Sierra Wireless

Presented by:Jazz K, Mark K, Masood & Qi Lun H

Company Overview

• Founded in Richmond , BC in 1993

• Provides wireless communication products and services such as hardware, software, mobile connectivity

and M2M ( machine-to-machine communications.)

• The Company develops, manufactures, markets, sells and supports a broad range of single and multi-mode

wireless data modems and enabling software for use with handheld computing devices, notebook

computers and vehicle-based or monitoring applications.

• Sales are made both directly and through indirect channels including wireless communications service

providers, original equipment manufacturers and value-added resellers. Key channel partners include Bell

Atlantic Mobile, AT&T Wireless

• Sierra Wireless is considered a technical and market leader in wireless data, having been recognised with

several significant industry awards.

Time Line• May 31, 1993 : Incorporated in Canada • Jan. 31, 1999: Acquired shares of Airbanc Wireless Solutions Inc. for

US$500,000 and 55,555 common shares valued at US$350,000.• April 23, 1999: Reorganisation (company's capital structure was approved by the

Company's shareholders • May 17, 1999: Sierra Wireless completed its Initial Public Offering• May 5, 2000: Sierra Wireless issued new share.The common shares of Sierra

Wireless are now listed on NASDAQ under the symbol "SWIR" and are listed and traded on The Toronto Stock Exchange under the symbol "SW".

• June 22, 2000: Acquired Code Division Multiple Access module business from Qualcomm Incorporated for US$9,500,000 cash and a payable of US$2,250,000.

• Aug. 12, 2003: Acquired AirPrime, Inc. forUS$23,825,000 • Nov. 21, 2006: Sierra Wireless products are now available in the United Kingdom.• Nov. 22, 2006: Launched Sierra Wireless products in France.• Nov. 29, 2006: Signed an agreement for the distribution of Sierra Wireless modules

to be sold in Australia and New Zealand.• May 25, 2007: Acquired AirLink for cash consideration of US$11,000,000 and

issued approximately 1,300,000 shares to the shareholders of AirLink.

Competitors

• Kyocera Communications

• Novatel Wireless

• Sony Ericsson Mobile

• Multi-Tech Systems

• Digi International

1993 – 1999: Prior to IPO• 2 wholly-owned subsidiaries.

– Sierra Wireless Data, Inc., – Airbanc Wireless Solutions Inc.

• Acquisitions– Extend the product line– Adding value by providing a more complete solution– Acquiring emerging wireless communications technologies – Expanding geographically

• A compound annual growth rate of 43%• Revenue structure in 1998

– 89% in the United States– 7% was in Canada– 4% was outside of North America.

• Company has funded its operations and growth by:– cash flow from operations– private placements of its equity– research and development grants from government authorities – operating line of credit

1993 – 1999: Prior to IPO• Private equity– In March 1998 Sierra completed a $15.0 million private placement of

preference shares to a group of institutional investors. • Operating line of credit – Canadian chartered bank. – Funds upto$1.5 million– Interest at prime plus 1% – Secured by company's capital assets and inventory.• Time Line– 1st quarter of 1995: Sierra recd revenue from the

their first commercial product– 3rd quarter of 1997: Break-even occurred– All four quarters of 1998: Company remain was profitable.

Positive earnings

Financial Structure prior to IPO

1999-2000: During IPO

• Conversion of preference shares to new Common Shares on a one-for-one basis

• Offered 4,500,000 common shares– New issue by the Company: 2,833,333 – Secondary offering by certain shareholders: of 1,666,667

• Underwriters used: ScotiaMcLeod Inc.,RBC Dominion Securities Inc., CIBC World Markets Inc. and TD Securities Inc.

1999-2000: During IPO• Offering cost

– $1,300,000.

– The expenses of the offering, underwriters' fee are paid out of the general funds of the Company.

– The Selling Shareholders will pay the Underwriters' fee, but not the expenses of the offering.

• Over-Allotment Option – Sierra and one of the Selling Shareholders – Exercisable until 30 days– 438,750 additional Common Shares by Sierra – 236,250 additional Common Shares, by the selling shareholder

Total price to the public $73,743,750Underwriters' fee $4,424,625Net proceeds to the Company $ 43,829,552 Selling Shareholders $25,489,573

1999-2000: During IPO• Principal Shareholders– PMC-Sierra, Inc. (26.5%) – Scotia Merchant Capital Corporation (19.0%).

