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

Echelon (ELON)

Q4 2011 Earnings Call

February 09, 2012 5:00 pm ET

Executives

Annie Leschin -

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

William R. Slakey - Chief Financial Officer

Analysts

John Quealy - Canaccord Genuity, Research Division

Patrick Jobin - Crédit Suisse AG, Research Division

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

Shawn E. Lockman - Piper Jaffray Companies, Research Division

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

David Giesecke - Wedbush Securities Inc., Research Division

Dale Pfau - Cantor Fitzgerald & Co., Research Division

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

Paul Coster - JP Morgan Chase & Co, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Echelon Fourth Quarter 2011 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the presentation over to your host for today's call Ms. Annie Leschin. You may proceed, ma'am.

Annie Leschin

Thank you, operator. Hello, everyone, and thank you for joining us this afternoon for Echelon's Fourth Quarter and Full Year 2011 Earnings Conference Call. With me on today's call are Ron Sege, Chairman and Chief Executive Officer; and Bill Slakey, Executive Vice President and CFO. Both of them 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 in the IR section of our website to help walk through the quarterly results and outlook for our market.

Before we begin, I'd like to let everyone know that during the quarter, Echelon will be participating in Pacific Crest Emerging Technology Conference on February 15 in San Francisco. The Jefferies CleanTech Conference on February 22 in New York, Morgan Stanley Technology Media and Telecom Conference on February 27 in San Francisco and Canaccord's Sustainability and CleanTech Conference on February 29 in Deer Valley. If additional events are scheduled, we will 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 operating results, accounting matters and overall future prospects. These are forward-looking statements based on important 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 are 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

Good afternoon, and thank you for joining us for our fourth quarter conference call. I will be referring to the presentation starting with Slide 3. The close of 2011 marks the anniversary of my first full year with the company, and I'm pleased with our progress towards many of the goals we laid out a year ago. We delivered 41% revenue growth year-over-year, significantly outpacing the broader market, accelerated the rollout of large-scale projects in the U.S. and Europe, established an important partnership in China and reached a key milestone with our partner in Brazil.

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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