Echelon Corporation (ELON) today announced financial results for the fourth quarter ended December 31, 2014.
- Q4 Revenues: $9.6 million
- Q4 GAAP Net Loss: $2.6 million; GAAP Net Loss per Share: $0.06
- Q4 Non-GAAP Net Loss: $2.2 million; Non-GAAP Net Loss per Share: $0.05
Revenues, which consist of IIoT revenues only, were $9.6 million in the fourth quarter, up from $9.2 million in the previous quarter, and down from $12.5 million a year ago, including $446,000 of sales to Enel in the quarter compared with $3.2 million in the same period last year.
GAAP gross margins in the fourth quarter were 55.3% compared with 60.6% in the fourth quarter of 2013. Lower gross margins were driven by the reallocation of costs after the sale of the grid business and lower sales from Enel. Total operating expenses for the quarter decreased to $7.8 million from $8.6 million in the same period last year, and decreased from $12.6 million in the previous quarter.
GAAP net loss for the fourth quarter was $2.6 million, or $0.06 per share, compared with a net loss of $4.0 million, or $0.09 per share, including discontinued operations in the same period last year, and down from net loss of $7.2 million, or $0.17 in the previous quarter. Non-GAAP net loss for the fourth quarter was $2.2 million, or $0.05 per share, compared with a non-GAAP net loss of $1.4 million, or $0.03 per share for the third quarter of 2013, and $2.3 million, or $0.05 in the previous quarter.
“2014 was a year of significant change for Echelon. We sold our grid business, introduced new products to modernize our product portfolio and broadened the applicability of our technology in the lighting control market by acquiring Lumewave, all while carefully managing our expenses,” said Ron Sege, Chairman and CEO of Echelon. “We see both the transition to Industrial IoT applications in our traditional customer base and the move to LED lighting as potential broad drivers of demand for our solutions.”
Business Outlook
Echelon’s guidance for the first quarter of 2015 are as follows:
- Total revenues are expected to be $8.6 million to $9.6 million.
- Non-GAAP gross margin is expected to be in a range of 55% to 57% of revenue.
- Operating expenses are expected to be in a range of $7.0 to $7.5 million.
- Non-GAAP loss per share is expected to be between $0.04 to $0.07, based on 44 million fully diluted weighted average shares outstanding.
- GAAP loss per share is expected to be between $0.06 to $0.09.
- Cash burn for the quarter is expected to exceed non-GAAP loss by $1.0 to $2.0 million due to expected payments as a result of the sale of our Grid business.
For those interested in further discussion regarding this release, Echelon’s management will participate in a conference call today at 4:30 p.m. Eastern Time. To access the call, dial (888) 771-4371 or (847) 585-4405 outside the U.S. and provide the confirmation number 38791951. An archived replay of the webcast will be available approximately two hours following the end of the call.
Use of Non-GAAP Financial Information
Echelon continues to provide all information required in accordance with GAAP, but believes that an investor’s evaluation of our ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Accordingly, we provide non-GAAP net income and non-GAAP net income per share data as additional information relating to Echelon’s operating results. Echelon presents these non-GAAP financial measures to provide investors with an additional tool for evaluating Echelon’s operating results in a manner that focuses on what Echelon believes to be its ongoing business operations. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or net income per share prepared in accordance with GAAP.
Echelon’s management uses certain non-GAAP financial information, namely operating results from continuing operations excluding restructuring charges, litigation charges, impairment charges, the impact of stock-based compensation charges made in accordance with ASC 718 (formerly SFAS 123R), as well as certain other non-routine charges, to evaluate its ongoing operations and for internal planning and forecasting purposes. Accordingly, we believe it is useful for Echelon’s investors to review, as applicable, information that both includes and excludes these charges (and the related tax impact) in order to assess the performance of Echelon’s business and for planning and forecasting in future periods. Whenever Echelon reports such non-GAAP financial measures, a complete reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure is provided. Investors are encouraged to review these reconciliations to ensure they have a thorough understanding of the reported non-GAAP financial measures and their most directly comparable GAAP financial measures.
About Echelon Corporation
Echelon Corporation (ELON) is a leading independent control networking company for the Industrial Internet of Things. Echelon delivers multi-protocol and multi-media elements necessary to design, install, monitor and control industrial-strength ‘communities of devices’ within the lighting, building automation and Internet of Things markets worldwide. The company develops and sells complete systems and subsystems for target applications, plus system-on-chips (SoCs), embedded software, and commissioning and management tools for OEMs. With more than 100 million Echelon-powered devices installed worldwide, the company helps its customers easily and safely migrate existing control systems to the most modern platforms, while bringing new devices and applications into an ever-growing global Industrial Internet. Echelon helps its customers reduce operational costs, enhance satisfaction and safety, grow revenues and perform better in both established and emerging markets. More information about Echelon can be found at https://www.echelon.com and at the company’s blog at https://blog.echelon.com/.
Echelon, the Echelon logo, and IzoT are trademarks of Echelon Corporation registered in the United States and other countries. Other product or service names mentioned herein are the trademarks of their respective owners.
Risk Factors Regarding Forward-Looking Statements
This press release contains “forward-looking” statements within the meaning of Section 21A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbor created thereby. Echelon advises caution in reliance on forward-looking statements. Forward looking statements include, without limitation, the company’s opportunities for future growth, the company’s ability to improve its financial model and accelerate its transition to the IIoT, and the Company’s guidance for the first quarter of 2015. Actual results could differ materially from those projected in forward-looking statements as a result of a number of risks and uncertainties. Such risks and uncertainties, include, but are not limited to, risks associated with the continued development and growth of markets for Echelon’s products; the risk that we will not realize our expectations with respect to the successful integration and growth of the products we acquired from Lumewave; failure to achieve revenue estimates or maintain expense controls; circumstances that may delay the time frame for achieving our business outlook; the timely development of Echelon’s products and services and the ability of those products and services to perform as designed and meet customer expectations; the risk that Echelon does not meet expected or required shipment, delivery or acceptance schedules for its products and that Echelon may incur penalties or additional expenses or delay revenue recognition as a result; and other risks identified in Echelon’s SEC filings. The discussion of risk factors are detailed in the Company’s filings with the Securities and Exchange Commission, including reports on its most recently filed Form 10-K and Form 10-Q. The financial information presented in this release reflects estimates based on information that is available to us at this time. Actual results, events and performance may differ materially. Echelon undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.
The condensed consolidated financial statements that follow should be read in conjunction with the notes set forth in Echelon’s Annual Report on Form 10-K when filed with the Securities and Exchange Commission.