SANTA CLARA, Calif.,
Feb. 8, 2018 /PRNewswire/
-- Echelon Corporation (NASDAQ: ELON) today announced
financial results for the fourth quarter ended December 31, 2017.
"We ended 2017 with growth across both our distributed
intelligence LON-enabled embedded IoT and connected lighting
solutions product lines," said Ron
Sege, Chairman and CEO. "Echelon is being acknowledged
across the lighting industry as one of the leading suppliers of
connected outdoor lighting solutions worldwide, and our innovative
portfolio of products continues to win awards and praise from
customers. Over the last year, we have also seen an increasing
number of existing LON-enabled embedded customers pursue an
'embrace, extend and enhance' strategy, as they look to embrace the
value of their assets by leveraging existing connected devices,
extend them with emerging technologies, and enhance the data
collected with cloud-based analytics. With a majority of our
largest embedded LON customers showing year-over-year growth, and
the value of accessible, operational data increasing, we believe
this trend will continue."
Financial Highlights
- Revenues: $8.0
million.
- GAAP Operating expenses $5.4
million; Non-GAAP Operating expenses $5.1 million.
- GAAP Net Loss: $1.2
million; GAAP Net Loss per Share: $0.27.
- Non-GAAP Net Loss: $0.9
million; Non-GAAP Net Loss per Share: $0.20.
- Cash & investments: $20.5
million.
Revenues were $8.0 million in the
fourth quarter, an increase from $7.8
million, or 3%, in the previous quarter and from
$7.5 million, or 7%, in the previous
year. The Company's lighting solutions business grew year-over-year
and sequentially. The LON-based embedded platform business grew
year-over-year but saw a modest decline sequentially as customers
scheduled orders to manage year-end inventory balances.
GAAP gross margin in the fourth quarter was 52.0% compared with
57.3% in the prior quarter and 55.0% a year ago. The decreases were
the result of a combination of product mix, higher costs associated
with the initial ramp of new lighting products, and one-time costs
related to freight and inventory management.
GAAP operating expenses for the quarter were $5.4 million, up from $5.2
million in the previous quarter and down from $5.8 million in the same period last year.
Non-GAAP operating expenses for the quarter were $5.1 million, up slightly from $5.0 million last quarter, and flat with a year
ago. The sequential increase was primarily driven by increased
R&D spending associated with new product introductions to meet
increased customer demand.
GAAP net loss for the quarter was $1.2
million, or $0.27 per share,
compared to last quarter's net loss of $0.9
million, or $0.19 per share,
and a net loss of $1.2 million, or
$0.28 per share, in the same period
last year. Non-GAAP net loss for the fourth quarter was
$0.9 million, or $0.20 per share, compared with non-GAAP net loss
of $0.6 million, or $0.14 per share, in the previous quarter and
$0.5 million, or $0.11 per share a year ago. The sequential
increase was primarily the result of the lower gross margin in the
fourth quarter. The year-over-year increase in non-GAAP net loss
was primarily attributable to foreign currency translation gains
and losses between the two quarters.
Included in both GAAP and non-GAAP results for the fourth
quarter of 2017 were foreign currency translation losses of
$107,000, which were attributable to
fluctuations in foreign currency denominated short-term
intercompany balances. This compares to foreign currency
translation losses of $196,000 in the
third quarter of 2017 and gains of $549,000 in the fourth quarter of 2016.
The Company ended the year with $20.5
million in cash and investments.
Connected Lighting Solutions Highlights
Connected lighting solutions revenue increased in the fourth
quarter to record levels, driven by a confluence of market trends
and Company activities. Echelon's sales efforts over the last
several quarters showed accelerated results this quarter with
multiple project installations simultaneously underway. While the
Company sees strengthening in the market and the emergence of a
strong product cycle, sales are expected to remain
unpredictable and implementations to take three to six months to
fully install and commission, resulting in lumpy revenue in this
product line.
