[May 05, 2016] |
|
Echelon Reports First Quarter 2016 Results
Echelon Corporation (NASDAQ: ELON) today announced financial results for
the first quarter ended March 31, 2016.
"During the first quarter we continued our multi-quarter pivot towards
the dynamic intelligent lighting systems market and are starting to see
some positive signs of customer traction with our multi-vendor,
multi-application 'connect anything anywhere' platform," said Ron Sege,
Chairman and CEO of Echelon. "While revenue this quarter was at the low
end of our guidance, we have the lowest cost structure we have seen in
years, a significantly retooled salesforce and an accelerating pace of
product innovations based on our 25 year heritage in control networking.
We continue to believe we are focused on the right markets with the
right offerings at the right time."
Financial Highlights
-
Revenues: $8.6 million
-
Operating expenses reached their lowest level in at least 10
years, down 27% (21% non-GAAP) from a year ago
-
GAAP Net Loss: $953,000; GAAP Net Loss per Share: $0.22
-
Non-GAAP Net Loss: $1.2 million; Non-GAAP Net Loss per Share:
$0.27
-
Cash & investments of $23.7 million
-
Cash burn of $2.4 million compared to $4.0 million a year ago
-
Tax Benefit Preservation "382" Plan adopted to protect the
Company's ability to use its significant net operating losses to
offset future tax liabilities.
Revenues were $8.6 million in the first quarter, down from $9.6 million
in the previous quarter due to sales force transitions and scheduling
delays for some of our larger lighting projects. Revenues were $9.9
million in the same period a year ago. Our embedded systems business
continued its long-term decline, which was more pronounced this quarter
in part due to one-time events.
GAAP gross margin in the first quarter was 55.6% compared with 57.0% in
the first quarter of 2015 and 57.3% in the fourth quarter of 2015
predominantly due to product mix and lower revenue levels.
Total operating expenses for the quarter decreased to $5.6 million from
$7.6 million year over year due to ongoing cost reduction initiatives
including right-sizing of facilities. The sequential decrease from $11.3
million was largely due to the impact of a one-time, non-cash goodwill
impairment charge of $5.7 million taken in the fourth quarter of 2015.
GAAP net loss for the first quarter was $953,000 or $0.22 per share,
compared with a net loss of $1.4 million, or $0.32 per share in the same
period last year, and a net loss of $5.6 million, or $1.27 per share in
the previous quarter.
Non-GAAP net loss for the first quarter was $1.2 million, or $0.27 per
share, compared with non-GAAP net loss of $1.3 million, or $0.29 per
share for the first quarter of 2015, and $293,000, or $0.07 in the
previous quarter. The sequential increase in non-GAAP net loss resulted
from lower revenue levels and an increase in foreign currency
translation losses.
Project Highlights
The following activity is indicative of customer interest we are seeing
in the marketplace for our solutions. Pilot deployments may lead to
larger revenue streams but timing and amounts are uncertain:
-
Phase two of the Cambridge, MA lighting project to retrofit the
city's remaining 2,000+ decorative fixtures using a variety of LED
fixtures is underway using the Lumewave™ by Echelon adaptive control
system, allowing for a combination of wireless and power line carrier
communications. Combined with the approximately 5,000 fixtures
networked in 2015, we believe Cambridge is the first city in the US to
have "border-to-border" intelligent lighting installed and operating.
Multiple zones across the City allow for tailored dimming schedules to
meet citizen and safety needs.
-
Our project to install another border-to-border city-wide intelligent
lighting network in Bellingham, WA is nearing completion. This
system is connecting 3,615 streetlights, with wireless technology on
roadway lights and 'invisible' powerline communication on
highly-visible decorative luminaries.
-
We have begun a lighting pilot for a city of 86,000 in the Midwest
that includes our innovative powerline RF gateway for powerline and RF
communications.
-
We have received an order and expect to begin a lighting pilot for
parking lots and garages in a city of more than 1 million residents in Canada,
in the summer.
-
We have received an order and expect to begin a lighting pilot for in
a city of almost 100,000 residents in the Pacific Northwest,
also this summer.
-
We expect to be deploying a city-wide intelligent lighting system in Vadnais
Heights, MN this summer.
-
We completed a successful adaptive lighting parking garage pilot at a
Silicon Valley Fortune 100 company HQ.
