Silver Spring Networks Reports Third Quarter 2013 Financial Results

  Silver Spring Networks Reports Third Quarter 2013 Financial Results

                    Record $94.2 Million Non-GAAP Revenue

                  Record Non-GAAP Gross Profit Margin of 42%

                 Generated $21 Million in Operating Cash Flow

Business Wire

REDWOOD CITY, Calif. -- October 30, 2013

Silver Spring Networks, Inc. (NYSE: SSNI) today announced preliminary
unaudited financial results for its third quarter and nine month period ended
September 30, 2013.

Q3 Results

Non-GAAP revenue (billings) for the third quarter was $94.2 million, up 11%
year-over-year, driven by new customer deployments. GAAP revenue was $72.5
million as compared to $39.6 million a year ago.

Non-GAAP gross profit margin was 42.0%, up from 31.4% a year ago, primarily
due to a higher mix of higher margin revenue. GAAP gross profit margin was
32.0% as compared to 11.2% a year ago.

Non-GAAP net income was $9.7 million as compared with breakeven a year ago.
GAAP net loss was $12.3 million as compared with a GAAP net loss of $26.9
million a year ago.

Silver Spring generated $21.1 million in operating cash flow during the
quarter and ended the quarter with $143.4 million in cash and investments and
no debt outstanding.

“I am pleased with our third quarter results, generating strong gross profit
margins and cash flow, and we are on track to achieve our 2013 annual guidance
with 18% growth,” said Scott Lang, Chairman, President, and Chief Executive
Officer. “We are executing on our business model by delivering the most
innovative technology and services to our clients.”

Business Highlights (through October 30, 2013, unless otherwise stated)

  *17.5 million cumulative network endpoints delivered from inception through
    September 30, 2013 – up 17% from a year ago.
  *CPFL Energia in Brazil completes successful first phase of network and
    advanced metering deployment for industrial customers – first commercial
    scale smart grid deployment in Brazil driving significant energy and
    operational savings.
  *EDP Distribuição in Portugal expands network, advanced metering and
    distribution automation pilot – technology minimizing customer
    interruptions and enabling smarter integration of renewables.
  *Metrix partnership in New Zealand to network 37 thousand homes and
    businesses -- retailers now able to deliver comprehensive energy
    information to consumers in a disaggregated energy market.
  *Citelum partnership in Copenhagen – to establish a citywide network
    connecting 20 thousand street lights.
  *Sacramento Municipal Utility District renews managed services agreement
    for five years - helping drive greater operational efficiency, provide
    disaster recovery capability and deliver flexible and secure environments.

Year to Date Results

Non-GAAP revenue (billings) for the nine month period ended September 30,
2013, was $254.4 million, up 16% year-over-year, driven by growth in new
customer deployments. GAAP revenue was $229.7 million as compared to $146.7
million a year ago.

Non-GAAP gross profit margin was 34.2%, as compared with 34.1% a year ago.
GAAP gross profit margin was 35.5% as compared to 14.4% a year ago.

Non-GAAP net loss was $3.2 million as compared with a non-GAAP net loss of
$6.3 million year ago. GAAP net loss was $67.2 million as compared with a GAAP
net loss of $68.7 million a year ago. GAAP net loss includes non-cash charges
of $42.1 million in connection with Silver Spring’s initial public offering.

Conference Call

Silver Spring will host a conference call today at 1:30 pm PT (4:30 pm ET) to
review its results for the third quarter ended September 30, 2013 and its
outlook for the future. During the course of this call, Silver Spring may also
disclose material developments affecting its business and/or financial
performance. Listeners may access the conference call live at 877-407-0832
(U.S.) or 201-689-8433 (International) or via webcast at
http://ir.silverspringnet.com.

About Silver Spring Networks

Silver Spring Networks isaleadingnetworking platform and solutions provider
for smart energy networks. Silver Spring’s pioneering IPv6 networking
platform, with 17.5 million Silver Spring enabled devices delivered, is
connecting utilities to homes and business throughout the world with the goal
of achieving greater energy efficiency for the planet.Silver Spring’s
innovative solutions enable utilities to gain operationalefficiencies,
improve grid reliability, and empower consumers to monitor and manage energy
consumption. Silver Spring Networks’ customers include major utilities around
the globe such as Baltimore Gas & Electric, CitiPower & Powercor, Commonwealth
Edison, CPS Energy, Florida Power & Light, Jemena Electricity Networks
Limited, Pacific Gas & Electric, Pepco Holdings, Progress Energy, and
Singapore Power, among others. To learn more, please
visitwww.silverspringnet.com.