• Use of Proceeds:– $36.7 million OR ($42.5 million- Over-Allotment)– The Company will not receive any of the proceeds from

the sale of the Common Shares offered by the Selling Shareholders. • $12 million to fund research and development programs for

certain emerging technologies• $6 million to fund sales and marketing programs• the balance for general corporate purposes including future

potential strategic acquisitions and working capital.

1999-2000: During IPO

• What is a Prospectus ?

– A first draft filed by a firm prior to proceeding with an initial public offering of securities.

– Filed with the Securities & Exchange Commission– Provide pertinent information to prospective shareholders

about the company's business description, management, strategic initiatives, financial statements and ownership structure.

Listing on SEDAR• http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo

=00011917 • What is SEDAR? – the electronic filing system for

the disclosure documents of public companies and investment funds across Canada.

• Who files documents on SEDAR?– All Canadian public companies

and investment funds are required to file their documents in the SEDAR system.

• What documents are included?– Most of the documents which

are legally required to be filed with the Canadian Securities Administrators and many documents which may be filed with the Canadian exchanges are included in the SEDAR system.

Year 2000:Listed on NASDAQ

Historical Share Prices

Technology Boom (2000)

Technology Boom

Also referred to as the “dot-com bubble”– Lasted from roughly 1995-2000, climax being in mid 2000– Stock price increases across the board for many technology

companies– Rapid industry growth fueled by growth in the internet – Many new internet-based companies entered the market

stock prices rapidly increased due to high market confidence Widely available venture capital

investors had very high confidence in technological advancements

Technology Boom Bursts (2000)

The US Federal Reserve increased interest rates six times over 1999 and into early 2000

1. Due to rising interest rates, the economy begins to slow.Massive, multi-billion dollar sell orders created a chain reaction

within the marketAccelerated business spending due to Y2K 1. caused a surplus of inventory Internet retailers reported poor results

Release of IPO on NASDAQ (May 4th 2000)

Release of IPO on NASDAQ (May 4th 2000)

Issuances:-Common Shares offered by Sierra Wireless = 1,200,000 common shares-Common Shares offered by Selling Shareholders = 1,021,139 common shares-Common Shares to be outstanding after offering = 15,479,830 common shares

Use of Proceeds:-$25 Million to fund research and development initiatives including the development of wireless data platforms for various emerging technology standards-$25 Million to fund sales and marketing initiatives -The rest of the money left over will be put towards funding general corporate purposes and working capital

Release of IPO on NASDAQ (May 4th 2000)

Possible Risks to Revenues and Market Value of the Stock:Unable to achieve similar historical profitability, the share price may decline if:Sierra Wireless expects to report operating losses in 2000. If Sierra Wireless is unable to design and develop new products Sierra Wireless may not be able to sustain their current gross margins and as a result, profitability may decreaseThe revenues and earnings of Sierra Wireless may fluctuate from quarter to quarterIf the market price of our common shares fluctuates significantly, shareholders may not be able to sell the shares at or above the public offering price

Release of IPO on NASDAQ (May 4th 2000)

Possible Risks to Revenues and Market Value of the Stock:In regards to third-party suppliers, if they are not able to fulfill product manufacturing and delivery obligations, costs may increase and revenues and margins may decrease.In regards to technology changes, Sierra Wireless may have difficulty responding to changing technologies and therefore they may be unable to recover the research and development expenses, causing revenues to decline.Competition from bigger, more established companies with greater resources may prevent Sierra Wireless from maintaining market share which could result in a decline in revenues due to price drops.

Key Results of 2000 Annual Report

Revenues increaseExpenses significantly increaseLoss on Net EarningsLoss on EPSIncreased Deficit, end of yearStock price continues to decline until roughly August 2001, then remains relatively stable onward

Current

Ratios2008 2007 2006

ROA 14.74 10.88 5.08

ROE 19.12 14.49 6.74

ROI 13.62 17.22 3.84

Quick Ratio 1.35 1.95 1.8

Current Ratio 3.99 3.47 2.94

EBITDA Margin

15.34 12.99 9.27

Interest Coverage

5.82 5.04 0.73

Receivables Turnover

7.54 6.26 5.68

EPS 2.00 1.17 0.38

Any Questions?