Silver Spring Networks Reports Third Quarter 2016 Financial Results

Silver Spring Networks, Inc. (NYSE: SSNI) today announced financial results for its third quarter ended September 30, 2016.

Third Quarter Results (all comparisons made are against the prior year period, unless otherwise stated):

GAAP Results:
  • Revenue was $74.2 million, up 7%.
  • Gross margin was 38.1%, versus 47.5%.
  • Net loss was ($15.2) million versus a net loss of ($0.6) million.
  • Net loss per diluted share was ($0.29) versus a ($0.01) net loss per share.
  • $113.4 million in cash, cash equivalents and short-term investments at the end of the quarter, versus $121.9 million.

Non-GAAP Metrics:
  • Billings 1 of $76.1 million, up 2%.
  • Gross margin on billings 2 of 54.9%, versus 44.1%.
  • Non-GAAP net income of $6.9 million versus $4.9 million.
  • Non-GAAP income per fully-diluted share of $0.13, versus $0.10.

"We had another strong quarter, expanding our footprint by approximately 569,000 endpoints, commencing a large smart grid project, and winning additional awards since our last report," said Mike Bell, President and CEO, Silver Spring Networks. "Our third quarter results, and our high-profile awards in 2016, demonstrate the strong position we have built in our smart grid and smart city markets. We see significant potential for continued innovation and growth in our core markets, and a great opportunity to extend Silver Spring's platform and solutions into the broader Internet of Important Things™ opportunity."

1 Billings previously reported as non-GAAP revenue.

2 Gross margin on billings previously reported as non-GAAP gross margin.

Business Highlights (through November 3, 2016, unless otherwise stated):
  • Entered a new collaboration agreement with Singapore Power to expand its AMI deployment by an additional 200,000 electric customers, and to open the platform to other third-party IoT devices in support of Singapore's "Smart Nation" initiative.
  • Selected by CPFL Energia to significantly expand its Distribution Automation deployment across 100,000 square kilometers of its service territory over 350 cities in the state of São Paulo.
  • Selected by Baltimore Gas and Electric for a Distribution Automation program, an extension of its existing smart grid investment, to further improve grid reliability and efficiency with connectivity solutions for BGE's re-closers throughout their entire grid.
  • Selected by the City of Stockholm to deploy Starfish™ Network-as-a-Service to upgrade aging lighting infrastructure with intelligent street light controls in the capital of Sweden.
  • Named a Visionary in the Gartner Magic Quadrant 1 for Managed Machine-to-Machine Services, Worldwide.
  • Received prestigious industry awards, including Frost & Sullivan's Asia Pacific Smart Grid Service Provider of the Year Award, and the CTIA Emerging Technology Award for Industrial IoT. Our customer CESC of India won the 2016 Smart Grid Project of the Year award at the Asian Power Awards for its program with Silver Spring Networks.
  • Over 24.9 million cumulative network endpoints delivered from inception through September 30, 2016, up 12% from a year ago.

Conference Call

Silver Spring will host a conference call today at 2:00 pm PT (5:00 pm ET) to review its results for the third quarter ended September 30, 2016 and its outlook for the future. During the course of this call, Silver Spring may also disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live at 877-407-0832 (U.S.) or 201-689-8433 (International) or via webcast at http://ir.ssni.com. A dial-in replay of the conference call will be available until December 15, 2016 and can be accessed at 877-660-6853 (domestic) or 201-612-7415 (international) passcode 13648481. An audio webcast replay of the conference call will be available for one year at http://ir.ssni.com.

About Silver Spring Networks

Silver Spring Networks enables the Internet of Important Things™ by reliably and securely connecting things that matter. Cities, utilities, and companies on five continents use the company's cost-effective, high-performance IoT network and data platform to operate more efficiently, get greener, and enable innovative services that can improve the lives of millions of people. With more than 24.9 million devices delivered, Silver Spring provides a proven standards-based platform safeguarded with military grade security. Silver Spring Networks' customers include Baltimore Gas & Electric, CitiPower & Powercor, ComEd, Consolidated Edison, CPS Energy, Florida Power & Light, Pacific Gas & Electric, Pepco Holdings, and Singapore Power. Silver Spring has also deployed networks in Smart Cities including Copenhagen, Glasgow, Paris, Providence, and Stockholm. To learn more, visit www.ssni.com.