Lighting project highlights from the fourth quarter include the
following:
- A major city in New England selected Echelon's
IoT-enabled, connected streetlight system to intelligently control
5,150 LED streetlights in the downtown district. Together with the
potential for sizable energy and maintenance savings, Echelon was
chosen for its proven ability to control and manage the city's
lighting infrastructure through a combination of wireless
connections for conventional light fixtures, and power line
communication for decorative lighting fixtures. This system is
currently being installed.
- The City of Rancho
Cucamonga in southern California selected Echelon as part of their
LED streetlight retrofit project. Not only will the city have
fine-grained control over its streetlights and automated monitoring
and reporting for the first time, they also estimate that the
retrofit will save over $1.0 million
a year from lower energy use as well as maintenance savings. This
project is also currently being installed.
- A major city in Silicon Valley selected Echelon's
lighting controls for 5,749 LED street lights. Echelon was chosen
for its ability to control and manage the city's lighting
infrastructure and being "Smart City" enabled to support future IoT
applications. This project is currently being installed.
This quarter Echelon also began to enhance its professional
services capabilities for its lighting solutions portfolio. The
Company's experience in connected lighting systems, coupled with
its device networking expertise, is resulting in new opportunities
to play an expanded role in lighting projects. By building out a
professional service offering, Echelon can assist customers and
partners with the installation and programming of their networks.
This combination not only brings Echelon closer to its end
customers, but may also add a new revenue stream.
LonWorks®-enabled Embedded IoT Platform Highlights
As customers increasingly realize the power of Echelon's
distributed intelligence LonWorks-based solutions, they are opting
to 'embrace, extend, and enhance' their existing
installations. For example, Echelon is currently engaged in a
professional services project to extend an existing LonWorks
network in a large transportation system to access data for use in
monitoring and improving train safety. The LonWorks system will be
extended to provide data in conjunction with a video surveillance
system to cloud-based safety systems. While the design is not
finalized, the Company expects the solution will include Echelon's
powerful Edge Servers to aggregate data and send it to the cloud
for valuable analysis.
We believe that these trends have contributed to growth in 7 out
of 10 of the Company's largest embedded LonWorks customers in 2017,
with the top 3 customers growing an average 31%. In addition,
design wins for Echelon's 5000 and 6050 series System on Chips
(SoCs) also contributed to the growth. Overall, in 2017
Echelon had more than 1,000 active customers.
Advanced Technology Highlights
A broad upgrade of Echelon's outdoor lighting solutions product
line has set the stage for accelerated adoption. Sales of these
new, open and extendable solutions saw a noticeable increase in
orders shipped in the fourth quarter. This redesign paves the way
for city-wide lighting networks across multiple, mid-band sensor
and data applications, positioning Echelon to play an increasingly
large role in the trend towards smart cities. Key products that
were released in the fourth quarter include:
- The Echelon LumInsight® 2.1 Cloud CMS is an upgrade to
Echelon's native cloud-hosted CMS that includes asset and energy
management applications and is easily extensible to smart city
applications via its "widget" architecture. The user-friendly CMS
provides a configurable dashboard that can be customized for the
needs of not only maintenance and sustainability, but the city
manager as well. An advanced mapping user interface provides rich
insights into site status and network health. The CMS features
actionable alarms and reports and reports, and improved tools and
tutorials for making deployment easy for Echelon's partners.
LumInsight 2 Cloud is accessible from any browser-based
device.
- The Echelon LumInsight IoT Gateway is a new distributed
edge server platform for managing and monitoring mission critical
segments for a city-wide network. Echelon's Edge Servers become
smarter and more capable with the LumInsight IoT Gateway and
provide greater intelligence at the edge of the network for more
reliable, uninterrupted operations that support adaptive
operations. The server has an open programable and extendible
interface that enables scaling of multiple sites and segments
across an entire city's geography and integrates with existing
systems including building and industrial automation systems. This
gateway securely provides LumInsight 2 Cloud Central Management
System (CMS) the data it needs to manage a multi-site network.
