Echelon Reports Fourth Quarter and Full Year 2012 Results

          Echelon Reports Fourth Quarter and Full Year 2012 Results

PR Newswire

SAN JOSE, Calif., Feb. 12, 2013

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.

  oQ4 Revenues: $23.8 million
  oQ4 GAAP Net Loss: $4.1 million; GAAP Net Loss per Share: $0.10
  oQ4 Non-GAAP Net Loss: $2.7 million; Non-GAAP Net Loss per Share: $0.06
  o2012 Revenues: $134.0 million
  o2012 GAAP Net Loss: $12.8 million; GAAP Net Loss per Share: $0.30
  o2012 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:

  oTotal revenues are expected to be between $24.0 million and $26.0 million,
    with systems and sub-systems revenues accounting for about 50% each.
  oNon-GAAP gross margin is expected to be approximately 45-46%.
  oStock-based compensation expense is expected to be approximately $1.0
    million.
  oNon-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.
  oGAAP 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,  December 31,
                                               2012          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      Twelve Months Ended

                                December 31,           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       (167)       129         (361)       6
(expense), net
Interest expense on lease       (329)       (357)       (1,360)     (1,468)
financing obligations
Loss before provision for       (4,241)     (4,095)     (12,962)    (12,671)
income taxes
Income tax expense              71          100         219         329
Net loss                        (4,312)     (4,195)     (13,181)    (13,000)
Net loss attributable to        (207)       --          (363)       --
non-controlling interest
Net loss attributable to
Echelon Corporation             $ (4,105)  $ (4,195)  $ (12,818)  $ (13,000)
stockholders
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       $ 1,411   $2,905   $6,976   $9,649
expenses







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,
                         2012         2011          2012           2011
GAAP net loss            $ (4,105)    $ (4,195)     $ (12,818)     $ (13,000)
 Stock-based           1,411        2,905         6,976          9,649
compensation
 Restructuring charges --           --            1,176          --
 Total non-GAAP
adjustments to           1,411        2,905         8,152          9,649
earningsfrom operations
 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       (6)           70
income
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           (83,926)      (71,978)
investments
Proceeds from maturities and sales of               81,957        87,850
available-for-sale short-term investments
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     (1,325)       (2,265)
units and upon exercise of stock options
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

Website: http://www.echelon.com
 
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