Good day, and thank you, stand by. Welcome to Sierra Wireless third quarter earnings call and Q&A. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. David Climie, Vice President, Investor Relations. Please go ahead. Thanks, and good afternoon, everybody. Thank you for joining today's conference call and webcast. On the call today are Phil Brace, President and CEO, and Sam Cochrane, our CFO. As a reminder, today's call is being webcast and will be available on our website following the call. Today's call contains certain statements and information that are not based on historical facts and constitute forward-looking statements within the meaning of securities laws. These statements include strategies, goals, objectives, expectations, and commentary regarding the outlook for our business. Our forward-looking statements are based on a number of material assumptions which could prove to be significantly incorrect. Additionally, forward-looking statements are based on 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 uncertainty that could cause actual events or results to differ significantly from those expressed or implied by our forward-looking statements. I draw your attention to a longer discussion of our risk factors in our annual information form and management's discussion and analysis, which can be found on SEDAR and EDGAR, as well as other regulatory filings and our quarterly earnings release. With that, I will now turn the call over to Phil for his quarterly update. Thanks, David, and thank you everyone for joining us on the call today. Total revenue in the third quarter was $82.5 million, and GAAP gross margin was 29.3%. As we discussed during our Q2 earnings call, Q3 was negatively impacted by manufacturing capacity constraints due to the COVID-19 pandemic in Vietnam, as well as some well-publicized supply chain issues such as shipping and customs and continued tightness in the availability of components. Before I turn the call over to Sam for more details on the third quarter financials, I would like to talk about our current demand environment, how we're doing on the five-point operating plan that I outlined on last quarter's earnings call, and the recent changes I've made to our executive team, which we announced publicly yesterday. Regarding the current environment, we are continuing to experience very strong customer demand for our devices and services. We are seeing more customers in industrial, enterprise, and infrastructure markets wanting to deploy IoT solutions. At the end of Q3, we had record backlog for our devices based on orders from existing and new customers. We strongly believe the macro trends for LPWA, 5G, and private networks are positive, and we expect these technologies to ramp in 2022 and 2023. We also continue to see supply constraints, particularly in semiconductors, and we expect those constraints to continue throughout 2022. Regarding the five-point plan I laid out in early August, let me provide you with a short update on each item. The first action item was to work very closely with our contract manufacturing partner in Vietnam with the goal of resuming full production as soon as possible. Over the last three months, we have made steady progress in restoring manufacturing capacity at the Ho Chi Minh City facility. It was at its lowest level in July and has gradually improved since then. This improvement has continued into the fourth quarter, and we are now running at full capacity. Our partner has done an excellent job managing the COVID-19 protocols, and I very much want to thank all the employees in that location for their diligent work through a difficult situation. The second action item was to have two additional manufacturing sites up and running as quickly as possible to diversify our geographic production and increase our manufacturing resiliency. I'm glad to say that we have now reestablished capacity at a facility in China and are ramping new production lines at a facility in Mexico. With this North American facility, we can ship to our enterprise router customers in the U.S. much faster while reducing some of the global complexity associated with overseas manufacturing. The third action item was to use our balance sheet to play offense and invest in parts that will enable us to fulfill our customers' orders as soon as possible. These investments were made in Q3, and inventory levels increased, as you can see on the balance sheet. Now that we have ramped back up our manufacturing capacity, we have been converting our raw material component inventory into finished goods. The fourth item was to undertake strategic price increases to offset some of the additional costs and investments we are making, balanced with the need to remain competitive in the market. Our approach is to be strategic on pricing, not opportunistic, as we need to be able to meet our customers' IoT requirements over the long term while allowing us to earn proper return on investment and recoup the increases in costs that we are experiencing. We expect the impact of these pricing changes to occur gradually over time, starting in the fourth quarter. The fifth and final item was to control the company's OpEx. Our OpEx has declined sequentially, and we have been very careful in managing our expenses, balancing the need for continued