Echelon (ELON)

Q3 2011 Earnings Call

November 03, 2011 5:00 pm ET

Executives

Oliver R. Stanfield - Chief Financial Officer, Principal Accounting Officer and Executive Vice President of Finance

Ronald A. Sege - Chairman, Chief Executive Officer, President and Member of Stock Option Committee

Annie Leschin - IR

Analysts

Benjamin Schuman - Pacific Crest Securities, Inc., Research Division

Craig E. Irwin - Wedbush Securities Inc., Research Division

Sean K.F. Hannan - Needham & Company, LLC, Research Division

Mark Sigal - Canaccord Genuity, Research Division

Dale Pfau - Cantor Fitzgerald & Co., Research Division

Patrick Sullivan

Joseph A. Maxa - Dougherty & Company LLC, Research Division

Colin W. Rusch - ThinkEquity LLC, Research Division

Elaine Kwei - Jefferies & Company, Inc., Research Division

Christopher M. Kovacs - Robert W. Baird & Co. Incorporated, Research Division

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the Echelon Third Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. And I would now like to hand the call over to your host for today, Ms. Annie Leschin, Investor Relations. Please proceed.

Annie Leschin

Thank you, Operator. Hello, everyone, and thank you for joining us this afternoon for our third quarter 2011 earnings conference call. With me on today's call are Ron Sege, Chairman and Chief Executive Officer; and Chris Stanfield, Executive Vice President and CFO. Both of whom will present prepared remarks. By now, you should have received a copy of the press release that we issued a short time ago. If you would like a copy, please visit our website at www.echelon.com. Additionally, this quarter, we're going to refer to a set of slides that we have posted on the IR section of our website to help walk-through the quarterly results and outlook for our markets. Before we begin, I'd like to let everyone know that in the quarter, Echelon will be participating in NASDAQ OMX and Tech America Conference on November 7 in San Diego, The Stephens Fall Investment Conference on November 15 in New York, The Raymond James Fall Investor Conference on November 17 in Boston, The Baird Clean Tech Conference on November 30 in San Francisco and the Goldman Sachs Clean Energy and Power Conference on December 8 and 9 in New York City. If additional events are scheduled, we'll make other announcements. Now, I'd like to remind everyone that during the course of this call, we may make statements related to our business outlook, future financial and operating results, accounting matters and overall future prospects. These forward-looking statements are based on certain assumptions and are subject to a number of risks and uncertainties. We encourage you to read the risks described in our press release as well as in our SEC reports, including our report on Form 10-K and subsequent reports on Form 10-Q for a more complete disclosure of the risks and uncertainties related to our business. The financial information presented in this call reflects estimates based on information that is available to us at this time. Actual results could differ materially. Echelon undertakes no obligation to update or revise these forward-looking statements. And guidance will not be updated after today's call until our next scheduled quarterly financial release.

And now, I'd like to turn the call over to Ron Sege. Ron?

Ronald A. Sege

Thank you, Annie. Good afternoon and thank you for joining us for our third quarter conference call. First, I would like to take a moment to acknowledge, Ken Oshman, the longtime Chairman and CEO of Echelon. As you know, Ken passed away in early August. A sad time for all but especially for those of us who had known and worked with Ken for so long. He was a brilliant, well-respected man and a visionary leader, we all miss him dearly.

As you saw in our release earlier today, we announced an important development with our Edge Control Node project at Duke Energy. I will provide more detail on that later in my remarks, but first, I will go through the highlights of the quarter to provide some context. I'm pleased to report that we once again made progress towards our financial goals of growth and profitability this quarter. Strength in our utility markets grew 62% year-over-year growth in topline performance to $43.8 million and non-GAAP profitability of $0.04 per share. We were also cash flow positive for the quarter. We continue to ship products and volume to large utility customers, achieved a critical milestone in Brazil, built momentum with our partnership in China and achieved new wins in our street lighting vertical. Our recent European customer and partner event reinforced growing interest in our vision of a proven, open standard energy-control networking platform that runs metering and many other applications. It also reinforced our geographic targeting strategy, ranking attractiveness in terms of energy shortages, non-technical loss rates, political backing and distribution grid health.

Overall, we remained confident in our outlook for a strong 2011 with annual revenue growth at the high-end of our previously guided range of 40% and our commitment to our goal of full year non-GAAP profitability for 2012.

Now let me turn to updates on our Utility business. Large scale deployments at Duke, Fortum, Landis and NRGi are ongoing. Our deployment with Fortum, Finland is exhilarating with Zigbee wireless and Echelon power line communication links, connecting the Fortum grid with home area networks to provide multi-application support. We are excited about our new power line connectivity option as we believe it will provide a highly reliable connection to customers' in-home displays and controllers. Our meters with home power line connections are currently shipping with hardware support to be followed early next year by the remotely upgradable enabling COS software. We have several other small wins this quarter including in Denmark, Russia and Switzerland. In general, political support for the Smart Grid remains strong in Europe where Smart Grid rollouts are deploying at a steady pace and pushing the envelope in terms of applications.

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