Non-GAAP Financial Measures

Silver Spring believes that its results of operations under generally accepted
accounting principles, or GAAP, when considered in isolation, may only provide
limited insight into the performance of its business in any given period. As a
result, Silver Spring manages its business, makes planning decisions,
evaluates its performance and allocates resources by assessing non-GAAP
measures such as non-GAAP revenue (billings), cost of non-GAAP revenue
(billings), non-GAAP gross profit (loss), non-GAAP operating loss, non-GAAP
net loss, non-GAAP earnings (loss) per share, and adjusted EBITDA, in addition
to other financial measures presented in accordance with GAAP. Silver Spring
believes that these non-GAAP measures offer valuable supplemental information
regarding the performance of its business, and will help investors better
understand the sales volumes, and gross margin and profitability trends, as
well as the cash flow characteristics, of its business. These non-GAAP
measures should not be considered in isolation from, are not a substitute for,
and do not purport to be an alternative to, revenue, cost of revenue, gross
profit (loss), operating loss, net loss, loss per share or any other
performance measure derived in accordance with GAAP. Silver Spring may
consider whether other significant non-recurring items that arise in the
future should also be excluded in calculating the non-GAAP financial measures
it uses.

Non-GAAP revenue (billings) represents amounts invoiced for products for which
ownership, typically evidenced by title and risk of loss, has transferred or
services that have been provided to the customer, and for which payment is
expected to be made in accordance with normal payment terms. Non-GAAP revenue
excludes amounts for undelivered products, services to be performed in the
future, and amounts paid or payable to customers. Non-GAAP revenue is
initially recorded as deferred revenue and is recognized as GAAP revenue when
all revenue recognition criteria have been met under Silver Spring’s
accounting policies as described in Silver Spring’s filings with the
Securities and Exchange Commission. Silver Spring reconciles revenue to
billings by adding revenue to the change in deferred revenue in a given
period.

Cost of non-GAAP revenue (billings) represents the cost associated with
products and services that have been delivered to the customer, excluding
stock-based compensation and amortization of intangibles. Cost of product
shipments for which revenue is not recognized in the period incurred is
recorded as deferred cost of revenue. Deferred cost of revenue is expensed in
the statement of operations as cost of revenue when the corresponding revenue
is recognized. Costs related to services are expensed in the period incurred.
Silver Spring reconciles cost of revenue to non-GAAP cost of revenue by adding
cost of revenue to the change in deferred cost of revenue, less stock-based
compensation and amortization of intangibles included in cost of revenue, in a
given period.

Non GAAP gross profit (loss) is the difference between non-GAAP revenue and
cost of non-GAAP revenue.

Non-GAAP operating income (loss) represents operating loss adjusted for
non-GAAP revenue (billings) and cost of non-GAAP revenue (billings) and
excludes expenses related to the amortization of intangible assets, legal
settlements, and stock-based compensation.

Non-GAAP net income (loss) represents net loss adjusted for non-GAAP revenue
and cost of non-GAAP revenue, and excludes expenses related to the
amortization of intangible assets, legal settlements, stock-based
compensation, changes in fair value of preferred stock warrant liabilities and
embedded derivatives, and loss on extinguishment of promissory notes.

Non-GAAP earnings (loss) per share represents non-GAAP net loss divided by
weighted average shares outstanding for the period.

