-- Revenue from lighting increases for third
consecutive quarter --
Echelon Corporation (NASDAQ:ELON) today announced financial
results for the third quarter ended September 30, 2016.
“Revenue from our connected lighting business increased for the
third consecutive quarter while we maintained our operating
expenses at historical lows,” said Ron Sege, Chairman and CEO of
Echelon. “This quarter we introduced exciting new products that
offer a wider range of sustainability, security and livability
applications for making cities and enterprises smart. According to
an independent study released in October by the Northeast Group,
LLC, Echelon now sits among the top three market leaders in terms
of deployed smart streetlight systems worldwide.”
Financial Highlights
- Revenues: $8.2 million
- Operating expenses $5.7
million
- GAAP Net Loss: $1.3 million;
GAAP Net Loss per Share: $0.29
- Non-GAAP Net Loss: $1.1 million;
Non-GAAP Net Loss per Share: $0.25
- Cash & investments of $23.7
million
Revenues were $8.2 million in the third quarter, down from $10.0
million in the same period of 2015 and up from $8.1 million in the
second quarter of 2016. The increase in revenues from the second
quarter of 2016 is attributable to our ongoing focus on growing our
lighting business. As expected, our embedded systems business is
continuing its long-term decline, exacerbated year-on-year by the
reduction in shipments to Enel.
GAAP gross margin in the third quarter was 54.7% compared with
56.2% in the third quarter of 2015 and 58.4% in the second quarter
of 2016. The fluctuations in gross margin were predominantly due to
product mix as well as overall revenue levels and certain one-time
costs incurred in the third quarter of 2016.
Total operating expenses for the quarter were $5.7 million, down
from $6.8 million in the third quarter last year and flat when
compared to the prior quarter. The annual decrease was primarily
due to our ongoing efforts to manage costs while investing in our
strategy to grow our lighting business.
GAAP net loss for the third quarter was $1.3 million, or $0.29
per share, compared with a net loss of $1.0 million, or $0.24 per
share in the same period last year, and a net loss of $571,000, or
$0.13 per share, in the previous quarter. The increase in our
losses were due primarily to foreign currency swings
quarter-to-quarter.
Non-GAAP net loss for the third quarter was $1.1 million, or
$0.25 per share, compared with non-GAAP net loss of $891,000, or
$0.20 per share for the third quarter of 2015, and $586,000, or
$0.13 per share, in the previous quarter.
Included in both our GAAP and non-GAAP results for the third
quarter of 2016 were foreign currency translation losses of
$74,000. This compares to foreign currency translation gains of
$170,000 in the third quarter of 2015 and $486,000 in the second
quarter of 2016. These foreign currency translation gains and
losses are attributable to our foreign currency denominated
short-term intercompany balances.
Customer Highlights
The following customer activity reflects the interest we are
seeing in the marketplace for our connected outdoor lighting and
embedded solutions. In addition to energy savings, customers are
beginning to express interest in the safety- and comfort-enhancing
aspects of our platform.
- In an interesting safety application, a
large Washington State municipality is using a Lumewave by
Echelon® connected lighting control system to centrally program
school zone safety flashers based on the changing requirements of
school schedules. This system replaces expensive and near-obsolete
2G cellular modem technology with a long-term solution that has no
recurring cost. With the Echelon Central Management System (CMS)
and gateways now installed to support this application, the city
has laid the foundation for its planned multi-year roll out of
35,000 LED street lights. Echelon’s LumInsight® 2 CMS will provide
calendar and permission-based scheduling not currently available
from its existing school zone flasher vendors.
- The installation throughout the city
of Cambridge, MA continued its expansion and is close to being
fully online with its 7,000+ LED fixtures using the Lumewave by
Echelon adaptive control system. We believe Cambridge is the first
city in the U.S. to have “border-to-border” intelligent lighting
installed and operating. The city is considering expanding its
system to include both the city parks with dimming features as well
as crosswalk flashers to allow for customized schedules to meet
citizen and safety needs.
- Phase 2 of the Bellingham, WA
city-wide deployment of 3,615 streetlights with Echelon’s wireless
technology on roadway lights and ‘invisible’ power line
communication on highly-visible decorative luminaries was ordered
and installed in the third quarter. The Bellingham LED conversion
program is projected to cut energy consumption from streetlights by
half, reducing approximately 2 million pounds of CO2 output
annually. This directly supports the city's Climate Action Plan
goal of reducing greenhouse gas emissions locally by 70% by the
year 2020.