Non-GAAP and Other Financial Metrics

Silver Spring supplements the results of operations presented in accordance with generally accepted accounting principles, or GAAP, with certain non-GAAP metrics. Silver Spring manages its business, makes planning decisions, evaluates its performance and allocates resources by assessing non-GAAP metrics such as billings, recurring billings, recurring billings per endpoint, cost of billings, gross profit (loss) on billings, gross margin on billings, non-GAAP operating expense, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP income tax provision (benefit), non-GAAP net income (loss), non-GAAP income (loss) per share, adjusted EBITDA, and total backlog. Silver Spring believes that these non-GAAP financial metrics, when taken together with the corresponding GAAP financial measures, offer valuable supplemental information regarding the performance of its business, and will help investors better understand the sales volumes, and gross margin and profitability trends, as well as the cash flow characteristics, of its business. The non-GAAP metrics should not be considered in isolation from, are not a substitute for, and do not purport to be an alternative to, revenue, cost of revenue, gross profit (loss), gross margin, operating expense, operating loss, net income (loss), net income (loss) per share or any other performance measure derived in accordance with GAAP. Silver Spring may consider whether other significant non-recurring items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses.

Billings represents amounts invoiced for products for which ownership, typically evidenced by title and risk of loss, has transferred or services that have been provided to the customer, and for which payment is expected to be made in accordance with normal payment terms. Billings excludes amounts for undelivered products, services to be performed in the future, and amounts paid or payable to customers. Billings are initially recorded as deferred revenue and are then recognized as revenue when all revenue recognition criteria has been met under Silver Spring's accounting policies as described in Silver Spring's filings with the Securities and Exchange Commission. Silver Spring reconciles revenue to billings by adding revenue to the change in deferred revenue in a given period.

Recurring billings are billings from Managed services and SaaS, as well as customer support and other service offerings. Recurring billings are primarily recurring in nature and include managed services, hosting and software maintenance, and support fees, as well as one-time Managed services and SaaS set up fees. Customer support and other services are provided to customers outside of Managed services and SaaS offerings, and are also recurring in nature. Silver Spring reconciles recurring revenue to recurring billings by adding revenue to the change in deferred revenue in a given period.

Recurring billings per endpoint represents a trailing twelve-month recurring billings revenue per cumulative endpoint shipped from inception to date.

Cost of billings represents the cost associated with products and services that have been delivered to the customer, excluding stock-based compensation, amortization of intangibles and acquisition-related charges. Cost of product shipments for which revenue is not recognized in the period incurred is recorded as deferred cost of revenue. Deferred cost of revenue is expensed in the statement of operations as cost of revenue when the corresponding revenue is recognized. Costs related to services are expensed in the period incurred. Silver Spring reconciles cost of revenue to cost of billings by adding cost of revenue and the change in deferred cost of revenue, less stock-based compensation, amortization of intangibles and acquisition-related charges, included in cost of revenue in a given period.

Gross profit (loss) on billings is the difference between billings and cost of billings.

Gross margin on billings is gross profit (loss) on billings as a percentage of billings.

Non-GAAP operating expense consists of research and development, sales and marketing, and general and administrative expenses, excluding amortization of intangible assets, stock-based compensation, acquisition-related charges, restructuring and legal settlements.

Non-GAAP operating income (loss) represents operating income (loss) adjusted for billings and cost of billings and excludes expenses related to the amortization of intangible assets, stock-based compensation, acquisition-related charges, restructuring and legal settlements.

Non-GAAP operating margin is non-GAAP operating income (loss) as a percentage of billings.

Non-GAAP income tax provision (benefit) represents income tax provision (benefit) excluding income tax benefit related to acquisitions.