investment while allocating as much as possible to production. Sam has been doing a great job with his team ensuring that we are only spending in areas where we absolutely have to. Moving on to the executive management changes that we announced yesterday. I'm very pleased to say that Pravin Desale has joined us as Senior Vice President of Engineering. Pravin and I have worked together at multiple companies, including Veritas, Seagate, and LSI, so we know each other well, and he has consistently delivered high-quality hardware and software solutions. We're glad to have him on board, and he'll be ramping up quickly here in the fourth quarter. In an effort to streamline the organization and also provide better focus for each of the teams, I have made the following key changes. Roy MacLean is reporting to me as Senior Vice President of Operations, overseeing manufacturing, procurement, and quality. Joining Roy's team will be a new Vice President of Supply Chain, who comes to us with more than 25 years of supply chain experience in Silicon Valley, including Lumentum and Cisco. I've asked Jim Ryan to take on the role of Senior Vice President, Product, Partnerships, and Marketing. The product management team of Sierra will now be consolidated under his leadership. Steve Harmon is moving to a new role as Senior Vice President of Global Sales. Steve will be adding the European and Asian regions together with his America sales team, so that will streamline and improve our go-to-market efforts worldwide. As a result of these changes, the new leadership at Sierra is smaller, more efficient, and with clear roles and responsibilities. I would like to take the opportunity to thank those leaving the company for their contributions and service. In conclusion, our demand remains very strong across our product lines, and we expect again to be supply constrained in 2022. We have made significant progress getting the manufacturing lines back up and running with increased geographic diversity, including a new facility in North America. We have a new leaner management structure with clearly defined roles and responsibilities that enables a clear focus on profitable growth in 2022. I would once again like to thank our employees, our customers, our suppliers as we collectively work through the challenges of the COVID-19 pandemic and the tight global supply chain. Together, we will thrive. With that, I will turn the call over to Sam for his review of the third quarter results. Thank you, Phil. Good afternoon, everyone. Note that we report our financial results in US dollars and on a US GAAP basis. We also present non-GAAP results to provide a better understanding of our operating performance. A full reconciliation between our GAAP and non-GAAP results is available on our website. Total revenue in the third quarter was $82.5 million, compared to $113.4 million in the same period last year. Connectivity, software, and services revenue was $35.2 million in Q3, up $5.4 million or 18.2% year-over-year. Gross profit in the third quarter was $24.1 million or 29.3%, lower sequentially by approximately 5.5 percentage points. Our performance in the third quarter was primarily impacted by our manufacturing capacity being significantly reduced in Q3 due to the COVID-19 related production interruptions in Vietnam. This significantly impacted our revenue and gross profit in the quarter. Gross profit margin was lower due to the absorption of fixed costs spread across lower production volume due to the production interruptions and higher component costs as a result of continuing supply chain constraints. Our non-GAAP operating expenses in the third quarter were $44.7 million, down $6.2 million or -12.2% year-over-year. This reflects our cost efficiency initiatives that we've been undertaking. Sequentially, OpEx decreased $1.6 million or -3.5%, as we've been tightly managing expenses in several areas this past quarter. Also, note our GAAP OpEx in Q3 reflects an $11.5 million impairment charge related to the intangible assets of Maingate that was acquired in 2015 in Sweden. In the third quarter, our adjusted EBITDA was -$15 million, compared to an adjusted EBITDA of -$7.1 million a year ago. Moving to the balance sheet. We ended the third quarter with $75.5 million of cash, including $9.9 million in attractive long-term debt that we obtained during the quarter. Cash flow from operations was -$48.4 million, and capital spending was $4.3 million, which was expected in Q3. During the quarter, we continued our strategy of investing in inventory to secure the supply of components. You can see that inventory increased to $71.2 million from $46.9 million at the end of Q2 this year. Over the next two quarters, we expect working capital to normalize as we experience improved production in Q4, and we'll be shipping more products to our customers. Regarding guidance for the fourth quarter, the impact of the COVID-19 pandemic on our global business continues to remain uncertain. While we continue to experience and evaluate the effects on our business, the overall severity and duration of adverse impacts related to COVID-19 on our business, financial condition, cash flows, and operating results for the remainder of 2021 and beyond cannot be reasonably estimated at this time. As Phil mentioned, global