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Echelon's CEO Discusses Q4 2011 Results - Earnings Call Transcript

In 2011, we reduced our non-GAAP operating loss to less than 1% of revenue from almost 15% in 2010 and achieved non-GAAP profitability in 2 of 4 quarters. Perhaps most importantly, we honed our vision and made the strategic decision to reemphasize our roots as an embedded control systems supplier. Our greatest strength lies in our long history of partnering to provide customers with our advanced technology in a number of flexible ways. This approach enables us to better serve our current markets and enter a broader array of emerging ones.

Turning to Slide 4. Today, Echelon is an energy control networking company with one proven open standard multi-application platform selling complete systems and embedded subsystems for Smart Grid, Smart City and Smart Building applications. We help our customers reduce operational costs, enhance satisfaction and safety, grow revenues and prepare for a dynamic future.

Our objective for 2012 is to continue to sharpen our focus and improve our execution. We plan to complete the implementation of our system and subsystem strategy throughout our organization, sales of our system solutions will remain an integral part of our strategy for the metering and distribution automation applications. We will increase our emphasis on sales of our subsystems to partners such as Honeywell, Siemens, ELO and Holley who utilize them in their own products so that we can better penetrate our target markets. Innovation will be more focus on our core platform and we will increasingly partner to leverage each other's core competencies.

Please turn to Slide 5. Of course, while our strategy and early results hold great promise, ongoing good operational execution, pipeline conversion and a sufficiently bland market are imperative. On a micro basis, the regulatory delays in Indiana appear no closer to resolution. In addition, macro conditions remain tentative in the smart energy market amidst the European financial crisis, and competition is heightened as the industry faces slow growth and ongoing consolidations. New tenders are fewer and farther between and pricing pressures are increasing. Against these headwinds, our disciplined sales approach has significantly broadened and deepened our pipeline and we have a firm product cost reduction plan in place. We believe we can achieve modest revenue growth for 2012 and, therefore, we remain committed to our goal of full year non-GAAP profitability.

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