Adjusted EBITDA is net loss adjusted for changes in deferred revenue and
deferred cost of revenue, other (income) expense, net, provision for income
taxes, depreciation and amortization, stock-based compensation and certain
other items management believes affect the comparability of operating results.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and
uncertainties.These forward-looking statements include statements regarding
the momentum in Silver Spring Networks’ business, future growth and future
financial results. Statements including words such as "anticipate", "believe",
"estimate" or "expect" and statements in the future tense are forward-looking
statements. These forward-looking statements are preliminary estimates and
expectations based on current information and are subject to business and
economic risks and uncertainties that could cause actual events or actual
future results to differ materially from the expectations set forth in the
forward-looking statements. Important factors that could cause results to
differ materially from the statements herein include: general economic risks;
specific economic risks in different geographies and among different
industries; failure to maintain or increase renewals and increase business
from existing customers; uncertainties around continued success in sales
growth and market share gains; lengthy sales cycles with no assurances that a
prospective customer will select Silver Spring’s products and services;
amounts included in backlog may not result in billings or revenue; adverse
publicity about, or consumer or political opposition to, the smart grid;
security breaches involving smart grid products or services; the ability to
integrate technology into third-party devices and Silver Spring’s relationship
with third-party manufacturers; execution risks related to new product
introductions and innovation; the ability to attract and retain personnel,
including members of Silver Spring’s management team; changes in strategy;
technological changes that make Silver Spring’s products and services less
competitive; dependence on a limited number of key suppliers and customers;
competition, particularly from larger companies with more resources than
Silver Spring; risks related to retention of management; international
business uncertainties; the ability to acquire and integrate other businesses;
and other risk factors set forth from time to time in Silver Spring’s filings
with the SEC, copies of which are available free of charge at the SEC’s
website at www.sec.gov. All forward-looking statements in this press release
reflect Silver Spring’s expectations as of October 30, 2013. Silver Spring
undertakes no obligation, and expressly disclaims any obligation, to update
any forward-looking statements in this press release in light of new
information or future events. In addition, the preliminary financial results
set forth in this press release are estimates based on information currently
available to Silver Spring. WhileSilver Springbelieves these estimates are
meaningful, they could differ from the actual amounts thatSilver Spring
ultimately reports in its Quarterly Report on Form 10-Q for the fiscal quarter
endedSeptember 30, 2013.Silver Springassumes no obligation and does not
intend to update these estimates prior to filing its Form 10-Q for the fiscal
quarter endedSeptember 30, 2013.


SILVER SPRING NETWORKS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
                                                              
                   Three Months Ended               Nine Months Ended
                   September 30,                    September 30,
                   2013              2012           2013           2012
Revenue:
Product revenue    $  56,650         $  30,394      $ 146,366      $ 122,292
Service revenue      15,831          9,234       83,328       24,374  
Net revenue           72,481            39,628        229,694        146,666
                                                                   
Cost of
revenue:
Product cost of       34,844            22,846        100,152        88,358
revenue
Service cost of      14,411          12,348      47,932       37,137  
revenue
Total cost of         49,255            35,194        148,084        125,495
revenue
                                                                   
Gross profit          23,226            4,434         81,610         21,171
                                                                   
Operating
expenses:
Research and          16,980            15,480        60,851         46,872
development
Sales and             7,424             6,822         26,514         21,732
marketing
General and          10,937          6,599       35,952       21,024  
administrative
Total operating       35,341            28,901        123,317        89,628
expenses
                                                                   
Operating             (12,115  )        (24,467 )     (41,707  )     (68,457 )
income (loss)
                                                                   
Other income
(expense)
Interest              (54      )        (1,198  )     (1,290   )     (3,351  )
expense
Conversion of
promissory
notes and            -               (830    )    (23,676  )    3,570   
remeasurement
of warrants and
derivatives
Other income          (54      )        (2,028  )     (24,966  )     219
(expense), net
                                                                   
Income (loss)
before                (12,169  )        (26,495 )     (66,673  )     (68,238 )
provision for
income taxes
                                                                   
Provision for        100             373         492          469     
income taxes
Net income         $  (12,269  )     $  (26,868 )   $ (67,165  )   $ (68,707 )
(loss)
Deemed dividend
to convertible       -             -              (105,000 )    -       
preferred
stockholders
Net income
(loss)
attributable to    $  (12,269  )     $  (26,868 )   $ (172,165 )   $ (68,707 )
common
stockholders
                                                                   
Net income
(loss) per
share
Basic net
income (loss)
per share          $  (0.26    )     $  (7.30   )   $ (4.96    )   $ (18.75  )
attributable to
common
stockholders
Diluted net
income (loss)
per share          $  (0.26    )     $  (7.30   )   $ (4.96    )   $ (18.75  )
attributable to
common
stockholders
                                                                   