demand for our products remains very strong. Given this landscape, we are providing revenue guidance for Q4 of $120 million-$135 million, with a midpoint of $127.5 million. We are experiencing very strong customer demand and orders for our products and solutions, and we believe the macro trends of IoT, private networks, and 5G are accelerating. With that, I will now turn the call over to questions. Operator, please open the lines. Your first question comes from the line of Josh Nichols with B. Riley Securities. Please go ahead. Hey, guys. This is actually Aman jumping in for Josh. Congratulations on a better-than-expected quarter here. My first question is, what type of rampant demand for high-margin 5G products is the company experiencing? When do you think that will have a favorable impact on gross margin? Hi there. This is Phil. You know, we're actually seeing very strong demand for our 5G products. I think what we've said historically is we expect to see that really ramp and have an impact probably towards the second half of 2022 into 2023. I mean, we're ramping very strong, but in terms of percentage of overall volume, it's still not a big enough percentage. Suffice to say, they're ramping, and we're getting very good traction on our customers. That's helpful. You know, with the strong end market demand, do you anticipate backlog growth? Would that potentially flushing out in 2022 as production improves? Yeah. I mean, right now, I mean, our backlog frankly is as strong as we've ever seen it from that side, and I think we're gonna continue to work it. As I mentioned, we expect to continue to have more demand than we can fulfill, certainly well into 2022, if not all of 2022. That's a function of our strong demand but also a function of our supply chain constraints on the semiconductor side. Got it. Last question from me. I know you've been ramping up your production facility in Mexico. Can you talk about how that's progressing and where you are to getting that close to, you know, max capacity? Yeah. We've actually started, you know, ramping up production for enterprise products. Some of the first products came off the line earlier this month, so into the fourth quarter. You know, I think that we're continuing to ramp that. So I think we've been pleased with that ramp-up. At this point now, we are in fact shipping production level units of various sorts out of three different facilities around the globe. Thank you. I'll pass it on. Thank you. Thank you. Your next question comes from the line of Thanos Moschopoulos with BMO Capital Markets. Please go ahead. Hi, good afternoon. How should we think about gross margins? For example, if Q4 revenue were to kind of rebound to Q2 levels, which I guess would be at the upper end, would the gross margin profile look similar, or are there some dynamics associated with the supply constraints that would lead to a different gross margin profile even if the revenue recovers? Yeah. Hi, Thanos, this is Phil. You know, look, I think that we do expect gross margin to recover some into the fourth quarter. You know, really two factors. One, we expect the volume to increase. And second is we'll start to see some of the effect of the pricing increases we made. So we do expect to see some of that. You know, offsetting that'll be a little bit of mix related issues 'cause where we're farthest behind is on the module side. So you might expect us to try and recover from the module backlog and then you know also additional continued cost increases. So I would expect the gross margins to improve into the fourth quarter. We're not guiding that, but we've got some headwinds and tailwinds that are kind of offsetting a little bit there. Net, we should see some improvement into the fourth quarter. Okay. Maybe better late to ask this, but just as far as seasonality, normally you have a seasonal dip in Q1, but just given the dynamic here with supply constraints and the backlog, might it be different this time around, or what would be your thoughts on that? Yeah, that's a good question. I mean, historically, we do see some seasonality into Q1 from Q4. I mean, obviously, we're not guiding Q1 at this point. So, you know, it's a little bit premature. But I will say, I mean, I think we expect to be component constrained again here fairly soon before long. So I think that, you know, I think Q4 here is probably gonna be a bit of a bounce back quarter, just us burning through some of the component inventory that we had on the balance sheet, and we're gonna likely be supply constrained again here in the first quarter. Okay. Finally as far as OpEx, I mean, given some of the cost actions, would be fair to think of OpEx being down a little bit sequentially in Q4 versus Q3, or how do we think about that? Yeah. I think it may be slightly up. I mean, we're doing everything we can to control it. I mean, I think in the Q3 timeframe, we really worked hard to make sure that obviously that was a pretty challenging situation. We delayed some stuff that we actually need to get done from a certification perspective. I'm not expecting you know, a lot of movement, but it may be up a little bit, but we're not really guiding that. It's kind of in and around there. Okay. All right, thanks so much. Bye. Thank you. Your next question comes from the line of Todd