Echelon Reports Fourth Quarter and Full Year 2012 Results

Feb 12, 2013, 16:00 ET from Echelon Corporation

SAN JOSE, Calif., Feb. 12, 2013 /PRNewswire/ -- Echelon Corporation (NASDAQ: ELON) today announced financial results for the fourth quarter and full year 2012 ended December 31, 2012.

  • Q4 Revenues: $23.8 million
  • Q4 GAAP Net Loss: $4.1 million; GAAP Net Loss per Share: $0.10
  • Q4 Non-GAAP Net Loss: $2.7 million; Non-GAAP Net Loss per Share: $0.06
  • 2012 Revenues: $134.0 million
  • 2012 GAAP Net Loss: $12.8  million; GAAP Net Loss per Share: $0.30 
  • 2012 Non-GAAP Net Loss: $4.7 million; Non-GAAP Net Loss per Share: $0.11

"While 2012 was a challenging year in the smart grid market, we made some significant strides in Echelon's strategic transformation. We entered new territories with our subsystems strategy, developed new advanced metering products via our Echelon-Holley joint venture and successfully implemented cost saving and gross margin enhancing initiatives," said Ron Sege, chairman and CEO of Echelon.

"We ended the fourth quarter with a number of promising system and sub-system pilots and deployments, indicating that our strategy of targeting geographies with strong fundamentals for investment in grid modernization is sound. As we expect 2013 to be another year of modest demand in the smart grid market, we will continue the difficult task of restructuring our operations while investing in our strategic initiatives."

Total revenues for the fourth quarter were $23.8 million, down from $40.5 million in the same period last year. Revenues from Echelon's systems sales, reflecting sales to our utility customers, were $10.7 million for the fourth quarter, down from $26.4 million in the same period last year. Revenues from Echelon's sub-systems, largely from commercial customers, were $13.1 million in the fourth quarter, down from $14.2 million a year ago. Included in sub-systems revenues were $2.9 million of sales to Enel in the fourth quarter compared to $2.1 million in the same period last year.

For the full year of 2012, revenues were $134.0 million compared to $156.5 million in 2011. System and sub-system revenues both decreased 14% to $85.2 million and $48.8 million, respectively. Within sub-system sales, Enel project sales decreased 9% to $6.5 million.

Gross margin in the fourth quarter of 2012 was 47.0% compared to 39.2% in the fourth quarter of 2011. Total operating expenses for the quarter were $14.9 million compared to $19.8 million in the fourth quarter of 2011.

GAAP net loss for the fourth quarter was $4.1 million, or $0.10 cents per share, compared to a net loss of $4.2 million, or $0.10 cents per share, in the same period last year. Non-GAAP net loss for the fourth quarter was $2.7 million, or $0.06 cents per share, compared to a non-GAAP net loss of $1.3 million, or $0.03 cents per share for the fourth quarter of 2011. 

GAAP net loss for the full year of 2012 was $12.8 million, or $0.30 cents per share, compared to GAAP net loss of $13.0 million, or $0.31 cents per share, for the same period in 2011. Non-GAAP net loss for the year was $4.7 million, or $0.11 cents per share, compared to non-GAAP net loss of $3.4 million, or $0.08 cents per share in 2011.

Restructuring Charge The company expects to incur a $2.5 to $3.0 million restructuring charge in the first quarter related to a workforce reduction that will affect approximately 15% of its employees. These actions are expected to be implemented over the next 12 months.

Business Outlook Echelon offers the following guidance for the first quarter of 2013:

  • Total revenues are expected to be between $24.0 million and $26.0 million, with systems and sub-systems revenues accounting for about 50% each.
  • Non-GAAP gross margin is expected to be approximately 45-46%.
  • Stock-based compensation expense is expected to be approximately $1.0 million.
  • Non-GAAP loss per share amounts are expected to range from $0.06 to $0.11, based on a fully diluted weighted average shares outstanding of 43.0 million.
  • GAAP loss per share is expected to be between $0.16 and $0.21.

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 888-771-4371 or 847-585-4405 outside the U.S and provide the confirmation number 34104452. 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 ASC 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 (ELON) is an energy control networking company, with the world's most widely deployed proven, open standard, multi-application platform, selling complete systems and embedded sub-systems for smart grid, smart city and smart building applications. Our platform is embedded in more than 100 million devices, 35 million homes, and 300,000 buildings and powers energy savings applications for smart grids, smart cities and smart buildings. We help our customers reduce operational costs, enhance satisfaction and safety, grow revenues and prepare for a dynamic future. More information about Echelon can be found at http://www.echelon.com.

Visit the Smart Energy Blog by Echelon.

Echelon and the Echelon logo are registered 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 certain geographies; the potential for system and sub-system pilots and deployments to expand; and Echelon's anticipated performance, including revenue and gross margin rates, for the first quarter of 2013. 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 or achieve gross margins targets 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.