-
In our embedded business we had multiple design wins including
in control applications for supermarket refrigeration and gas pump
card readers.
Product Highlights
This quarter we introduced a number of enhancements to our scalable,
multi-protocol, sensor-enabled lighting control platform managed through
an open Central Management Software platform:
-
Cloud and enterprise central management system (CMS)
-
The LumInsight 1.01 platform can now support a range of
applications from simple room-level regulatory compliance to
enterprise-wide monitoring and control of lighting systems
to strategic applications as a public cloud service.
-
Multi-protocol, multi-technology gateways
-
The Lumewave™ Powerline-RF Gateway (News - Alert) was introduced to
customers in the fall. This next-generation outdoor lighting
control solution seamlessly integrates two of the most widely used
lighting control connectivity technologies, power line and
wireless, to provide flexibility, reduce deployment costs and ease
maintenance.
-
Lumewave Gateway & Base Station 2.0 is a
smaller, new Gateway and Base Station based on a Linux platform
that is available for Ethernet or Cellular for either LAN or WWAN
communications.
-
Echelon SmartServer 2.2 SP4 is Echelon's controller/gateway
that combines features required for lighting control and building
automation. This release introduces the Outdoor Lighting System
(OLS) modules on the SmartServer to enhance outdoor lighting
applications and provide richer capabilities for ESCO's.
-
End controller nodes
-
Lumewave EMB 900 is a new Lumewave RF end node controller
for parking garages lights and other related fixtures. Models are
available with integrated coax and antenna that install within the
fixture and models that mount on the side or bottom/top of
fixtures.
-
Lumewave Top900 480 volt is a versatile RF lighting
controller that supports a wide range of voltages (100-480 volt)
with one stock-keeping unit. This simplifies ordering, design and
installation for partners and customers.
-
Lumewave Top900 868 Mhz lighting controller demo kits are
now available for our European customers to test the viability of
RF products for Echelon's European customers.
Sales & Marketing Highlights
-
We announced the appointment of Rick Schuett as Senior Vice
President of Worldwide Sales. Schuett brings more than 20 years of
leadership, core lighting experience, and proven sales success to the
Echelon team. Rick will drive the Company's go-to-market strategies in
both the lighting and the LonWorks-based embedded systems business.
-
At the recently-completed Lightfair International, among
the world's largest annual architectural and commercial lighting trade
show, the Company showcased our new LumInsight CMS and our Lumewave
Powerline-RF Gateway. Judging from interactions at the booth, interest
in networking and control solutions is increasing significantly in the
industry. The Powerline-RF gateway received a "Top 10 Must See"
award from the well-respected Edison Report.
-
We announced that we joined the Smart
Lighting Engineering Research Center at Rensselaer
Polytechnic Institute to support and participate in the
institute's pursuit of the study and commercialization of
transformational smart lighting systems.
Other updates
-
The Company has adopted an inducement plan to enable it to
continue to attract top talent as it executes its business plan.
Outlook
Echelon's guidance for the second quarter of 2016 is as follows:
-
Total revenues are expected to be $7.5 million to $7.9 million,
reflecting the previously-announced reductions in revenues from Enel
-
Non-GAAP gross margin is expected to be in a range of 55% to 57%
-
Operating expenses are expected to be in a range of $5.6 million to
$5.9 million
-
Non-GAAP loss per share is expected to be between $0.26 and $0.40,
based on 4.4 million fully diluted weighted average shares outstanding
-
GAAP loss per share is expected to be between $0.31 and $0.46 per share
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 from continuing operations excluding restructuring
charges, litigation charges, impairment charges, the impact of
stock-based compensation charges made in accordance with ASC (News - Alert) 718
(formerly SFAS 123R), as well as certain other non-routine charges, 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), a pioneer in developing
open-standard control networking platforms, delivers elements necessary
to design, install, monitor and control industrial-strength 'communities
of devices' within the lighting, building automation, Internet of Things
and related markets worldwide. Echelon sells its lighting products under
the Lumewave by Echelon brand and its building automation and other
IIoT-related products as part of its IzoT™ platform. With more than 100
million Echelon-powered devices installed worldwide, Echelon helps its
customers easily and safely migrate existing control systems to the most
modern platforms, while bringing new devices and applications into an
ever-growing global Industrial Internet. Echelon helps its customers
reduce operational costs, enhance satisfaction and safety, grow revenues
and perform better in both established and emerging markets. More
information about Echelon can be found at http://iiot.echelon.com,
or www.echelon.com
and at the company's blog at blog.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 contains "forward-looking" statements within the
meaning of Section 21A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and is
subject to the safe harbor created thereby. Echelon advises caution in
reliance on forward-looking statements. Forward looking statements
include, without limitation, the Company's opportunities for future
growth, and the Company's guidance for the second quarter of 2016.