Coupland with CIBC. Please go ahead. Good evening, everyone. I was curious on what is the expected cash burn in the fourth quarter. If you're gonna unwind the inventory, will you not have to make further inventory investments as you go into 2022, so the burn rate picks up again? Some color on that would be helpful. Thanks a lot. Yeah. Thanks. This is Phil. Sam, I'll try a little bit, and then maybe you dig in with the details. I mean, I do expect our inventory to go down in the fourth quarter as we continue to burn kind of make our component inventory into finished goods. You know, cash on the balance sheet will really depend on a number of other factors in terms of, you know, working capital and timing of AP/AR and a bunch of things like that. We expect the working capital as a result of that to normalize over the next couple of quarters. We do expect inventory to go down here in the fourth quarter. Sam, do you wanna make any additional color on that? Yeah, sure. If you look at the revenue guidance we provided, you know, it's kinda gonna be flattish cash from operations. You have really working capital should improve a little bit, offset by some restructuring costs. You saw the announcement of management changes yesterday, also offset by a little bit of CapEx. I think cash will be flattish to ±$5 million would be a good range. Okay. If you burn the components and you're supply constrained in 2022, do you have to start to dip back in and drive inventory up throughout 2022? How should we think about that? Thanks a lot. Well, Todd, I mean, we're at an elevated level right now with the factory being interrupted with what was happening in Vietnam, which we've previously disclosed. I think we've seen a high in our inventory levels given our relative size. That being said, obviously we will continue to invest into the supply constraints throughout 2022. I just don't think you'll see it quite at these levels because we'll be turning it quicker with our factories on. That investment will continue and overall, we'll have to make those investments in working capital. You know, I see this closer to the ceiling on the inventory side. Great. Appreciate it. Thanks a lot. Thank you. Your next question comes from the line of Anthony Stoss with Craig-Hallum. Please go ahead. Hey, guys. Hey, Phil and Sam. A couple questions here. Phil, I understand the component shortages, but from a production standpoint, if you've got two additional facilities coming online in the December quarter, are you capable in Q1 from a production basis to handle kind of the influx of orders? I know you probably won't with component in terms of production. Secondly, Phil, you were brought in to really make some pretty significant operational changes, and I know you got hit right out of the gate with COVID issues in Vietnam. With the new management team, can you now hit the ground running and start to focus on those operational issues and maybe give us a sense of what OpEx might look like, say, a year from now? Yeah. Hi, Tony. Thanks. I mean, well, just a couple of quick comments on that. In terms of the manufacturing output and things like that, one of the things to keep in mind, what we've tried to do with our manufacturing is actually increase resiliency, because we knew we are gonna be relatively component constrained. We didn't wanna bring on enough capacity and have it stranded. What we've been doing is actually moving test fixtures, moving component supply, doing things like that. While we may end up with a little bit extra capacity in general, what we've been trying to do is just increase our ability to manufacture at different sites and give us some more resiliency. It's not like I've got triple the capacity online. That's one thing to keep in mind. You know, in terms of some of the operational changes, I think you've seen, you know, I've taken a pretty big change in terms of clarifying the staff, in terms of the organization, their roles and responsibilities. You know, you see us kind of turning around and getting the manufacturing recovered. You're gonna start to see recovery in gross margins. You know, where it goes into 2022, I would expect. You know, we're not guiding that at this point, but I certainly think the backlog and the business conditions continue to be strong and you should expect to see significantly improved financial results from this company in 2022. Okay. If I could just ask one more, and I think you commented about this in the last quarterly conference call, just increasing visibility from your customers. Everybody wants to get ahead of continuing - ... component shortages. Are you into kind of 2023 yet with your customers, and you have a good sense of what they're willing to pay and what your ASPs might look like and hopefully, gross margins improving? Yeah. We are not into 2023 yet. I would say we're probably out into Q3 of 2022. You know, I think, yeah, the gross margin question is, obviously, we're gonna try and do what we can to improve that across the board. There's gonna be multiple factors that drive that, right? Mix, component increase, price increases, all the rest of it. I think that what I would say is rest assured that, myself and my management team are keenly focused on improving all elements of the P&L. Okay. Best of luck, guys. Thank you. Thank