- The city of Bloemfontein, South
Africa, has embarked on a smart city initiative to install
18,000 luminaries to upgrade its streetlight infrastructure over
the next three years. In the first phase completed earlier this
year, 3,000 luminaries were installed by Echelon’s partner, MAT
Co., Ltd. using outdoor lighting controllers based on Echelon power
line technologies along with Echelon’s SmartServer® gateways. This
initial project expanded to include another 1,000 lights and
SmartServers, which were installed during the third quarter.
- At a Pacific Northwest
military base, Echelon’s partner received formal notice from
Bonneville Power Administration to proceed with the contract to
replace approximately 2,400 outdoor lighting fixtures with LEDs,
including Lumewave by Echelon wireless controllers and
approximately 400 Lumewave by Echelon motion sensors. The
combination of the controllers with the motion sensors allows the
military base to achieve over 80% savings while increasing security
and reducing maintenance.
- The Port of Seattle, which
manages the physical port, marinas and Sea-Tac airport, among other
facilities, completed its lighting installation at the Shilshole
Bay Marina during the quarter. The port also placed a follow-on
order for Lumewave by Echelon’s lighting controllers and microwave
occupancy sensors which is currently being installed at the
Fisherman’s Terminal property. The port also plans to expand the
system to include its Salmon Bay Terminal and Jack Block Park
properties next year.
- Across a dozen U.S. auto
dealerships, Echelon’s outdoor lighting controls were rolled
out in new and expanded deployments in the third quarter.
Applications include energy savings, theft prevention and
merchandise display enhancement. Echelon continues to focus on
national, independent and large automotive dealerships.
- Several municipalities in the U.S.,
Canada, Vietnam, Mexico, Uruguay and Argentina, among others,
have selected Echelon technology for pilot projects with
applications ranging from fixture maintenance to highway direction
of travel. While these pilots are not material in terms of
short-term revenues, we believe they improve the likelihood of
future business.
- In the embedded business,
earlier this year we partnered with a gas pump manufacturer and won
a new design to upgrade credit card readers in gas station fuel
dispensers. This quarter we doubled our business with this customer
due to the implementation of the EMV Liability Shift regulation,
which requires gas station merchants to install chip readers in
their gas dispensers by October 2017.
- Also in the embedded business, we
received an order for multiple IzoT® Net and LNS DDE servers from
an existing customer. This was the result of our ability to support
the latest Microsoft operating systems in large corporate office
buildings.
- A wireless asset management systems
company for industrial trucks, rental vehicles, and transportation
assets has developed a new design for a Radio-Frequency
Identification (RFID) tracking device using Echelon’s Neuron® 5000
chip. Echelon replaced the incumbent due to our next generation
microcontroller’s superior performance, lower cost and small form
factor.
Product Highlights
- The new CLP 4000 sensor-compatible
lighting controller – enables smarter, safer cities
- This new product extends Echelon’s
multi-application platform enabling high-value safety and comfort
features while providing energy and maintenance cost savings.
Combining LEDs with advanced controllers enables outdoor lighting
to play a strategic role in making cities safer, more comfortable
and more efficient. This next-generation controller includes faster
and smarter communication technology, multiple lighting control
options and native support for advanced sensors. The CLP 4000 is
currently being sampled for multiple smart city projects. With this
new product, for example, city officials can integrate dimming and
white-tuning capabilities with emergency call box systems to assist
first responders by improving visibility, quickly and
dynamically.
- The New U60 Network Interface Module
– easy network connectivity for any controller or gateway
- This new member of the U60 module
family of products makes it easier for controller and gateway
manufacturers to add LON® network connectivity to their products
without investing valuable R&D resources to do a chip-level
design. The U60 module has already been designed into multiple OEM
products.
- SmartServer 2.2 – first-of-its-kind
gateway for buildings, lighting, and other Internet of Things (IoT)
applications
- This new SmartServer is a platform for
integrating a wide range of applications with power line meshing
that enables outdoor power line-based lighting controls to be
installed in large geographic areas with a single controller. It is
an industry-leading converged controller and gateway for building
automation, lighting controls, and IoT applications and supports
multiple standard protocols including LON, BACnet, and Modbus. The
SmartServer offers customers a broader selection of devices that
can be easily integrated into and managed by one head-end interface
thereby reducing the installed cost of outdoor lighting
systems.