Actual results could differ materially from those projected in
forward-looking statements as a result of a number of risks and
uncertainties. Such risks and uncertainties, include, but are not
limited to, risks associated with the continued development and growth
of markets for Echelon's products; failure to achieve revenue estimates
or maintain expense controls; circumstances that may delay the time
frame for achieving our business outlook; the risk of competition that
may arise as the market develops or through consolidations in the
industry, 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; success of the pilot programs and that the
pilot programs will result in follow-on orders; 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 (News - Alert) filings. The discussion of risk
factors are detailed in the Company's filings with the Securities and
Exchange Commission, including reports on its most recently filed Form
10-K and Form 10-Q. The financial information presented in this release
reflects estimates based on information that is available to us at this
time. Actual results, events and performance may differ materially.
Echelon undertakes no obligation to update or revise these
forward-looking statements, whether as a result of new information,
future events or otherwise.
The condensed consolidated financial statements that follow should be
read in conjunction with the notes set forth in Echelon's Quarterly
Report on Form 10-Q when filed with the Securities and Exchange
Commission.
|
ECHELON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
ASSETS
|
|
|
|
|
Current Assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,288
|
|
|
$
|
7,691
|
Restricted investments
|
|
1,401
|
|
|
1,401
|
Short-term investments
|
|
16,993
|
|
|
16,978
|
Accounts receivable, net
|
|
4,219
|
|
|
4,030
|
Inventories
|
|
3,327
|
|
|
2,893
|
Deferred cost of goods sold
|
|
1,086
|
|
|
1,122
|
Other current assets
|
|
1,071
|
|
|
1,109
|
Total current assets
|
|
33,385
|
|
|
35,224
|
Property and equipment, net
|
|
535
|
|
|
595
|
Other long-term assets
|
|
2,181
|
|
|
2,227
|
|
|
$
|
36,101
|
|
|
$
|
38,046
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
2,403
|
|
|
$
|
2,267
|
Accrued liabilities
|
|
1,475
|
|
|
2,885
|
Deferred revenues
|
|
3,270
|
|
|
3,359
|
Total current liabilities
|
|
7,148
|
|
|
8,511
|
Long-term liabilities
|
|
713
|
|
|
614
|
Total stockholders' equity
|
|
28,240
|
|
|
28,921
|
|
|
$
|
36,101
|
|
|
$
|
38,046
|
|
|
|
|
|
|
|
|
ECHELON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
Revenues
|
|
$
|
8,647
|
|
|
$
|
9,868
|
|
Cost of revenues (1)
|
|
3,837
|
|
|
4,244
|
|
Gross profit
|
|
4,810
|
|
|
5,624
|
|
Operating expenses:
|
|
|
|
|
Product development (1)
|
|
2,240
|
|
|
2,612
|
|
Sales and marketing (1)
|
|
1,313
|
|
|
2,188
|
|
General and administrative (1)
|
|
1,999
|
|
|
2,821
|
|
Total operating expenses
|
|
5,552
|
|
|
7,621
|
|
Loss from operations
|
|
(742
|
)
|
|
(1,997
|
)
|
Interest and other income (expense), net
|
|
(205
|
)
|
|
838
|
|
Interest expense on lease financing obligations
|
|
-
|
|
|
(252
|
)
|
Loss before provision for income taxes
|
|
(947
|
)
|
|
(1,411
|
)
|
Income tax (benefit)/ expense
|
|
6
|
|
|
13
|
|
Net loss
|
|
$
|
(953
|
)
|
|
$
|
(1,424
|
)
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.22