- The Echelon TOP900TLX-E controller is a new addition to
the TOP900 family and is a compact, plug and play lighting control
node targeted at municipal and outdoor enterprise markets in North
and Latin America. This new
product adds capability for automatic discovery and location
through an embedded GPS module, and is designed to provide accurate
revenue grade metering on each node for tracking usage and
validating energy savings. It also provides the ability to collect
valuable user-configurable operational data for diagnostics and
analysis at a granular level.
Sales & Marketing Highlights
Echelon was recently acknowledged as the supplier with the third
largest global installed base of smart streetlight controls as of
the end of 2017, as noted in Global LED and Smart Streetlighting:
Market Forecast (2017 – 2027) published by the NorthEast Group LLC
in November.
Echelon's InSight® Cognitive Vision System (CVS) was
named a Top 10 Product of the year and received a 2017 Edison
Report LightTrades Award. Echelon demonstrated InSight CVS earlier
in the year in both traffic counting and traffic adaptive lighting
applications.
Echelon's LumInsight 2 cloud platform was named an LEDS Magazine
Sapphire Award finalist. The Sapphire Awards recognize the top
advances and visionaries in the LED industry. This is the second
year in a row that Echelon has been recognized as a finalist.
Two publications recently highlighted Echelon products used in
the Internet of Things (IoT). American City & County Magazine
wrote about Echelon's smart lighting solutions being used by the
city of Goldendale, WA to upgrade
their streetlights to LEDs, while addressing the local
observatory's needs for dark skies. IoTNowTransport wrote a feature
article highlighting Echelon's role in Amtrak's high-speed Acela
train's critical monitoring system for compartment tilt, braking,
doors, etc based on Echelon's Embedded LonWorks platform.
During the quarter Echelon augmented its sales and field
engineering force with experts from the data networking and
wireless markets. We believe that the Company's unique blend of
data networking, operational technology and lighting expertise will
create competitive advantages in the years to come.
Outlook
Echelon's guidance for the first quarter of 2018 is as
follows:
- Total revenues are expected to be in a range of $7.7 million to $8.1
million. This estimate is based on the new revenue
recognition guidance, which became effective for Echelon on
January 1, 2018. Under the old
revenue recognition rules, the Company would have expected first
quarter 2018 revenues in a range of $7.8
million to $8.2 million.
- Gross margin is expected to be in a range of 53% to 54%.
- GAAP operating expenses are expected to be in a range of
$5.9 million to $6.1 million.
- Non-GAAP operating expenses are expected to be in a range of
$5.6 million to $5.8 million as we continue to incur near-term
costs associated with the roll-out of new products. The Company
expects these costs will return to more recent historical levels
later in 2018.
- GAAP loss per share is expected to be between $0.35 and $0.46,
based on 4.5 million weighted average shares outstanding.
- Excluding expected non-cash equity compensation charges of
$0.07 per share, non-GAAP loss per
share is expected to be between $0.28
and $0.39.
About Echelon Corporation
For 30 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 140 million connected devices
installed worldwide, Echelon's 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
campuses 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, InSight, LON, Lumewave, LumInsight, and
LonWorks are trademarks of Echelon Corporation that may be
registered in the United States
and other countries. All other trademarks are owned by 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, restructuring, goodwill impairment, 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 first quarter of 2018, 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; anticipated product
performance and value; 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
Reports 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
Annual Report on Form 10-K when filed with the Securities and
Exchange Commission.