- Multi-protocol, multi-technology
gateways
- The BACnet Gateway Interface for
Lumewave by Echelon wireless lighting control systems is now being
deployed in multiple customer trials from corporate to higher
education campuses. This two-way BACnet interface allows existing
Building Management and Automation systems to communicate with and
coordinate control of the lighting system for facility-wide
integrated energy management and operations. The BACnet
Gateway Interface seamlessly integrates to the LumInsight Desktop
CMS and is a key part of Echelon's efforts to enable the
convergence of building and lighting.
Proof of Concepts
Echelon is currently working with industry partners and
customers on some interesting PoCs that take advantage of the high
degree of controllability of LED lighting. These include:
- Intelligent and on-demand white tuning
that varies the color temperature of outdoor lights from a warm
yellow 2,700 Kelvin to a cool blue 5,500 Kelvin
- Traffic-adaptive roadway lighting that
adjusts light levels on the road according to actual or predicted
traffic
- Weather-driven lighting schedules that
can vary light levels according to real-time weather
predictions
We hope to discuss more details of these concepts in coming
quarters.
Sales & Marketing
Highlights
- As noted by the increase in lighting
revenue for the third consecutive quarter, our upgraded and
experienced lighting sales team is making solid progress. Requests
for proposals totaling over 360,000 street lights were received in
the third quarter alone. Discussions are underway with
approximately 20 U.S. and international manufacturers of LED OEM
fixtures to establish potential partnerships with Echelon.
Additionally, Echelon is expanding its presence with Energy Savings
Companies (ESCOs).
- We recently added Glenn International
as our new sales representative agency for Central America and the
Caribbean. Glenn is the region’s leading supplier of electrical,
lighting and telecom equipment. We also welcomed MRD Soluciones de
Iluminacion to represent Echelon in Argentina and Uruguay. With
more than 10 years of experience representing LED fixtures and
indoor controls, they also bring over 25 years of experience in
lighting in the South America market.
- In the embedded IIoT business, we
recently announced that ABBA Logic, a supplier to security
integrators, has introduced a revolutionary upgrade to its line of
access control products based on Echelon’s 6050 processor. ABBA
Logic can now provide security integrators with cost-effective,
expandable IP network-based solutions that can be used with a
variety of software front ends without a large service commitment.
Applications include correctional facilities, airports and schools
that require high levels of secure access.
Industry Highlights
- In a recent global study of the LED and
smart networked streetlighting market by the Northeast Group, LLC,
Echelon ranked among the top three leaders of smart connectivity
deployments, ahead of such household names as GE and Philips. The
report also noted that Echelon captured the number one position in
Asia-Pacific. The study projects that LED and smart streetlights
will reach 89% and 42% of the total streetlight market,
respectively, by 2026. To capitalize on this trend, the Lumewave by
Echelon platform is architected to allow cities to integrate a
growing range of IoT applications. This should enable municipal
systems such as crosswalk flashers, emergency call boxes, traffic
analysis and human-centric street lighting to work together
seamlessly while improving public safety and creating a more
comfortable environment.
Outlook
Echelon’s guidance for the fourth quarter of 2016 is as
follows:
- Total revenues are expected to be $7.8
million to $8.2 million
- Gross margin is expected to be in a
range of 55% to 57%
- Operating expenses are expected to be
in a range of $5.8 million to $6.0 million
- GAAP loss per share is expected to be
between $0.27 and $0.39, based on 4.4 million fully diluted
weighted average shares outstanding
- Excluding expected non-cash equity
compensation charges of $0.09 per share, non-GAAP loss per share is
expected to be between $0.18 and $0.30
About Echelon Corporation
For 25 years Echelon (NASDAQ: ELON) has pioneered the
development of open-standard networking platforms for connecting,
monitoring and controlling devices in commercial and industrial
applications. With more than 110 million devices installed
worldwide, Echelon’s proven, scalable solutions host a range of
applications enabling customers to reduce energy and operational
costs, improve safety and comfort, and create efficiencies through
optimizing physical systems. Echelon is focusing today on two IoT
(Internet of Things) market areas: Creating smart cities and smart
enterprises through connected outdoor lighting systems, and
enabling device makers to bring connected products to market faster
via a range of IoT-optimized embedded systems. More information
about Echelon can be found at www.echelon.com.