|
)
|
|
$
|
(0.32
|
)
|
|
|
|
|
|
Shares used in computing net loss per share:
|
|
|
|
|
Basic
|
|
4,417
|
|
|
4,395
|
|
Diluted
|
|
4,417
|
|
|
4,395
|
|
|
|
|
|
|
(1) Amounts include stock-based compensation costs as follows:
|
|
|
|
|
Cost of revenues
|
|
$
|
42
|
|
|
$
|
(41
|
)
|
Product development
|
|
46
|
|
|
99
|
|
Sales and marketing
|
|
(109
|
)
|
|
(83
|
)
|
General and administrative
|
|
98
|
|
|
182
|
|
Total stock-based compensation expenses
|
|
$
|
77
|
|
|
$
|
157
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
March 31,
|
|
|
2016
|
|
2015
|
GAAP net loss
|
|
$
|
(953
|
)
|
|
$
|
(1,424
|
)
|
|
|
|
|
|
Stock-based compensation
|
|
77
|
|
|
157
|
|
Adjustment to contingent consideration
|
|
(318
|
)
|
|
-
|
|
Total non-GAAP adjustments to earnings from operations
|
|
(241
|
)
|
|
157
|
|
Income tax effect of reconciling items
|
|
-
|
|
|
-
|
|
Non-GAAP net loss
|
|
$
|
(1,194
|
)
|
|
$
|
(1,267
|
)
|
Non-GAAP net loss per share:
|
|
|
|
|
Diluted
|
|
$
|
(0.27
|
)
|
|
$
|
(0.29
|
)
|
Shares used in computing net loss per share:
|
|
|
|
|
Diluted
|
|
4,417
|
|
|
4,395
|
|
|
|
|
|
|
|
|
ECHELON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
Cash flows provided by (used in) operating activities:
|
|
|
|
|
Net loss
|
|
$
|
(953
|
)
|
|
$
|
(1,424
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
144
|
|
|
601
|
|
Increase in allowance for doubtful accounts
|
|
-
|
|
|
37
|
|
Increase in accrued investment income
|
|
(11
|
)
|
|
(8
|
)
|
Stock-based compensation
|
|
77
|
|
|
157
|
|
Adjustment to contingent consideration
|
|
(318
|
)
|
|
(101
|
)
|
Change in operating assets and liabilities:
|
|
|
|
|
Accounts receivable
|
|
(189
|
)
|
|
(136
|
)
|
Inventories
|
|
(433
|
)
|
|
87
|
|
Deferred cost of goods sold
|
|
40
|
|
|
(22
|
)
|
Other current assets
|
|
41
|
|
|
(231
|
)
|
Accounts payable
|
|
113
|
|
|
(1,459
|
)
|
Accrued liabilities
|
|
(904
|
)
|
|
14
|
|
Deferred revenues
|
|
(131
|
)
|
|
141
|
|
Deferred rent
|
|
109
|
|
|
(9
|
)
|
Net cash used in operating activities
|
|
(2,415
|
)
|
|
(2,353
|
)
|
|
|
|
|
|
Cash flows provided by (used in) investing activities:
|
|
|
|
|
Purchases of available-for-sale short-term investments
|
|
(3,992
|
)
|
|
(3,991
|
)
|
Proceeds from maturities and sales of available-for-sale short-term
investments
|
|
4,000
|
|
|
4,000
|
|
Change in other long-term assets
|
|
-
|
|
|
16
|
|
Capital expenditures
|
|
(5
|
)
|
|
(113
|
)
|
Net cash provided by (used in) investing activities
|
|
3
|
|
|
(88
|
)
|
|
|
|
|
|
Cash flows provided by (used in) financing activities:
|
|
|
|
|
Principal payments of lease financing obligations
|
|
-
|
|
|
(587
|
)
|
Repurchase of common stock from employees for payment of taxes on
vesting of restricted stock units and upon exercise of stock options
|
|
(1
|
)
|
|
(104
|
)
|
Net cash used in financing activities
|
|
(1
|
)
|
|
(691
|
)
|
|
|
|
|
|
Effect of exchange rates on cash:
|
|
10
|
|
|
(851
|
)
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
(2,403
|
)
|
|
(3,983
|
)
|
Cash and cash equivalents:
|
|
|
|
|
Beginning of period
|
|
7,691
|
|
|
13,340
|
|
End of period
|
|
$
|
5,288
|
|
|
$
|
9,357
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160505006416/en/
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