Investor Relations Contact
Annie Leschin/Rhonda
Bennetto
StreetSmart Investor Relations
(415) 775-1788
annie@streetsmartir.com
rhonda@streetsmartir.com
ECHELON
CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
thousands)
(Unaudited)
|
|
|
|
December 31,
2017
|
|
December 31,
2016
|
ASSETS
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
7,261
|
|
|
$
|
9,803
|
|
Restricted
investments
|
|
1,250
|
|
|
1,250
|
|
Short-term
investments
|
|
11,967
|
|
|
11,983
|
|
Accounts receivable,
net
|
|
2,721
|
|
|
3,015
|
|
Inventories
|
|
3,251
|
|
|
2,570
|
|
Deferred cost of
revenues
|
|
1,767
|
|
|
1,104
|
|
Other current
assets
|
|
1,152
|
|
|
900
|
|
Total current
assets
|
|
29,369
|
|
|
30,625
|
|
Property and
equipment, net
|
|
458
|
|
|
445
|
|
Other long-term
assets
|
|
1,712
|
|
|
1,838
|
|
|
|
$
|
31,539
|
|
|
$
|
32,908
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
2,317
|
|
|
$
|
1,697
|
|
Accrued
liabilities
|
|
1,878
|
|
|
2,174
|
|
Deferred
revenues
|
|
4,805
|
|
|
3,671
|
|
Total current
liabilities
|
|
9,000
|
|
|
7,542
|
|
Long-term
liabilities
|
|
652
|
|
|
688
|
|
Total stockholders'
equity
|
|
21,887
|
|
|
24,678
|
|
|
|
$
|
31,539
|
|
|
$
|
32,908
|
|
ECHELON
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except
per share amounts)
(Unaudited)
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
8,030
|
|
|
$
|
7,498
|
|
|
$
|
31,667
|
|
|
$
|
32,385
|
|
Cost of revenues
(1)
|
3,858
|
|
|
3,375
|
|
|
14,016
|
|
|
14,302
|
|
Gross
profit
|
4,172
|
|
|
4,123
|
|
|
17,651
|
|
|
18,083
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Product
development (1)
|
2,551
|
|
|
2,119
|
|
|
9,313
|
|
|
8,260
|
|
Sales and
marketing (1)
|
1,368
|
|
|
1,638
|
|
|
5,532
|
|
|
6,189
|
|
General and
administrative (1)
|
1,450
|
|
|
1,782
|
|
|
6,959
|
|
|
8,077
|
|
Restructuring
charges
|
—
|
|
|
286
|
|
|
—
|
|
|
286
|
|
Total operating
expenses
|
5,369
|
|
|
5,825
|
|
|
21,804
|
|
|
22,812
|
|
Loss from
operations
|
(1,197)
|
|
|
(1,702)
|
|
|
(4,153)
|
|
|
(4,729)
|
|
Interest and other
income, net
|
(58)
|
|
|
567
|
|
|
(498)
|
|
|
808
|
|
Loss before provision
for income taxes
|
(1,255)
|
|
|
(1,135)
|
|
|
(4,651)
|
|
|
(3,921)
|
|
Income tax expense
(benefit)
|
(53)
|
|
|
102
|
|
|
(28)
|
|
|
182
|
|
Net loss
|
$
|
(1,202)
|
|
|
$
|
(1,237)
|
|
|
$
|
(4,623)
|
|
|
(4,103)
|
|
|
|
|
|
|
|
|
|
Basic and diluted net
loss per share
|
$
|
(0.27)
|
|
|
$
|
(0.28)
|
|
|
$
|
(1.04)
|
|
|
$
|
(0.93)
|
|
|
|
|
|
|
|
|
|
Shares used in
computing net loss per share:
|
|
|
|
|
|
|
|
Basic and
Diluted
|
4,520
|
|
|
4,432
|
|
|
4,465
|
|
|
4,425
|
|
|
|
|
|
|
|
|
|
(1) Amounts include stock-based
compensation costs as follows:
|
|
|
|
|
|
|
|
Cost of
revenues
|
$
|
40
|
|
|
$
|
51
|
|
|
$
|
158
|
|
|
$
|
48
|
|
Product
development
|
115
|
|
|
130
|
|
|
475
|
|
|
173
|
|
Sales and
marketing
|
(43)
|
|
|
86
|
|
|
(20)
|
|
|
57
|
|
General and
administrative
|
199
|
|
|
189
|
|
|
844
|
|
|
468
|
|
Total stock-based
compensation expenses
|
$
|
311
|
|
|
$
|
456
|
|
|
$
|
1,457
|
|
|
$
|
746
|
|