Investor Relations Contacts: 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, 2012

December 31, 2011

ASSETS

Current Assets:

   Cash and cash equivalents

$     18,876

$     17,658

   Short-term investments

42,979

40,998

   Accounts receivable, net

15,725

35,215

   Inventories

11,729

11,125

   Deferred cost of goods sold

846

6,536

   Other current assets

2,662

4,044

Total current assets

92,817

115,576

Property and equipment, net

21,777

27,201

Other long-term assets

8,989

8,928

$ 123,583

$ 151,705

 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$     8,551

$  18,313

Accrued liabilities

4,637

7,755

Current portion of lease financing obligations

2,056

1,870

Deferred revenues

4,912

12,716

Total current liabilities

20,156

40,654

Long-term liabilities

19,632

21,943

Total stockholders' equity

83,795

89,108

$ 123,583

$ 151,705

 

 

 

ECHELON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)

 

Three Months Ended

 December 31,

Twelve Months Ended

December 31,

2012

2011

2012

2011

Revenues:

Product

$ 22,088

$ 39,484

$129,475

$152,699

Service

1,710

1,051

4,542

3,788

Total revenues

23,798

40,535

134,017

156,487

Cost of revenues:

Cost of product (1)

12,039

24,026

75,391

87,063

Cost of service (1)

570

601

2,171

2,262

Total cost of revenues

12,609

24,627

77,562

89,325

Gross profit

11,189

15,908

56,455

67,162

Operating expenses:

Product development (1)

6,559

8,750

30,009

34,755

Sales and marketing (1)

4,949

6,536

21,461

25,719

General and administrative (1)

3,426

4,489

15,050

17,897

Restructuring charges

--

--

1,176

--

Total operating expenses

14,934

19,775

67,696

78,371

Loss from operations

(3,745)

(3,867)

(11,241)

(11,209)

Interest and other income (expense), net

(167)

129

(361)

6

Interest expense on lease financing obligations

(329)

(357)

(1,360)

(1,468)

Loss before provision for income taxes

(4,241)

(4,095)

(12,962)

(12,671)

Income tax expense

71

100

219

329

Net loss

(4,312)

(4,195)

(13,181)

(13,000)

Net loss attributable to non-controlling interest

(207)

--

(363)

--

Net loss attributable to Echelon Corporation stockholders

$  (4,105)

$  (4,195)

$ (12,818)

$ (13,000)

Net loss per share attributable to Echelon Corporation stockholders:

Basic

$  (0.10)

$  (0.10)

$  (0.30)

$  (0.31)

Diluted

$  (0.10)

$  (0.10)

$  (0.30)

$  (0.31)

Shares used in computing net loss per share:

Basic

42,905

42,290

42,650

42,083

Diluted

42,905

42,290

42,650

42,083

 

 

(1) Amounts include stock-based compensation costs as follows:

Cost of product

$    104

$   237

$   566

$   864

Cost of service

29

50

111

112

Product development

430

1,080

2,304

3,891

Sales and marketing

436

741

1,896

2,251

General and administrative

412

797

2,099

2,531

      Total stock-based compensation expenses

$ 1,411

$2,905

$6,976

$9,649

 

 

 

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,

2012

2011

2012

2011

GAAP net loss

$ (4,105)

$ (4,195)

$ (12,818)

$ (13,000)

   Stock-based compensation

1,411

2,905

6,976

9,649

   Restructuring charges

--

--

1,176

--

   Total non-GAAP adjustments to earnings from operations

1,411

2,905

8,152

9,649

   Income tax effect of reconciling items

--

--

--

--

Non-GAAP net loss

$ (2,694)

$  (1,290)

$ (4,666)

$(3,351)

Non-GAAP net loss per share:

   Diluted

$  (0.06)

$  (0.03)

$  (0.11)

$ (0.08)

Shares used in computing net loss per share:

   Diluted

42,905

42,290

42,650

42,083

 

 

ECHELON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

 

Twelve Months Ended

December 31,

2012

2011

Cash flows provided by (used in) operating activities:

Net loss including non-controlling interest

$   (13,181)

$   (13,000)

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

6,579

5,921

Loss on disposal of fixed assets

22

128

Increase in allowance for doubtful accounts

40

25

Reduction of (increase in) accrued investment income

(6)

70

Stock-based compensation

6,976

9,649

Change in operating assets and liabilities:

Accounts receivable

19,405

(10,121)

Inventories

(642)

(2,106)

Deferred cost of goods sold

5,686

(3,926)

Other current assets

1,386

164

Accounts payable

(9,669)

8,033

Accrued liabilities

(3,249)

1,185

Deferred revenues

(7,906)

3,806

Deferred rent

(43)

(53)

Net cash provided by (used in) operating activities

5,398

(225)

Cash flows provided by (used in) investing activities:

Purchase of available-for-sale short-term investments

(83,926)

(71,978)

Proceeds from maturities and sales of available-for-sale short-term investments

81,957

87,850

Change in other long-term assets

(15)

(17)

Capital expenditures

(1,129)

(2,349)

Net cash provided by (used in) investing activities

(3,113)

13,506

Cash flows provided by (used in) financing activities:

Principal payments of lease financing obligations

(1,971)

(1,731)

Repurchase of common stock from employees for payment of taxes on vesting of restricted stock units and upon exercise of stock options

(1,325)

(2,265)

Proceeds from exercise of stock options

--

945

Proceeds from non-controlling interests

1,960

--

Net cash used in financing activities

(1,336)

(3,051)

Effect of exchange rates on cash:

269

(247)

Net increase in cash and cash equivalents

1,218

9,983

Cash and cash equivalents:

Beginning of period

17,658

7,675

End of period

$   18,876

$   17,658

 

SOURCE Echelon Corporation



RELATED LINKS

http://www.echelon.com