Non-GAAP net income (loss) represents net income (loss) adjusted for changes in deferred revenue and deferred cost of revenue, and excludes expenses related to the amortization of intangible assets, stock-based compensation, acquisition-related charges, income tax benefit related to acquisitions, restructuring and legal settlements.

Non-GAAP income (loss) per share represents non-GAAP net income (loss) divided by weighted average shares outstanding for the period.

Adjusted EBITDA is net income (loss) adjusted for changes in deferred revenue and deferred cost of revenue, other (income) expense, net, (benefit) provision for income taxes, depreciation and amortization, stock-based compensation, acquisition-related charges, restructuring, legal settlements and certain other items management believes affect the comparability of operating results.

Total backlog represents future product and service billings that Silver Spring expects to generate pursuant to contracts entered into with its utility customers and meter manufacturers. Total backlog includes order backlog, which represents future billings for open purchase orders and other firm commitments.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding the momentum in Silver Spring Networks' business; customer and industry activity; future deployments; expected benefits from our products; future innovation; future product availability; future growth and market opportunity; and future financial results. Statements including words such as "anticipate", "believe", "estimate" or "expect" and statements in the future tense are forward-looking statements. These forward-looking statements are preliminary estimates and expectations based on current information and are subject to business and economic risks and uncertainties that could cause actual events or actual future results to differ materially from the expectations set forth in the forward-looking statements. Important factors that could cause results to differ materially from the statements herein include: timing around customer decisions and deployment pace; receipt by our customers of required regulatory approvals; dependence on a limited number of customers and key suppliers; general economic risks; specific economic risks in different geographies and among different industries; failure to maintain or increase renewals and increase business from existing customers; uncertainties around continued success in sales growth and market share gains; the expansion of our target markets, including the IoT market; lengthy sales cycles with no assurances that a prospective customer will select Silver Spring's products and services; amounts included in backlog may not result in billings or revenue; adverse publicity about, or consumer or political opposition to, the smart grid; security breaches involving smart grid products or services; the ability to integrate technology into third-party devices and Silver Spring's relationship with third-party manufacturers; execution and customer adoption risks related to new product introductions and innovation, including our new fifth generation networking platform and products; the ability to attract and retain personnel, including members of Silver Spring's management team; changes in strategy; technological changes that make Silver Spring's products and services less competitive; competition, particularly from larger companies with more resources than Silver Spring; international business uncertainties; the ability to acquire and integrate other businesses; and other risk factors set forth from time to time in Silver Spring's filings with the SEC, copies of which are available free of charge at the SEC's website at www.sec.gov. All forward-looking statements in this press release reflect Silver Spring's expectations as of November 3, 2016. Silver Spring undertakes no obligation, and expressly disclaims any obligation, to update any forward-looking statements in this press release in light of new information or future events. In addition, the preliminary financial results set forth in this press release are estimates based on information currently available to Silver Spring.

3 Gartner, Magic Quadrant for Managed M2M Services, Worldwide, 17 October 2016

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
 
SILVER SPRING NETWORKS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
       
 
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Revenue:
Product $ 50,463 $ 50,093 $ 153,232 $ 209,839
Services   23,723     19,412     91,526     80,473  
Net revenue 74,186 69,505 244,758 290,312
 
Cost of revenue:
Product 29,249 21,377 86,668 118,527
Services   16,695     15,141     48,308     47,387  
Total cost of revenue 45,944 36,518 134,976 165,914
Gross profit 28,242 32,987 109,782 124,398
 
Operating expenses:
Research and development 18,165 15,837 51,583 47,581
Sales and marketing 10,425 7,900 28,597 26,109
General and administrative 11,667 9,305 33,752 31,889

Impairment of intangible assets
2,204 2,204
Restructuring       339     39     1,611  
Total operating expenses   42,461     33,381     116,175     107,190  
 