Weighted
average number
of shares used
in computation
Basic                 46,729            3,682         34,733         3,664
Diluted               46,729            3,682         34,733         3,664
                                                                   
Non-GAAP
results (in
thousands,
except per
share data)
The following tables reconcile the Company's net income (loss) and income
(loss) per share as presented in its unaudited Condensed Consolidated
Statements of Operations and prepared in accordance with GAAP to its non-GAAP
net income (loss) and non-GAAP income (loss) per share.
                                                                   
                   Three Months Ended               Nine Months Ended
                   September 30,                    September 30,
                   2013              2012           2013           2012
Net income         $  (12,269  )     $  (26,868 )   $ (67,165  )   $ (68,707 )
(loss)
Change in
deferred
revenue, net of       21,735            45,593        24,744         72,091
foreign
currency
translation
Change in
deferred cost
of revenue, net       (6,842   )        (23,858 )     (30,028  )     (20,867 )
of foreign
currency
translation
Amortization of
intangibles in        48                48            144            144
cost of revenue
Conversion of
promissory
notes and             -                 830           23,676         (3,570  )
remeasurement
of warrants and
derivatives
Convertible
notes accretion       -                 1,069         935            2,787
/ interest
Stock-based           6,990             3,217         44,503         11,823
compensation
                                                                   
Non-GAAP net       $  9,662          $  31          $ (3,191   )   $ (6,299  )
income (loss)
                                                                   
Non-GAAP income
(loss) per
share
Basic              $  0.21           $  0.01        $ (0.09    )   $ (1.72   )
Diluted            $  0.19           $  0.00        $ (0.09    )   $ (1.72   )
                                                                   
Weighted
average number
of shares used
in computation
Basic                 46,729            3,682         34,733         3,664
Diluted               49,620            29,556        34,733         3,664
                                                                             

SILVER SPRING NETWORKS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)
                                                               
                                                  September 30,   December 31,
                                                  2013            2012 (a)
ASSETS
Current assets:
Cash and cash equivalents                         $  81,865       $ 72,646
Short-term investments                               61,566         -
Accounts receivable                                  59,587         56,528
Inventory                                            6,997          7,731
Deferred cost of revenue                             65,869         45,298
Prepaid expenses and other current assets           5,615        3,456    
Total current assets                                 281,499        185,659
                                                                  
Property and equipment, net                          12,857         12,701
Deferred cost of revenue, non-current                209,232        199,865
Deferred tax assets, non-current                     8,075          8,265
Other long-term assets                               2,275          11,254
                                                                 
TOTAL ASSETS                                      $  513,938     $ 417,744  
                                                                  
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable                                  $  26,323       $ 28,104
Accrued liabilities                                  19,156         14,831
Deferred revenue                                     149,990        89,838
Current portion of capital lease obligations         1,760          1,647
Deferred tax liability                              7,950        7,897    
                                                                  
Total current liabilities                            205,179        142,317
                                                                  
Deferred revenue, non-current                        382,556        418,218
Preferred stock warrant liability                    -              11,261
Convertible promissory notes and embedded            -              56,319
derivatives
Other liabilities                                    15,138         18,412
                                                                  
Convertible preferred stock:
$0.001 par value; no shares authorized, issued
and outstanding, and aggregate liquidation
preference of $0 as of September 30, 2013;           -              270,725
26,072 shares authorized, 22,366 shares issued
and outstanding, and aggregate liquidation
preference of $381,338 as of December 31, 2012
                                                                  
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value, 10,000
shares authorized and no shares issued or
outstanding as of September 30, 2013; no shares      -              -
authorized, issued or outstanding,as of
December 31, 2012
                                                                             
Common stock, $0.001 par value; 1,000,000
shares authorized, 46,933  shares issued and
outstanding as of September 30, 2013; 80,000         46             4
shares authorized and 3,764 shares issued and
outstanding as of December 31, 2012
                                                                             
Additional paid-in capital                           528,598        51,078
Accumulated other comprehensive income (loss)        40             (136     )
Accumulated deficit                                 (617,619 )    (550,454 )
                                                                  
Total stockholders’ deficit                          (88,935  )     (499,508 )
                                                                 
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK    $  513,938     $ 417,744  
AND STOCKHOLDERS' DEFICIT
                                                                  
