[November 05, 2015]

Echelon Reports Third Quarter 2015 Results

Echelon Corporation (NASDAQ: ELON) today announced financial results for the third quarter ended September 30, 2015.

• Q3 Revenues: $10.0 million
• Q3 GAAP Net Loss: $1.0 million; GAAP Net Loss per Share: $0.02
• Q3 Non-GAAP Net Loss: $891,000; Non-GAAP Net Loss per Share: $0.02

Revenues were $10.0 million in the third quarter, up from $9.4 million in the previous quarter, and up from $9.2 million a year ago.

GAAP gross margin in the third quarter was 56.2% compared with 54.5% in the third quarter of 2014 due to higher revenues and ongoing systematic cost reductions. Operating expenses declined to $6.8 million from $12.6 million in the same period last year. Operating expenses for the third quarter of 2014 included a one-time $4.4 million write down of property and equipment in the same period last year as well as $227,000 of restructuring costs. GAAP operating expenses this quarter decreased by $3.2 million from the previous quarter, which included a one-time charge of $3.3 million for lease terminations. Non-GAAP operating expenses declined to $6.7 million in the third quarter from $7.6 million in the same period last year.

GAAP net loss for the third quarter was $1.0 million, or $0.02 per share, compared with a net loss of $9.2 million, or $0.21 per share including discontinued operations in the same period last year, and down from a net loss of $5.2 million, or $0.12 in the previous quarter. Non-GAAP net loss for the third quarter was $891,000, or $0.02 per share, compared with a non-GAAP net loss of $2.1 million, or $0.05 per share for the third quarter of 2014, and $2.0 million, or $0.05 in the previous quarter.

"Once again this quarter we made progress towards our long-term goal of making LED lighting strategic for our customers through IIoT technologies," said Ron Sege, Chairman and CEO of Echelon. "Our revenues grew year over year and we continued to broaden and deepen our portfolio of intelligent lighting control systems. With a further improved expense structure, an increasingly differentiated product offering and a growing sales channel, we remain focused on achieving long-term profitable growth."

Echelon's guidance for the fourth quarter of 2015 are as follows:

• Total revenues are expected to be $9.8 million to $10.2 million.
• 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 $6.8 million to $7.1 million.
• Non-GAAP loss per share is expected to be between $0.02 to $0.04, based on 44.2 million fully diluted weighted average shares outstanding.
• GAAP loss per share is expected to be between $0.03 to $0.05.

For those interested in further discussion regarding this release, Echelon's management will participate in a conference call today at 4:30 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 40850507. 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 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) is a leading independent control networking company for the Industrial Internet of Things. Echelon delivers multi-protocol and multi-media elements necessary to design, install, monitor and control industrial-strength 'communities of devices' within the lighting, building automation and Internet of Things markets worldwide. The Company develops and sells complete systems and subsystems for target applications, plus system-on-chips (SoCs), embedded software, and commissioning and management tools for OEMs. With more than 100 million Echelon-powered devices installed worldwide, the Company 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://www.echelon.com and at the Company's blog at http://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 fourth quarter of 2015. 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 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; risks resulting from our declining stock price and related potential de-listing from NASDAQ; 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.

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