Echelon, Echelon logo, LumInsight, Lumewave, Lumewave by
Echelon, SmartServer, Neuron and LON are trademarks of Echelon
Corporation that may be registered in the United States and other
countries. Other product or service names mentioned herein are the
trademarks of their respective owners.
Use of Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are
prepared and presented in accordance with U.S. generally accepted
accounting principles, or GAAP, we have provided in this press
release certain measures that have not been prepared in accordance
with GAAP. These non-GAAP financial measures consist of (i)
non-GAAP net income, which is defined as net income less
stock-based compensation expense, adjustments to contingent
consideration, lease termination charges, and income tax effect of
reconciling items, and (ii) non-GAAP net income per share, which is
defined as non-GAAP net income divided by the fully diluted
weighted-average number of shares outstanding.
We use these non-GAAP financial measures internally to analyze
our financial results and trends, prepare and approve our annual
budget, and develop short- and long-term operating plans. We
believe these non-GAAP financial measures are useful to investors
as an additional tool to evaluate ongoing operating results and
trends. However, it is important to note that these non-GAAP
financial measures are not based on any standardized methodology
and are not necessarily comparable to similar measures used by
other companies. In addition, stock-based compensation expense and
other excluded items may have a material impact on our reported
financial results. As a result, these non-GAAP financial measures
should not be considered in isolation or as a substitute for
comparable financial information prepared in accordance with GAAP
and should be read only in conjunction with our consolidated
financial statements prepared in accordance with GAAP. A
reconciliation of our non-GAAP financial measures to their most
directly comparable GAAP financial measures has been provided in
the financial statement tables included in this press release, and
investors are encouraged to review the reconciliation.
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. Forward
looking statements include, without limitation, statements
regarding our future financial and operating performance, including
our guidance for the fourth quarter of 2016, opportunities for
future growth, the size of prospective markets, and our business
strategy, plans and objectives. Actual results could differ
materially from those projected in our forward-looking statements
as a result of a number of risks and uncertainties, including, but
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; changes in our
headcount growth or the fair market value of our common stock,
either of which could impact our ability to estimate our future
stock-based compensation expense; circumstances that may delay the
time frame for achieving our business outlook; our ability to
attract and retain talent; the risk of competition that may arise
as the market develops or through consolidations in the industry;
the timely development of our products and services and the ability
of those products and services to perform as designed and meet
customer expectations; the deployment and success of the pilot
programs and proof of concepts, including the extent to which they
result in follow-on orders; the risk that we do not meet expected
or required shipment, delivery or acceptance schedules for our
products, which could cause us to incur penalties or additional
expenses or delay revenue recognition as a result; and other risks
identified in the reports we file with the Securities and Exchange
Commission, including our most recent Annual Report on Form 10-K
and Quarterly Report on Form 10-Q.
The financial information presented in this release reflects
estimates based on information that is available to us at this
time. We undertake 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 our
Quarterly Report on Form 10-Q when filed with the Securities and
Exchange Commission.
ECHELON CORPORATIONCONDENSED CONSOLIDATED
BALANCE SHEETS(In thousands)(Unaudited)
September 30, 2016 December 31,
2015 ASSETS Current Assets: Cash and cash equivalents $
10,487 $ 7,691 Restricted investments 1,250 1,401 Short-term
investments 11,990 16,978 Accounts receivable, net 3,709 4,030
Inventories 2,609 2,893 Deferred cost of revenues 1,142 1,122 Other
current assets 674 1,109 Total current assets 31,861 35,224
Property and equipment, net 475 595 Other long-term assets 2,126
