So what: Quarterly revenue rose 7.9% year over year to $154.6 million, including a 5.1% increase in OEM Solutions to $130.7 million, and a 26.3% increase in Enterprise Solutions revenue to $23.9 million. Organic growth came in at 4%.
Adjusted earnings before interest, taxes, depreciation and amortization rose 2.5% to $12.1 million, and adjusted earnings per diluted share fell by a penny to $0.23.
For perspective, Sierra Wireless' guidance called for higher revenue of $157 million to $160 and earnings per share of $0.23 to $0.27. Analysts, on average, were expecting revenue of $158.7 million, and earnings of $0.25 per share.
During the subsequent conference call, management explained its third-quarter results came in below expectations due to "temporary headwinds" in demand for 4G-enabled enterprise notebooks as the industry migrates to Intel's new Skylake processor platform. Nonetheless, Sierra Wireless expects this crimped demand to return to normal over the next few months.
Now what: However, Sierra Wireless also stated a single automotive customer is adjusting its order timing to better align with demand in the current quarter. In part, this is due to previous RF component supply constraints, which caused some customers to build larger inventory than they otherwise would have at this point in the year. This, too, should prove temporary, but combined with the aforementioned processor platform transition, resulted in Sierra Wireless offering lighter-than-expected current-quarter guidance.
For the fourth quarter, the company now expects revenue of $148 million to $151 million, and earnings per share of $0.09 to $0.11. Both ranges fell significantly below consensus estimates, which predicted fourth-quarter revenue and earnings of $165.2 million and $0.29 per share, respectively.
Of course, it's never fun to endure a post-earnings plunge of this magnitude. But these temporary headwinds aren't indicative of deeper problems within Sierra Wireless' business. Rather, they appear to be a consequence of the volatile nature of a young industry in its earliest stages. As such, I think this drop should be of little consequence to long-term investors willing to watch Sierra Wireless' Internet of Things growth story unfold.
Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Sierra Wireless. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.