(a) Derived from audited consolidated financial
statements
                                                                  

SILVER SPRING NETWORKS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
                                                              
                         Three Months Ended          Nine Months Ended
                         September 30,               September 30,
                         2013          2012          2013          2012
                                                                   
OPERATING ACTIVITIES
                                                                   
Net income (loss)        $ (12,269 )   $ (26,868 )   $ (67,165 )   $ (68,707 )
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and           1,624         1,815         4,990         5,459
amortization
Stock-based                6,990         3,217         44,503        11,823
compensation
Conversion of
promissory notes and
remeasurement of           -             830           23,676        (3,570  )
warrants and
derivatives
Other non-cash             113           808           1,565         2,464
adjustments
Changes in assets and
liabilities:
Accounts receivable        10,057        (14,077 )     (3,126  )     (30,833 )
Inventory                  5,541         (2,421  )     534           (5,676  )
Prepaid expenses and       939           823           (2,248  )     447
other current assets
Deferred cost of           (6,865  )     (23,858 )     (29,938 )     (20,867 )
revenue
Other long-term assets     1,484         (902    )     3,846         (2,356  )
Accounts payable           (9,119  )     4,120         (1,746  )     7,330
Accrued liabilities        2,917         (1,382  )     2,379         (3,053  )
Customer deposits          (1      )     (146    )     (247    )     (6,954  )
Deferred revenue           21,824        45,593        24,490        72,091
Other liabilities         (2,104  )    2,249       (3,343  )    4,122   
Net cash provided by
(used in) operating       21,131      (10,199 )    (1,830  )    (38,280 )
activities
                                                                   
INVESTING ACTIVITIES
                                                                   
Decrease in restricted     -             -             -             140
cash
Purchases of               (61,451 )     -             (61,451 )     -
short-term investments
Purchases of property     (881    )    (1,116  )    (3,343  )    (4,249  )
and equipment
Net cash used in          (62,332 )    (1,116  )    (64,794 )    (4,109  )
investing activities
                                                                   
FINANCING ACTIVITIES
                                                                   
Payment upon
termination of
preferred stock            -             -             (12,000 )     -
warrants of a related
party
Proceeds from initial
public offering, net       (233    )     -             84,472        -
of offering costs
Proceeds from private
placement of common        -             -             12,000        -
stock with a related
party
Payments on capital        (541    )     (380    )     (1,485  )     (888    )
lease obligations
Proceeds from
sale-leaseback             -             -             -             1,676
transaction
Proceeds from issuance
of convertible notes,      -             -             -             28,993
net of paid issuance
costs
Proceeds from issuance
of common stock, net       388           143           578           545
of repurchases
Taxes paid related to
net share settlement      (1,518  )    -           (7,722  )    -       
of equity awards
Net cash provided by
(used in) financing       (1,904  )    (237    )    75,843      30,326  
activities
                                                                   
Net increase
(decrease) in cash and     (43,105 )     (11,552 )     9,219         (12,063 )
cash equivalents
Cash and cash
equivalents -             124,970     71,176      72,646      71,687  
beginning of period
Cash and cash
equivalents - end of     $ 81,865     $ 59,624     $ 81,865     $ 59,624  
period
                                                                             

SILVER SPRING NETWORKS, INC.
UNAUDITED RECONCILIATION OF NET REVENUE BETWEEN GAAP AND NON-GAAP
(in thousands, except percentages)
                                                                            
TYPE             Q3          Q4          Q1          Q2           Q3          YoY%
                 CY12         CY12         CY13         CY13          CY13         Change
GAAP net
revenue
Product net      $ 30,394     $ 40,332     $ 41,720     $ 47,996      $ 56,650     86   %
revenue
Service net
revenue
Managed
services and       4,756        4,018        4,559        37,508        9,835      107  %
SaaS
Professional      4,478      5,721      7,424      18,006      5,996     34   %
Total service    $ 9,234     $ 9,739     $ 11,983    $ 55,514     $ 15,831    71   %
net revenue
Total GAAP net   $ 39,628    $ 50,071    $ 53,703    $ 103,510    $ 72,481    83   %
revenue
% Product          77     %     81     %     78     %     46      %     78     %
% Service          23     %     19     %     22     %     54      %     22     %
                                                                                   
