Echelon Reports Fourth Quarter and Full Year 2011 Results

Category:

Thursday, February 9, 2012 5:08 am PST

Dateline:

SAN JOSE, Calif.
"As smart grid, city and building applications come together, the opportunities for Echelon’s proven, open-standard, multi-application platform continue to grow."

Echelon Corporation (NASDAQ: ELON) today announced financial results for the fourth quarter and full year 2011 ended December 31, 2011.

  • Q4 Revenues: $40.5 million
  • Q4 GAAP Net Loss: $4.2 million; GAAP Net Loss per Share: $0.10
  • Q4 Non-GAAP Net Loss: $1.3 million; Non-GAAP Net Loss per Share: $0.03
  • 2011 Revenues: $156.5 million
  • 2011 GAAP Net Loss: $13.0 million; GAAP Net Loss per Share: $0.31
  • 2011 Non-GAAP Net Loss: $3.4 million; Non-GAAP Net Loss per Share: $0.08

“I am pleased with the progress we made in 2011. Revenues grew 41%, and we significantly reduced our non-GAAP operating loss, as deployments accelerated in the US and Europe. We further focused our strategy and the way we approach the smart energy markets. Our flexible system and sub-system solutions and geographic ranking system allow us to better serve existing customers and to enter large, emerging territories such as Brazil and China,” said Ron Sege, chairman and CEO of Echelon. “As smart grid, city and building applications come together, the opportunities for Echelon’s proven, open-standard, multi-application platform continue to grow.”

Total revenues for the fourth quarter were $40.5 million, up from $38.8 million in the same period last year. Revenues from Echelon’s systems sales, which were sales to our utility customers, were $26.4 million for the fourth quarter, up from $25.3 million in the same period last year. Revenues from Echelon’s sub-systems, largely from commercial customers, were $14.2 million in the fourth quarter, up from $13.5 million a year ago. Included in sub-systems revenues were sales to Enel, which were $2.1 million in the fourth quarter as compared to $1.2 million in the same period last year.

For the year ended December 31, 2011, revenues were $156.5 million compared to revenues of $111.0 million in 2010. Revenues from Echelon's system sales experienced a year over year increase of 74% to $99.4 million, while revenues from Echelon's sub-system sales increased 6% to $57.1 million. Within the sub-system sales, year over year revenues from the Enel project increased 53% to $7.1 million.

Gross margin in the fourth quarter of 2011 was 39.2% compared with 43.5% in the fourth quarter of 2010. Total operating expenses for the quarter were $19.8 million compared to $22.5 million in the fourth quarter of 2010.

GAAP net loss for the fourth quarter was $4.2 million, or $0.10 cents per share, compared to a net loss of $6.0 million, or $0.14 cents per share, in the same period last year. Non-GAAP net loss for the fourth quarter was $1.3 million, or $0.03 cents per share, compared to a non-GAAP net loss of $1.8 million, or $0.04 cents per share for the fourth quarter of 2010.

GAAP net loss for the full year of 2011 was $13.0 million, or $0.31 per share, compared to GAAP net loss of $31.3 million, or $0.76 per share, for the same period in 2010. Non-GAAP net loss for the year was $3.4 million, or $0.08 per share, compared to non-GAAP net loss of $17.8 million, or $0.43 per share in 2010.

Business Outlook

Echelon offers the following guidance for the first quarter of 2012:

  • Total revenues are expected to be between $39 million and $41 million, with systems revenues accounting for about 70%, sub-systems revenues 30%.
  • Non-GAAP gross margin is expected to be approximately 40%.
  • Stock-based compensation expense is expected to be approximately $2.9 million.
  • Non-GAAP loss per share amounts are expected to range from $0.04 to $0.07, based on a fully diluted weighted average shares outstanding of 42.3 million.
  • GAAP loss per share is expected to be between $0.11 and $0.14.

For those interested in further discussion regarding this release, Echelon's management will participate in a conference call today at 2:00 p.m. Pacific/5:00 p.m. Eastern Time. To access the call, dial 877-299-4454 and enter passcode: 90727264 (callers outside the US please use 617-597-5447). An archived replay of the webcast will be available approximately two hours following the end of the call.

Use of Non-GAAP Financial Information

Echelon continues to provide all information required in accordance with GAAP, but believes that an investor’s evaluation of our ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Accordingly, we provide non-GAAP net income and non-GAAP net income per share data as additional information relating to Echelon’s operating results. Echelon presents these non-GAAP financial measures to provide investors with an additional tool for evaluating Echelon’s operating results in a manner that focuses on what Echelon believes to be its ongoing business operations. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or net income per share prepared in accordance with GAAP.

