Q2 results in M2M industry

The M2M industry has begun to announce results for the second quarter of 2011. Earnings varied according to company and industry. In the Personal Navigation Device (PND) industry, both Garmin and TomTom reported loss in revenue from the year-ago quarter, primarily due to weak PND markets in both North America and Europe. Satellite companies Iridium and Orbcomm both posted strong Q2 results due to a strong market and company acquisitions. Other M2M companies such as Numerex and Sierra Wireless posted weak second quarter results for various reasons, but expect third quarter results to improve.

Iridium

Iridium (McLean, Va., U.S.A.) a mobile satellite communications company, reported strong financial results for the second quarter of 2011. The company posted a net income of $11.7 million, up from $8.2 million in the first quarter of this year, and $3.2 million in the second quarter of 2010.

Total revenue for the second quarter totaled $95.9 million, up 14% from $84.0 million in the same period last year, and up $4.6 million from the first quarter 2011.

Operational Earnings Before Interest, Taxes, Depreciation and Amortization ("OEBITDA") for the second quarter was $48.4 million, compared to $36.1 million for the prior-year period, representing a year-over-year growth of 34%.

Iridium had a total billable subscriber base of 478,000 in the second quarter of 2011, compared to 383,000 for the year-ago period and 447,000 for the first quarter of 2011. Total billable subscribers grew 25% year-over-year

This successful quarter comes as Iridium’s pilot link data system was approved by the U.S. Federal Aviation Administration (FAA).

Orbcomm

Orbcomm (Fort Lee, N.J., U.S.A.), a provider of satellite and cellular data communications, posted strong second quarter financial results, increasing revenue 37.9%, from $7.8 million in the second quarter of 2010, to $10.8 million in the second quarter of 2011.

According to Orbcomm, the increase in revenue is due to growth in its satellite service revenues and revenue from StarTrak after closing the acquisition on May 16, 2011.

Adjusted EBITDA in the second quarter of 2011 was $1.7 million, versus $1.6 million in the prior year period.

In the second quarter of 2011, Orbcomm had approximately 606,000 billable subscriber communicators, a 12.3% increase over the second quarter of 2010. Net subscriber additions during the quarter were about 17,000, comprised of over 18,000 satellite additions and a decrease of 1,000 terrestrial subscribers.

Numerex

Numerex (Atlanta, Ga., U.S.A.) a provider of M2M products, posted weak second quarter financial results, with $14.2 million in total revenue, down from $14.4 million the same quarter last year. This was up slightly from the first quarter of 2011, when it posted total revenue of 13.5 million.

Generally Accepted Accounting Principles (GAAP) net earnings saw a decrease of $47,000, from $340,000 in the second quarter of 2011 to 387,000 in the year-ago quarter.
The company added 42,000 subscribers this quarter to bring the total to 1,266,000, up from 1,027,000 in the same quarter in 2010.

According to Stratton Nicolaides, and CEO of Numerex, the company’s weak second quarter results may be due to the company’s decision to leave certain markets.

“We have discontinued the sale of hardware that did not lead to a recurring subscription and service revenue, which totaled nearly $4 million in the first six months of 2010,” said Nicolaides. “As a result, despite the loss of margin from hardware and the costs associated with gearing up our managed services operations, we have generated GAAP earnings of four cents per share for the first six months of the year and have improved our overall gross margins.”

Gross margins at Numerex increased from 43% in the second quarter of 2010, to 43.8% in the second quarter of 2011.

Sierra Wireless

Sierra Wireless (British Columbia, Canada), a provider of M2M communication products, posted a narrower-than-expected loss in the second quarter, according to Reuters.

Revenue for the second quarter of 2011 was $139.9 million, a decrease of 12% compared to $159.1 million in the second quarter of 2010, and a decrease of 3% compared to $144.3 million in the first quarter of 2011.

The year-over-year revenue decrease was driven by the loss of revenue from Barnes & Noble and Clearwire, which together accounted for nearly $25 million in revenue in the second quarter of 2010.

M2M revenue was $73.9 million, down 12% compared to $83.6 million in the second quarter of 2010. Excluding sales to Barnes & Noble, the company's core M2M business increased 14% in the second quarter of 2011 on a year-over-year basis.

In the third quarter of 2011, Sierra Wireless expects revenue to improve relative to the second quarter, driven by the launch of new 4G AirCard products, as well as continued steady year-over-year growth in our core M2M product lines.

TomTom

TomTom (Amsterdam, Netherlands), a manufacturer of automotive navigation systems, reported a weak financial result for the second quarter of 2011. Revenue in this quarter was $446.3 million, down significantly from $514.5 million in the year-ago quarter.

Revenue in the automotive sector grew by 34% year on year, to $85.3 million.

EBITDA was down 39% year-over-year, from $75 million in the second quarter of 2010, to $46 million in the second quarter of 2011.

“We have seen a decline of the PND market against a background of a weak consumer electronics market which impacted our Consumer business,” said Harold Goddijn, chief executive officer at TomTom. “On the other hand, sales by Automotive and Business Solutions grew as did our LIVE Services revenue. Based on the outlook for the PND market, we will reduce our cost base in the coming quarters to maintain a healthy cash flow.”

According to TomTom, both the European and North American PND markets are down compared to the same quarter last year, attributing to the loss in revenue.

Garmin

Garmin (Olathe, Kan., U.S.A.), a manufacturer of global positioning systems (GPS), posted weaker second quarter results that the year-ago quarter, but according to the company the results were ahead of expectation. Total revenue was $674 million, down 8% from $729 million in second quarter 2010.

“In the second quarter, revenue was slightly ahead of our expectations and we delivered strong free cash flow generation but margins fell short driven by increased deferral of high margin revenues associated with bundled product offerings and increased operating costs due to bad debt and legal expenses,” said Dr. Min Kao, chairman and chief executive officer of Garmin Ltd. “Based on our results in the first half of 2011, we expect to exceed our full year guidance for revenues with $2.5 to $2.6 billion of revenues.”

Four segments posted a growth this quarter, including at 25% increase in Fitness segment revenue to $78 million, and a 13% increase in the Aviation segment where revenue totaled $73 million.

The automotive and mobile segment posted a 19% revenue decline in the second quarter. According to Garmin this decline was due to significant volume declines in the North American PND market and product mix shifting toward bundled offerings.

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