SANTA CLARA, Calif.–(BUSINESS WIRE)–Echelon Corporation (ELON) today announced financial results for the fourth quarter ended December 31, 2016.
“This quarter we expanded our connected lighting platform revenues for the fourth quarter in a row, despite overall revenue being lower than expected. We are encouraged by the level of sales engagement and the market response to our vision of connected lighting applications moving beyond energy savings and into safety, livability and maintenance efficiencies,” said Ron Sege, Chairman and CEO. “We are especially pleased with the early response to our collaboration with the IBM Watson Cognitive Computing Platform, and what we believe is the world’s first, white-tunable outdoor lighting installation in a suburb of Minneapolis.”
Financial Highlights
- Revenues: $7.5 million
- GAAP Operating expenses $5.8 million; Non-GAAP Operating expenses $5.1 million
- GAAP Net Loss: $1.2 million; GAAP Net Loss per Share: $0.28
- Non-GAAP Net Loss: $0.5 million; Non-GAAP Net Loss per Share: $0.11
- Cash & investments: $23.0 million
Revenues were $7.5 million in the fourth quarter, down from $9.6 million in the same period of 2015 and $8.2 million in the third quarter of 2016. The decrease in revenues from the third quarter of 2016 was the result of softness in the embedded systems business. Our connected lighting platform revenues expanded from the previous quarter, marking the fourth quarter of sequential growth in these product lines. The year-over-year reduction in total revenue was exacerbated by lower shipments to Enel, as previously disclosed.
GAAP gross margin in the fourth quarter was 55.0% compared with 57.3% in the fourth quarter of 2015 and 54.7% in the third quarter of 2016. The reduction in gross margin from the fourth quarter of 2015 was due to product mix as well as overall lower revenue levels.
GAAP operating expenses for the quarter were $5.8 million, down from $11.3 million in the fourth quarter last year and up slightly from $5.6 million in the prior quarter. Non-GAAP operating expenses for the quarter were $5.1 million, down from $6.1 million in the fourth quarter last year and $5.5 million in the prior quarter. Fourth quarter non-GAAP operating expenses reached their lowest level in more than 10 years. The annual decrease was primarily due to our ongoing efforts to manage costs while investing in our strategy to grow our connected lighting business.
GAAP net loss for the fourth quarter was $1.2 million, or $0.28 per share, compared with a net loss of $5.6 million, or $1.27 per share in the same period last year, and a net loss of $1.2 million, or $0.28 per share, in the previous quarter. The year-over-year improvement was due to operating expense reductions as well as foreign exchange benefits.
Non-GAAP net loss for the fourth quarter was $0.5 million, or $0.11 per share, compared with non-GAAP net loss of $0.3 million, or $0.07 per share for the fourth quarter of 2015, and $1.1 million, or $0.25 per share, in the previous quarter.
Included in both our GAAP and non-GAAP results for the fourth quarter of 2016 were foreign currency translation gains of $549,000. This compares to foreign currency translation gains of $241,000 in the fourth quarter of 2015 and losses of $74,000 in the third quarter of 2016. These are attributable to the fluctuations in our foreign currency denominated short-term intercompany balances.
Customer Highlights
The following customer activity reflects the interest we are seeing in the marketplace for our connected outdoor lighting platform and embedded solutions. In addition to energy savings, customers are beginning to express interest in the safety- and comfort-enhancing aspects of our offerings.
- At a Pacific Northwest military base, we shipped and installed approximately 2,400 outdoor lighting fixtures with LEDs, including Lumewave by Echelon® wireless controllers and approximately 400 Lumewave by Echelon motion sensors.
- We received orders for 12 pilot projects for outdoor lighting with cities and municipalities. These projects extend across countries including Zimbabwe, the U.S., Mexico, Guyana, French Polynesia, Oman, Vietnam, Indonesia, U.A.E. and Colombia.
- We rolled out new deployments at seven automotive dealerships and continue to focus on national, independent, and large automotive dealerships. Automotive dealerships are a promising vertical for Echelon, with an estimated $350M market opportunity in the US alone.
- In our embedded business, Echelon’s next-generation transceiver technology was selected by Efficient Building Automation Corporation (EBAC) for use in two of its new Circon® controllers. These controllers enable customers to enhance their building automation systems with advanced functionality including Echelon’s internet-centric approach and flexibility to use the protocol of choice. For example, the software built into the new controllers will allow schools to automatically adjust the lights and HVAC systems depending on whether the students are in class, or whether the school is being occupied after hours.
More generally, while we are engaging in more sales opportunities, we are seeing elongation of sales cycles; we believe attributable to election-related factors and the expansion of the range of technology and application choices in the lighting industry.
Product Highlights
We are increasingly focused on expanding our Lumewave by Echelon connected lighting platform beyond on/off/dimming for energy savings to include a wide range of applications that also enhance safety, livability and maintenance efficiencies. During the quarter, Echelon released version 1.2 of its LumInsight® Enterprise and Cloud Central Management System (CMS) for sensor-enabled outdoor lighting networks. Using LumInsight CMS, city and facility managers are now able to integrate lighting or motion sensors directly to a single controller and associate it to other lights in the network. This reduces cost and enables dynamically adaptive lighting. LumInsight 1.2 also includes support for DALI devices, which greatly expands the application set that Echelon can address.