Change in
deferred net
revenue
Change in
deferred         $ 37,545     $ 25,793     $ 14,702     $ 17,905      $ 16,017
product
revenue
Change in
deferred
service
revenue
Managed
services and       3,555        6,441        3,825        (28,245 )     16
SaaS
Professional      4,493      3,271      1,541      (6,719  )    5,702  
Total change
in deferred       8,048      9,712      5,366      (34,964 )    5,718  
service
revenue
Total change
in deferred      $ 45,593     $ 35,505     $ 20,068     $ (17,059 )   $ 21,735
revenue
                                                                                   
Non-GAAP
revenue
Product net      $ 67,939     $ 66,125     $ 56,422     $ 65,901      $ 72,667     7    %
revenue
Service net
revenue
Managed
services and       8,311        10,459       8,384        9,263         9,851      19   %
SaaS
Professional      8,971      8,992      8,965      11,287      11,698    30   %
Total service    $ 17,282    $ 19,451    $ 17,349    $ 20,550     $ 21,549    25   %
net revenue
Total non-GAAP   $ 85,221    $ 85,576    $ 73,771    $ 86,451     $ 94,216    11   %
net revenue
% Product          80     %     77     %     76     %     76      %     77     %
% Service          20     %     23     %     24     %     24      %     23     %
                                                                                   
SOLUTION
GAAP net
revenue
Advanced
metering         $ 34,086     $ 46,250     $ 45,149     $ 97,598      $ 66,774     96   %
infrastructure
Distribution
automation and    5,542      3,821      8,554      5,912       5,707     3    %
demand side
management
Total GAAP net   $ 39,628    $ 50,071    $ 53,703    $ 103,510    $ 72,481    83   %
revenue
% Advanced
metering           86     %     92     %     84     %     94      %     92     %
infrastructure
% Distribution
automation and     14     %     8      %     16     %     6       %     8      %
demand side
management
                                                                                   
Change in
deferred net
revenue
Advanced
metering         $ 44,880     $ 32,208     $ 23,219     $ (21,380 )   $ 19,244
infrastructure
Distribution
automation and    713        3,297      (3,151 )    4,321       2,491  
demand side
management
Total change
in deferred      $ 45,593     $ 35,505     $ 20,068     $ (17,059 )   $ 21,735
net revenue
                                                                                   
Non-GAAP net
revenue
Advanced
metering         $ 78,966     $ 78,458     $ 68,368     $ 76,218      $ 86,018     9    %
infrastructure
Distribution
automation and    6,255      7,118      5,403      10,233      8,198     31   %
demand side
management
Total Non-GAAP   $ 85,221    $ 85,576    $ 73,771    $ 86,451     $ 94,216    11   %
net revenue
% Advanced
metering           93     %     92     %     93     %     88      %     91     %
infrastructure
% Distribution
automation and     7      %     8      %     7      %     12      %     9      %
demand side
management
                                                                                   
GEOGRAPHY
GAAP net
revenue
United States    $ 35,110     $ 46,421     $ 50,747     $ 94,516      $ 68,562     95   %
International      4,518        3,650        2,956        8,994         3,919      -13  %
                                                                  
Total GAAP net   $ 39,628    $ 50,071    $ 53,703    $ 103,510    $ 72,481    83   %
revenue
                                                                                   
% United           89     %     93     %     94     %     91      %     95     %
States
%                  11     %     7      %     6      %     9       %     5      %
International
                                                                                   
Change in
deferred net
revenue
United States    $ 38,325     $ 21,927     $ 8,839      $ (21,032 )   $ 15,289
International      7,268        13,578       11,229       3,973         6,446
                                                                  
Total change
in deferred      $ 45,593     $ 35,505     $ 20,068     $ (17,059 )   $ 21,735
net revenue
                                                                                   
Non-GAAP net
revenue
United States    $ 73,435     $ 68,348     $ 59,586     $ 73,484      $ 83,851     14   %
International      11,786       17,228       14,185       12,967        10,365     -12  %
                                                                  
Total non-GAAP   $ 85,221    $ 85,576    $ 73,771    $ 86,451     $ 94,216    11   %
net revenue
                                                                                   
% United           86     %     80     %     81     %     85      %     89     %
States
%                  14     %     20     %     19     %     15      %     11     %
International
                                                                                   