Echelon’s management uses certain non-GAAP financial information, namely operating results excluding restructuring charges as well as the impact of stock-based compensation charges made in accordance with FASC 718 (formerly SFAS 123R), to evaluate its ongoing operations and for internal planning and forecasting purposes. Accordingly, we believe it is useful for Echelon’s investors to review, as applicable, information that both includes and excludes these charges (and the related tax impact) in order to assess the performance of Echelon’s business and for planning and forecasting in future periods. Whenever Echelon reports such non-GAAP financial measures, a complete reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure is provided. Investors are encouraged to review these reconciliations to ensure they have a thorough understanding of the reported non-GAAP financial measures and their most directly comparable GAAP financial measures.

About Echelon Corporation

Echelon Corporation (NASDAQ: ELON) is the world's leading open standard energy control networking company. Echelon technologies connect more than 35 million homes, 300,000 buildings and 100 million devices to the smart grid, and help customers save 20% or more on their energy usage. With more than 20 years of experience in energy control, Echelon delivers a wide range of innovative solutions to commercial and electric utility customers. More information about Echelon can be found at http://www.echelon.com.

Echelon and the Echelon logo are trademarks of Echelon Corporation registered in the United States and other countries. Other product or service names mentioned herein are the trademarks of their respective owners.

Risk Factors Regarding Forward Looking Statements

This press release may contain statements relating to future plans, events or performance, including statements regarding Echelon’s potential business in South America and China; Echelon’s anticipated performance, including revenue growth rates and gross margin improvements, for the first quarter and full year of 2012 and thereafter, in particular markets and in general; the expected timeframe to reach profitability; and potential future growth. Such statements may involve risks and uncertainties, including risks associated with uncertainties pertaining to the continued development and growth of markets for Echelon's products and services; the risk that failure to achieve revenue growth, maintain expense controls and improve gross margins will delay the timeframe for achieving profitability; the risk that global economic conditions will affect our customers’ ability to receive regulatory or other approval or financing for system or sub-system-based deployments; risks relating to the timely development of Echelon's products and services, and the ability of those products and services to perform as designed and meet customer expectations; the risk that Echelon does not meet expected or required shipment, delivery or acceptance schedules for its products and that Echelon may incur penalties or additional expenses or delay revenue recognition as a result; and other risks identified in Echelon's SEC filings. Actual results, events and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Echelon undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

The financial statements that follow should be read in conjunction with the notes set forth in Echelon's Annual Report on Form 10-K when filed with the Securities and Exchange Commission.

ECHELON CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(Unaudited)

 
  December 31,
2011
  December 31,
2010

 

 

ASSETS
 
Current Assets:
Cash and cash equivalents $ 17,658 $ 7,675
Short-term investments 40,998 56,957
Accounts receivable, net 35,215 25,102
Inventories 11,125 8,993
Deferred cost of goods sold 6,536 2,588
Other current assets   4,044   3,962

 

 

Total current assets 115,576 105,277
 
Property and equipment, net 27,201 31,020
Other long-term assets   8,928   9,273

 

 

$ 151,705 $ 145,570

 

 

 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current Liabilities:
Accounts payable $ 18,313 $ 10,399
Accrued liabilities 7,755 6,713
Current portion of lease financing obligations 1,870 1,731
Deferred revenues   12,716   9,175

 

 

Total current liabilities   40,654   28,018

 

 

Long-term liabilities 21,943 23,563
 
Total stockholders' equity   89,108   93,989

 

 

$ 151,705 $ 145,570

 

 

ECHELON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

 
 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2011   2010 2011   2010

 

 

 

 

Revenues:
Product $ 39,484 $ 37,897 $ 152,699 $ 107,441
Service   1,051     913     3,788     3,596  

 

 

 

 

Total revenues   40,535     38,810     156,487     111,037  

 

 

 

 

Cost of revenues:
Cost of product (1) 24,026 21,325 87,063 59,722
Cost of service (1)   601     594     2,262     2,464  

 

 

 

 

Total cost of revenues   24,627     21,919     89,325     62,186  

 

 

 

 

Gross profit   15,908     16,891     67,162     48,851  

 

 

 

 

Operating expenses:
Product development (1) 8,750 10,164 34,755 34,762
Sales and marketing (1) 6,536 6,599 25,719 25,062
General and administrative (1) 4,489 4,532 17,897 17,647
Restructuring charges   --     1,212     --     1,212  

 

 

 

 

Total operating expenses   19,775     22,507     78,371     78,683  

 

 

 

 

Loss from operations (3,867 ) (5,616 ) (11,209 ) (29,832 )
Interest and other income, net 129 13 6 393
Interest expense on lease financing obligations   (357 )   (384 )   (1,468 )   (1,572 )