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
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
GAAP net
loss
|
$
|
(1,202)
|
|
|
$
|
(1,237)
|
|
|
$
|
(4,623)
|
|
|
$
|
(4,103)
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
311
|
|
|
456
|
|
|
1,457
|
|
|
746
|
|
Restructuring
charges
|
—
|
|
|
286
|
|
|
—
|
|
|
286
|
|
Lumewave
consideration adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
(318)
|
|
Total non-GAAP
adjustments to earnings from operations
|
311
|
|
|
742
|
|
|
1,457
|
|
|
714
|
|
Income tax effect of
reconciling items
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-GAAP net
loss
|
$
|
(891)
|
|
|
$
|
(495)
|
|
|
$
|
(3,166)
|
|
|
$
|
(3,389)
|
|
Non-GAAP net loss per
share:
|
|
|
|
|
|
|
|
Diluted
|
$
|
(0.20)
|
|
|
$
|
(0.11)
|
|
|
$
|
(0.71)
|
|
|
$
|
(0.77)
|
|
Shares used in
computing net loss per share:
|
|
|
|
|
|
|
|
Diluted
|
4,520
|
|
|
4,432
|
|
|
4,465
|
|
|
4,425
|
|
ECHELON
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited)
|
|
|
Twelve Months
Ended
|
|
December
31,
|
|
2017
|
|
2016
|
|
|
|
|
Cash flows provided by
(used in) operating activities:
|
|
|
|
Net loss
|
$
|
(4,623)
|
|
|
$
|
(4,103)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation and
amortization
|
454
|
|
|
489
|
|
Increase (reduction)
in allowance for doubtful accounts
|
(3)
|
|
|
6
|
|
Loss on disposal of
and write down of property, equipment, and other
|
—
|
|
|
1
|
|
Increase in accrued
investment income
|
(110)
|
|
|
(43)
|
|
Stock-based
compensation
|
1,457
|
|
|
746
|
|
Adjustment to
contingent consideration
|
—
|
|
|
(318)
|
|
Change in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
367
|
|
|
1,009
|
|
Inventories
|
(681)
|
|
|
323
|
|
Deferred cost of
revenues
|
(628)
|
|
|
(20)
|
|
Other current
assets
|
(242)
|
|
|
200
|
|
Accounts
payable
|
586
|
|
|
(558)
|
|
Accrued
liabilities
|
259
|
|
|
(1,176)
|
|
Deferred
revenues
|
1,004
|
|
|
340
|
|
Deferred
rent
|
(65)
|
|
|
81
|
|
Net cash used in
operating activities
|
(2,225)
|
|
|
(3,023)
|
|
|
|
|
|
Cash flows provided
by (used in) investing activities:
|
|
|
|
Purchases of
available‑for‑sale short‑term investments
|
(23,875)
|
|
|
(23,955)
|
|
Proceeds from
maturities and sales of available‑for‑sale short‑term
investments
|
24,000
|
|
|
29,155
|
|
Change in other
long‑term assets
|
(98)
|
|
|
160
|
|
Capital
expenditures
|
(209)
|
|
|
(117)
|
|
Net cash provided by
(used in) investing activities
|
(182)
|
|
|
5,243
|
|
|
|
|
|
Cash flows provided
by (used in) financing activities:
|
|
|
|
Repurchase of common
stock from employees for payment of taxes on vesting of restricted
stock units and upon exercise of stock options
|
(240)
|
|
|
(43)
|
|
Net cash used in
financing activities
|
(240)
|
|
|
(43)
|
|
|
|
|
|
Effect of exchange
rates on cash:
|
105
|
|
|
(65)
|
|
|
|
|
|
Net change in cash
and cash equivalents
|
(2,542)
|
|
|
2,112
|
|
Cash and cash
equivalents:
|
|
|
|
Beginning of
period
|
9,803
|
|
|
7,691
|
|
End of
period
|
$
|
7,261
|
|
|
$
|
9,803
|
|
|
|
|
|
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SOURCE Echelon Corporation