2,227 $ 34,462 $ 38,046 LIABILITIES AND STOCKHOLDERS’
EQUITY Current Liabilities: Accounts payable $ 2,137 $ 2,267
Accrued liabilities 1,827 2,885 Deferred revenues 3,733
3,359 Total current liabilities 7,697 8,511 Long-term
liabilities 730 614 Total stockholders’ equity 26,035 28,921
$ 34,462 $ 38,046
ECHELON CORPORATIONCONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(In thousands, except per share
amounts)(Unaudited)
Three Months Ended Nine Months Ended
September 30,
September 30, 2016 2015 2016
2015 Revenues $ 8,179 $ 9,983 $ 24,887 $
29,214 Cost of revenues (1) 3,701 4,370 10,892
12,435 Gross profit 4,478 5,613 13,995 16,779 Operating
expenses: Product development (1) 2,034 2,454 6,160 7,406 Sales and
marketing (1) 1,574 1,848 4,512 6,230 General and administrative
(1) 2,092 2,547 6,310 7,555 Lease termination charges — —
— 3,337 Total operating expenses 5,700
6,849 16,982 24,528 Loss from operations
(1,222 ) (1,236 ) (2,987 ) (7,749 ) Interest and other income
(expense), net (57 ) 184 241 564 Interest expense on lease
financing obligations — (5 ) — (385 ) Loss before
provision for income taxes (1,279 ) (1,057 ) (2,746 ) (7,570 )
Income tax expense 23 (10 ) 80 64 Net loss $
(1,302 ) $ (1,047 ) $ (2,826 ) (7,634 ) Basic and diluted
net loss per share $ (0.29 ) $ (0.24 ) $ (0.64 ) $ (1.73 )
Shares used in computing net loss per share: Basic and Diluted
4,431 4,413 4,423 4,407 (1)
Amounts include stock-based compensation costs as follows: Cost of
revenues $ 7 $ (34 ) $ (39 ) $ (102 ) Product development 74 94 62
229 Sales and marketing 53 (19 ) (68 ) (109 ) General and
administrative 54 115 295 91 Total
stock-based compensation expenses $ 188 $ 156 $ 250
$ 109
ECHELON CORPORATIONRECONCILIATION OF
NON-GAAP TO GAAP RESULTSExcluding 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 Nine Months Ended
September 30, September 30, 2016
2015 2016 2015 GAAP net loss $ (1,302 )
$ (1,047 ) $ (2,826 ) $ (7,634 ) Stock-based
compensation 188 156 250 109 Adjustment to contingent consideration
— — (318 ) — Lease termination charges — — —
3,337 Total non-GAAP adjustments to earnings from operations
188 156 (68 ) 3,446 Income tax effect of reconciling items —
— — — Non-GAAP net loss $ (1,114 ) $ (891 ) $
(2,894 ) $ (4,188 ) Non-GAAP net loss per share: Diluted $ (0.25 )
$ (0.20 ) $ (0.65 ) $ (0.95 ) Shares used in computing net loss per
share: Diluted 4,431 4,413 4,423 4,407
ECHELON CORPORATIONCONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)
Nine Months Ended September 30, 2016
2015 Cash flows provided by (used in)
operating activities: Net loss $ (2,826 ) $ (7,634 ) Adjustments to
reconcile net loss to net cash used in operating activities:
Depreciation and amortization 377 1,413 Reduction in allowance for
doubtful accounts (1 ) (17 ) Lease termination charges — 3,337 Loss
on disposal of and write down of property, equipment, and other —
53 Increase in accrued investment income (30 ) (23 ) Stock-based
compensation 250 109 Adjustment to contingent consideration (318 )
(98 ) Change in operating assets and liabilities: Accounts
receivable 322 (19 ) Inventories 285 630 Deferred cost of revenues
(35 ) 190 Other current assets 435 (418 ) Accounts payable (130 )
(1,509 ) Accrued liabilities (965 ) (55 ) Deferred revenues 364 6
Deferred rent 93 (154 ) Net cash used in operating
activities (2,179 ) (4,189 ) Cash flows provided by (used
in) investing activities: Purchases of available-for-sale
short-term investments (17,972 ) (7,984 ) Proceeds from maturities
and sales of available-for-sale short-term investments 23,155
20,852 Change in other long-term assets (63 ) (793 ) Capital
expenditures (84 ) (83 ) Net cash provided by investing activities
5,036 11,992 Cash flows provided by (used in)
financing activities: Principal payments of lease financing
obligations — (11,147 ) Repurchase of common stock from employees
for payment of taxes on vesting of restricted stock units and upon
exercise of stock options (42 ) (152 ) Net cash used in financing
activities (42 ) (11,299 ) Effect of exchange rates on cash:
(19 ) (639 ) Net change in cash and cash equivalents 2,796
(4,135 ) Cash and cash equivalents: Beginning of period 7,691
13,340 End of period $ 10,487 $ 9,205
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161108006162/en/
Investor Relations Contact:StreetSmart Investor
RelationsAnnie Leschin, 415-775-1788annie@streetsmartir.com
Echelon Corp. (delisted) (NASDAQ:ELON)
Historical Stock Chart
From Mar 2024 to Apr 2024
Echelon Corp. (delisted) (NASDAQ:ELON)
Historical Stock Chart
From Apr 2023 to Apr 2024