 

 

 

 

Loss before provision for income taxes (4,095 ) (5,987 ) (12,671 ) (31,011 )
Income tax expense   100     49     329     301  

 

 

 

 

Net loss $ (4,195 ) $ (6,036 ) $ (13,000 ) $ (31,312 )

 

 

 

 

Net loss per share:
Basic $ (0.10 ) $ (0.14 ) $ (0.31 ) $ (0.76 )
Diluted $ (0.10 ) $ (0.14 ) $ (0.31 ) $ (0.76 )
 
Shares used in computing net loss per share:
Basic 42,290 41,639 42,083 41,365
Diluted 42,290 41,639 42,083 41,365
 
 
 
(1) Amounts include stock-based compensation costs as follows:
Cost of product $ 237 $ 290 $ 864 $ 1,172
Cost of service 50 31 112 125
Product development 1,080 1,014 3,891 4,185
Sales and marketing 741 712 2,251 2,939
General and administrative   797     953     2,531     3,907  

 

 

 

 

Total stock-based compensation expenses $ 2,905   $ 3,000   $ 9,649   $ 12,328  

 

 

 

 

ECHELON CORPORATION

RECONCILIATION OF NON-GAAP TO GAAP RESULTS

Excluding adjustments itemized below

(in thousands, except per share amounts)

(Unaudited)

 
An itemized reconciliation between net earnings on a GAAP basis and non-GAAP basis is as follows:
 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2011   2010 2011   2010

 

 

 

 

GAAP net loss $ (4,195 ) $ (6,036 ) $ (13,000 ) $ (31,312 )
Stock-based compensation 2,905 3,000 9,649 12,328
Restructuring charges   --     1,212     --     1,212  

 

 

 

 

Total non-GAAP adjustments to earnings from operations 2,905 4,212 9,649 13,540
Income tax effect of reconciling items   --     --     --     --  

 

 

 

 

Non-GAAP net loss $ (1,290 ) $ (1,824 ) $ (3,351 ) $ (17,772 )

 

 

 

 

Non-GAAP net loss per share:
Diluted $ (0.03 ) $ (0.04 ) $ (0.08 ) $ (0.43 )
Shares used in computing net loss per share:
Diluted 42,290 41,639 42,083 41,365
 

ECHELON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 
 

Twelve Months Ended
December 31,

2011   2010

 

 

Cash flows provided by (used in) operating activities:
Net loss $ (13,000 ) $ (31,312 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 5,921 6,721
Loss on disposal of fixed assets 128 5
Increase in allowance for doubtful accounts 25 28
Reduction of (increase in) accrued investment income 70 (31 )
Stock-based compensation 9,649 12,328
Change in operating assets and liabilities:
Accounts receivable (10,121 ) (3,580 )
Inventories (2,106 ) 2,006
Deferred cost of goods sold (3,926 ) 608
Other current assets 164 (402 )
Accounts payable 8,033 2,999
Accrued liabilities 1,185 1,795
Deferred revenues 3,806 (275 )
Deferred rent   (53 )   (75 )

 

 

Net cash used in operating activities   (225 )   (9,185 )

 

 

Cash flows provided by (used in) investing activities:
Purchase of available-for-sale short-term investments (71,978 ) (62,848 )
Proceeds from maturities and sales of available-for-sale short-term investments 87,850 68,847
Change in other long-term assets (17 ) 27
Capital expenditures   (2,349 )   (1,995 )

 

 

Net cash provided by investing activities   13,506     4,031  

 

 

Cash flows provided by (used in) financing activities:
Repurchase of common stock from employees for payment of taxes on
vesting of performance shares and upon exercise of stock options
(2,265 ) (2,945 )
Principal payments of lease financing obligations (1,731 ) (1,588 )
Proceeds from exercise of stock options   945     615  

 

 

Net cash used in financing activities   (3,051 )   (3,918 )

 

 

Effect of exchange rates on cash:   (247 )   (459 )

 

 

Net increase (decrease) in cash and cash equivalents 9,983 (9,531 )
Cash and cash equivalents:
Beginning of period   7,675     17,206  

 

 

End of period $ 17,658   $ 7,675  

 

 

Contact:

Press Contact:
Echelon
Amy Lee, +1-408-790-3019
alee@echelon.com
or
Investor Relations Contact
StreetSmart Investor Relations
Annie Leschin/Vanessa Lehr, +1-415-775-1788
annie@streetsmartir.com

Contacts

Press Information

Public Relations

pr@echelon.com

Investor Relations

Annie Leschin

annie@streetsmartir.com

General Inquiries

info@echelon.com