you. Thank you. Your next question comes from the line of Derek Soder with Colliers Securities. Please go ahead. Hey, guys. Thanks for taking my questions. I wanted to start with monthly recurring revenue, sort of flat again quarter over quarter. You know, I understand you guys have some month-to-month fluctuations. I was hoping if you can sort of explain that a bit more, why that's the case. Maybe explain it as it relates to attach rates of connectivity and software on your devices, you know, how that's trending, that'd be great. That's a good question. Thanks, this is Phil. I mean, I do think that you know, we kinda guided that to be you know, relatively you know, flattish, I guess, and we kinda came in there. I think the delay in production of both modules and routers has caused a bit of delay in terms of deployment, which in turn has affected that growth. It has grown nicely year-over-year. I would expect that to grow into 2022 from that side. I think that you know, that's where we're looking at that point. I think your question on attach rate is in fact a good one. You know, I'm not prepared to, you know, frankly answer that today 'cause I think there's a lot of moving parts in and out of that, and we've been just, frankly, trying to figure out how to make sure we get the manufacturing up and running. I think what you should walk away with is that the key part of the business, we do expect it to grow into 2022. I am focused on growing the entire company, as well. Got it. You guys have been sort of going to the gray market for components. You're still in a component-constrained environment broadly. Has your ability to sort of use the gray market for additional components changed at all? You sort of navigated the supply constraints pretty well throughout COVID. Has that market deteriorated or, you know, can the gray market sort of serve as a decent level of support on the component side in 2022? You know, as you might imagine, the gray market, spot market changes daily. In some cases the price premiums that we see out there for certain constrained components are frankly way out of reach. You know, we have not been able to get all of our components satisfied on the gray market. I don't expect that to be the case in 2022. What we try and do is work as best we can with our partners. We are trying to build all the various different kits that we can and when it comes down to the very last minute, then we look to see what's available on the gray market and if we can get enough at a reasonable enough price, then depending on the situations we'll do it, and depending on the situations we won't. I would say it's a case-by-case basis that we manage daily and we'll likely be in that situation through 2022. Got it. Very helpful. Thanks, guys. Thank you. Your next question comes from the line of Paul Treiber with RBC Capital Markets. Please go ahead. Oh, thanks very much and good afternoon. Just following up on the supply chain constraints that you're seeing, what's your like with the changes in your manufacturing footprint, is there an opportunity or what timeframe do you see as an opportunity to make changes to try to mitigate some of the supply constraints in terms of re-engineering your products? You know, over what timeframe do you think that's possible? You know, most of 2021, a lot of 2021, from an engineering capacity perspective, has been actually spent doing redesign of components. We are actually continuing to do that on that front. What's interesting there is, I mean, we've really taken an approach to try and increase the diversity of components that we use versus what has historically been engineering dogma to try and use the same components and increase reuse. We're actually going out and trying to get multiple different products to make sure we've got diversity in place. We're continuing to do that. I expect that a certain percentage of the engineering capacity we have will be focused on doing that kind of development, certainly through the first half of 2022. Yeah, I mean, if you can throw over some rough numbers it'd be helpful, but like the environment is, you know, likely to be challenging. To what extent, like from a proportion point of view, I don't know if it's 50% or whatnot, do you think you can mitigate those challenges through improved engineering of products, you know, just diversifying component supplies? Yeah, I mean, we definitely are trying that. In some cases, right, obviously it's easier. For example, it's easier to swap out memories or it's easier to swap out passive components and do some other things. When you've got some more complicated logic that requires software and firmware changes, we wanna be really careful because it involves a requal with some of our, you know, network operators, right? Which is obviously a painful situation. You know, it's hard to give a blanket answer to that. Obviously, we try and minimize the amount of downstream impact that we can. Oftentimes these replacements are not pin for pin compatible. It takes a little more work to do so. Just one last one from me. Just in terms of the cash and the cash flow, you know, on the balance sheet, you have a reasonable amount of cash. I mean, how much of that is either, you know, either stranded in certain geographies or there's some sort of restrictions