SILVER SPRING NETWORKS, INC.
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
(in thousands, except percentages and headcount)
                                                                                     
                 Q3            Q4            Q1            Q2            Q3            YoY%
                 CY12           CY12           CY13           CY13           CY13           Change
                                                                                            
CASH FLOW DATA
Operating cash   $ (10,199  )   $ 14,002       $ (8,913   )   $ (14,048  )   $ 21,131       307  %
flow
Operating cash     (43,330  )     (24,278  )     (19,847  )     (19,158  )     12,172       128  %
flow - TTM
                                                                                            
BALANCE SHEET
DATA
Cash, cash
equivalents      $ 59,624       $ 72,646       $ 142,354      $ 124,970      $ 143,431      141  %
and short-term
investments
Deferred net
revenue
End of quarter     472,551        508,056        528,176        510,722        532,546
Less:
Beginning of       (426,958 )     (472,551 )     (508,056 )     (528,176 )     (510,722 )
quarter
Foreign
currency          -            -            (52      )    395          (89      )
translation
adjustment
Change in
deferred net
revenue, net     $ 45,593      $ 35,505      $ 20,068      $ (17,059  )   $ 21,735   
of foreign
currency
translation
Deferred cost
of revenue
End of quarter     227,170        245,163        260,572        268,236        275,101
Less:
Beginning of       (203,312 )     (227,170 )     (245,163 )     (260,572 )     (268,236 )
quarter
Foreign
currency          -            -            14           99           (23      )
translation
adjustment
Change in
deferred cost
of revenue,      $ 23,858      $ 17,993      $ 15,423      $ 7,763       $ 6,842    
net of foreign
currency
translation
                                                                                            
STOCK-BASED
COMPENSATION
Cost of goods    $ 521          $ 560          $ 6,724        $ 2,531        $ 1,376        164  %
sold
Research and       876            934            9,544          3,607          1,905        117  %
development
Sales and          632            550            3,346          1,526          950          50   %
marketing
General and       1,188        1,225        7,054        3,181        2,759       132  %
administrative
Total            $ 3,217       $ 3,269       $ 26,668      $ 10,845      $ 6,990       117  %
                                                                                            
EMPLOYEES          570            566            572            589            608          7    %
                                                                                            
HOMES &
BUSINESSES
Cumulative
network            14,967         15,781         16,507         17,008         17,509       17   %
endpoints
delivered*
*Endpoints
refer to
communication
modules in
electric
meters
                                                                                            

SILVER SPRING NETWORKS
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data and percentages)
                                                                                 
                 Q3           Q4           Q1            Q2           Q3           YOY %
                 CY12          CY12          CY13           CY13          CY13          Change
QUARTERLY
RECONCILIATION
OF RESULTS
                                                                                        
Net revenue
GAAP net         $ 39,628      $ 50,071      $ 53,703       $ 103,510     $ 72,481      83    %
revenue
Change in
deferred
revenue, net      45,593      35,505      20,068       (17,059 )    21,735  
of foreign
currency
translation
Non-GAAP net     $ 85,221     $ 85,576     $ 73,771      $ 86,451     $ 94,216     11    %
revenue
                                                                                        
Gross profit
GAAP gross       $ 4,434       $ 10,548      $ 10,134       $ 48,250      $ 23,226      424   %
profit
Change in
deferred
revenue, net       45,593        35,505        20,068         (17,059 )     21,735
of foreign
currency
translation
Change in
deferred cost
of revenue,        (23,858 )     (17,993 )     (15,423 )      (7,763  )     (6,842  )
net of foreign
currency
translation
Amortization
of intangibles     48            48            48             48            48
in cost of
revenue
Stock-based       521         560         6,724        2,531       1,376   
compensation
Non-GAAP gross   $ 26,738     $ 28,668     $ 21,551      $ 26,007     $ 39,543     48    %
profit
GAAP gross
margin % (as a     11      %     21      %     19      %      47      %     32      %
% of GAAP net
revenue)
Non-GAAP gross
margin % (as a     31      %     34      %     29      %      30      %     42      %
% of non-GAAP
net revenue)
                                                                                        
