown material risks and uncertainties. Many factors could cause our
  actual results, achievements and developments in our business to
  differ significantly from those expressed or implied by our
  forward-looking statements, including without limitation, the
  following factors. These risk factors and others are discussed in our
  Annual Information Form and Management’s Discussion and Analysis of
  Financial Condition and Results of Operations, which may be found on
  SEDAR at www.sedar.com
  and on EDGAR at www.sec.gov
  and in our other regulatory filings with the Securities and Exchange
  Commission in the United States and the provincial securities
  commissions in Canada:
  • competition from new or established competitors or from those
    with greater resources;
  • the loss of, or significant demand fluctuations from, any of
    our significant customers;
  • our business transformation initiatives may result in
    disruptions to our business and may not achieve the anticipated
    benefits;
  • our ability to attract or retain key personnel and the impact
    of organizational change on our business;
  • deterioration in macro-economic conditions and resulting
    reduced demand for our products and services;
  • risks related to the acquisition and ongoing integration of
    Numerex;
  • disruption of, and demands on, our ongoing business and
    diversion of management’s time and attention in connection with
    acquisitions or divestitures;
  • cyber-attacks or other breaches of our information technology
    security;
  • risks related to the transmission, use and disclosure of user
    data and personal information;
  • our financial results being subject to fluctuation;
  • our ability to respond to changing technology, industry
    standards and customer requirements;
  • risks related to infringement on intellectual property rights
    of others;
  • our ability to obtain necessary rights to use software or
    components supplied by third parties;
  • our ability to enforce our intellectual property rights;
  • our reliance on single source suppliers for certain components
    used in our products;
  • failures of our products or services due to design flaws and
    errors, component quality issues, manufacturing defects, network
    service interruptions, cyber-security vulnerabilities or other
    quality issues;
  • our dependence on a limited number of third party manufacturers;
  • unanticipated costs associated with litigation or settlements;
  • our dependence on mobile network operators to promote and offer
    acceptable wireless data services;
  • risks related to contractual disputes with counterparties;
  • risks related to governmental regulation;
  • risks inherent in foreign jurisdictions; and
  • risks related to tariffs or other trade restrictions.

About Sierra Wireless

Sierra Wireless (NASDAQ: SWIR) (TSX: SW) is an IoT pioneer, empowering
businesses and industries to transform and thrive in the connected
economy. Customers start with Sierra because we offer a device to cloud
solution, comprised of embedded and networking solutions seamlessly
integrated with our secure cloud and connectivity services. OEMs and
enterprises worldwide rely on our expertise in delivering fully
integrated solutions to reduce complexity, turn data into intelligence
and get their connected products and services to market faster. Sierra
Wireless has more than 1,300 employees globally and operates R&D centers
in North America, Europe and Asia. For more information, visit www.sierrawireless.com.

AirPrime, AirLink, AirVantage, mangOH and Legato are trademarks of
Sierra Wireless. Other product or service names mentioned herein may be
the trademarks of their respective owners.

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