on it or you need it for the operations of the business? Sam, I'll let you answer that one in terms of location of the cash. Yeah, it's Sam here. Yeah, we don't have a ton of restricted cash. But obviously as a global company, we do operate in Asia Pacific, EMEA and North America. So a certain amount of cash is needed, you know, to operate in those regions. But there's no restricted cash or any cash stuck in an area. Like for instance, when we had automotive, we had cash in China, which is very difficult to move and get out, right? But we're no longer in any of those jurisdictions, so our cash can move relatively freely. Okay. Thank you. I'll pass the line. Your next question comes from the line of Scott Searle with Roth Capital. Please go ahead. Hey, good afternoon. Thanks for taking my questions. Nice job out of the gate in the outlook into the fourth quarter. Hey, maybe just to quickly dig in on that front, Phil, the guidance of $120-$135, it doesn't sound like demand and backlog are the problem. I'm wondering if you could address, you know, what you've got covered from a component and supply availability standpoint at the current time into that, you know, fourth quarter outlook. At what revenue level do the real supply constraints start to kick in? I've got a couple of follow-ups. Yeah, Scott. Thanks. Look, I think you might imagine that last quarter we didn't guide, right, given the uncertainty for all that. I think it's reasonable to assume that the guidance range that we have. I have a certain degree of confidence, a high degree of confidence that I have the supply to build the products in the range we talk about, so. Okay. You know, maybe Sorry, you had a second question going forward. Well, just in terms of where those supply constraints really start to kick in. I mean, you've talked about, you know, this fixing Vietnam, you'd quickly move from being production constrained to being supply constrained. I'm wondering if you could just kind of help us understand at what revenue level. I know it's gonna vary depending on the mix between modules and gateways, et cetera, but kind of roughly where we are today and where you think we are as we kind of move into the first half of this year or next year? Yeah, that's kind of a tricky one to answer. I guess what I'd say to you, the way you wanna think about it is, I mean, we've kind of ramped up to nominally full production at this point in the quarter, you know, in early November, we did. Probably by the end of the fourth quarter, we will be back in a supply component constrained environment. So it's kind of a situation where if we need 20 parts to build something, we get 19 and we miss one of them, then you still can't build. So, you know, it's difficult to answer that question. But I would say, you know, lead times with semiconductors are not decreasing. In fact, they're increasing. I think our procurement team is doing as good a job as possible managing all these situations. You know, I would expect us to be, again, component supply constrained or say demand far exceed our supply, even into Q1. Okay. Yeah. That, that's helpful. Maybe if I could, I know the revenue categories have shifted around a little bit, but looking at connectivity software and services- Traditionally that's had gross margins in the mid- to low-40s%. Relative to, I guess, the rest of the comps out there, it's a low gross margin figure. There's a lot of data traffic, I think, that goes through that, and it's also been an unprofitable business. I know it's early, but I'm wondering if you could give us kind of your thoughts on that front in terms of what that business should look like as we start to look out to the second half of next year. Well, I think it's fair to assume that we can do better. I think there are multiple comparisons on multiple different of our businesses where I'm not satisfied with the results, and I'd expect us to do better, not just on the gross margin side, but on the overall profitability of that business and other businesses. You know, I don't wanna get into specific things here, but you might imagine that I'm not- Yep. I'm not leaving any stone unturned in that area. Okay. Fair enough. One last one, if I could, kind of falls into the category of probably premature or unfair. You know, on the enterprise business, it's been a nice business for you guys. It's been a good business from a gross margin profitability standpoint. There have been some moves within the industry, whether it's Ericsson and Cradlepoint or more recently with Digi and Ventus. I'm wondering if you're seeing a push from your customer base to push more to a recurring revenue model there, and what's your early thoughts are on that front? Thanks. Yeah, I mean, look, I think the enterprise business is a very strong part of the portfolio. We've got a very good presence in first responders, public safety, industrial, oil and gas, infrastructure markets, a very strong feedback on our product line. Yes, I think we are looking at different ways that we can attach connectivity business to that, including some things like managed connectivity services and the like. That would be an area that we are definitely focused on growing. Great. Thanks so much. Thank you. We have no further question at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.