Operating
income (loss)
GAAP operating   $ (24,467 )   $ (20,187 )   $ (39,574 )    $ 9,982       $ (12,115 )   50    %
income (loss)
Change in
deferred
revenue, net       45,593       35,505        20,068         (17,059 )     21,735
of foreign
currency
translation
Change in
deferred cost
of revenue,        (23,858 )    (17,993 )    (15,423 )      (7,763  )     (6,842  )
net of foreign
currency
translation
Amortization
of intangibles     48            48            48             48            48
in cost of
revenue
Stock-based       3,217       3,269       26,668       10,845      6,990   
compensation
Non-GAAP
operating        $ 533        $ 642        $ (8,213  )    $ (3,947  )   $ 9,816      1742  %
income (loss)
GAAP operating
margin % (as a     -62     %     -40     %     -74     %      10      %     -17     %
% of GAAP
revenue)
Non-GAAP
operating
margin % (as a     1       %     1       %     -11     %      -5      %     10      %
% of non-GAAP
net revenue)
                                                                                        
Adjusted
EBITDA
GAAP net         $ (26,868 )   $ (21,010 )   $ (64,366 )    $ 9,470       $ (12,269 )   54    %
income (loss)
Change in
deferred
revenue, net       45,593        35,505        20,068         (17,059 )     21,735
of foreign
currency
translation
Change in
deferred cost
of revenue,        (23,858 )     (17,993 )     (15,423 )      (7,763  )     (6,842  )
net of foreign
currency
translation
Other (income)     2,028         902           24,728         184           54
expense, net
Provision for      373           (79     )     64             328           100
income taxes
Depreciation
and                1,815         1,796         1,677          1,689         1,624
amortization
Stock-based       3,217       3,269       26,668       10,845      6,990   
compensation
Adjusted         $ 2,300      $ 2,390      $ (6,584  )    $ (2,306  )   $ 11,392     395   %
EBITDA
                                                                                        
Net income
(loss)
GAAP net         $ (26,868 )   $ (21,010 )   $ (64,366 )    $ 9,470       $ (12,269 )   54    %
income (loss)
Change in
deferred
revenue, net       45,593        35,505        20,068         (17,059 )     21,735
of foreign
currency
translation
Change in
deferred cost
of revenue,        (23,858 )     (17,993 )     (15,423 )      (7,763  )     (6,842  )
net of foreign
currency
translation
Amortization
of intangibles     48            48            48             48            48
in cost of
revenue
Convertible
notes              1,069         1,081         935            -             -
accretion /
interest
Conversion of
promissory
notes and
remeasurement      830           (308    )     23,676         -             -
of warrants
and
derivatives
Stock-based       3,217       3,269       26,668       10,845      6,990   
compensation
Non-GAAP net     $ 31         $ 592        $ (8,394  )    $ (4,459  )   $ 9,662      31068 %
income (loss)
GAAP net
margin % (as a     -68     %     -42     %     -120    %      9       %     -17     %
% of GAAP
revenue)
Non-GAAP net
margin % (as a     0       %     1       %     -11     %      -5      %     10      %
% of non-GAAP
net revenue)
                                                                                        
GAAP income
(loss) per
share
Basic            $ (7.30   )   $ (5.65   )   $ (16.18  )*  $ 0.20        $ (0.26   )
Diluted          $ (7.30   )   $ (5.65   )   $ (16.18  )*  $ 0.19        $ (0.26   )
Weighted
average number
of shares used
in computation
Basic              3,682         3,720         10,469         46,599        46,729
Diluted            3,682         3,720         10,469         48,995        46,729
^* GAAP income
(loss) per
share is based
on net loss
attributable
to common
stockholders
                                                                                        
Non-GAAP
income (loss)
per share
Basic            $ 0.01        $ 0.16        $ (0.80   )    $ (0.10   )   $ 0.21
Diluted          $ 0.00        $ 0.02        $ (0.80   )    $ (0.10   )   $ 0.19
Weighted
average number
of shares used
in computation
Basic              3,682         3,720         10,469         46,599        46,729
Diluted            29,556        29,394        10,469         46,599        49,620

Contact:

Silver Spring Networks, Inc.
TriciaGugler, 650-839-4504
Investor Relations
tgugler@silverspringnet.com
Noel Hartzell, 650-839-4184
Global Communications
nhartzell@silverspringnet.com
 
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