Echelon Reports Fourth Quarter and Full Year 2011 Results

Feb 09, 2012, 16:00 ET from Echelon Corporation

SAN JOSE, Calif., Feb. 9, 2012 /PRNewswire/ -- 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.

Press Contacts:

Amy Lee

Echelon

+1 (408) 790-3019

alee@echelon.com

Annie Leschin/Vanessa Lehr

StreetSmart Investor Relations

+1 (415) 775-1788

annie@streetsmartir.com

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:

42,290

41,639

42,083

41,365

  Diluted                                   

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

SOURCE Echelon Corporation



RELATED LINKS

http://www.echelon.com