Operating (loss) income (14,219 ) (394 ) (6,393 ) 17,208
Other income (loss), net   113     (99 )   887     263  
(Loss) income before income taxes (14,106 ) (493 ) (5,506 ) 17,471
(Provision) benefit for income taxes   (1,143 )   (129 )   (2,136 )   637  
Net (loss) income $ (15,249 ) $ (622 ) $ (7,642 ) $ 18,108  
Net (loss) income per share:
Basic $ (0.29 ) $ (0.01 ) $ (0.15 ) $ 0.36  
Diluted $ (0.29 ) $ (0.01 ) $ (0.15 ) $ 0.35  
Weighted average shares used to compute net (loss) income per share:
Basic   51,743     50,188     51,244     49,789  
Diluted   51,743     50,188     51,244     51,257  
 
 
Reconciliation of GAAP to non-GAAP results (in thousands, except per share data)
The following tables reconcile the Company's net (loss) income and net (loss) income per share as presented in its unaudited Condensed Consolidated Statements of Operations and prepared in accordance with GAAP to its non-GAAP net income and non-GAAP net income per share.
 
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Net (loss) income $ (15,249 ) $ (622 ) $ (7,642 ) $ 18,108
Change in deferred revenue, net of foreign currency translation 1,958 5,192 (27,854 ) (83,376 )
Change in deferred cost of revenue, net of foreign currency translation 9,404 (6,712 ) 17,728 40,292
Amortization of intangibles 193 421 989 1,252
Stock-based compensation 7,898 5,853 21,839 21,537
Acquisition-related charges 508 559 1,534 2,045
Income tax benefit related to Detectent acquisition (114 ) (1,128 )
Restructuring 339 39 1,611

Impairment of intangible assets
  2,204         2,204      
Non-GAAP net income $ 6,916   $ 4,916   $ 8,837   $ 341  
Non-GAAP net income per share:
Basic $ 0.13   $ 0.10   $ 0.17   $ 0.01  
Diluted $ 0.13   $ 0.10   $ 0.17   $ 0.01  
Weighted average shares used to compute non-GAAP net income (loss) per share:
Basic   51,743     50,188     51,244     49,789  
Diluted   53,896     51,713     53,500     51,257  
 
 
SILVER SPRING NETWORKS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
   
 
September 30, December 31,
2016 2015 (a)
ASSETS
Current assets:
Cash and cash equivalents $ 48,048 $ 65,264
Short-term investments 65,310 59,181
Accounts receivable 45,031 47,813
Inventory 5,297 4,545
Deferred cost of revenue 196,301 196,868
Prepaid expenses and other current assets   11,552     10,835  
Total current assets 371,539 384,506
Property and equipment, net 29,800 14,106
Goodwill and intangible assets 11,197 14,390
Deferred cost of revenue, non-current 21,909 38,882
Deferred tax assets, non-current 993 1,069
Other long-term assets   2,004     4,772  
Total assets $ 437,442   $ 457,725  
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 22,430 $ 30,623
Deferred revenue 290,696 305,471
Accrued and other liabilities   39,211     42,751  
Total current liabilities 352,337 378,845
Deferred revenue, non-current 83,200 96,342
Other liabilities, non-current   23,202     16,403  
Total liabilities   458,739     491,590  
Total stockholders' deficit   (21,297 )   (33,865 )
Total liabilities and stockholders' deficit $ 437,442   $ 457,725  
 
(a) Derived from audited consolidated financial statements.
 
       
SILVER SPRING NETWORKS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2016   2015   2016   2015  
OPERATING ACTIVITIES
Net (loss) income $ (15,249 ) $ (622 ) $ (7,642 ) $ 18,108

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Deferred taxes (17 ) 172 94 (935 )

Impairment of intangible assets
2,204 2,204
Depreciation and amortization 2,096 1,990 6,332 5,892
Stock-based compensation 7,898 5,853 21,839 21,537
Other non-cash adjustments 659 230 772 354
Changes in assets and liabilities:
Accounts receivable 1,967 (2,568 ) 2,826 11,073
Inventory (2,811 ) 810 (750 ) 3,043
Prepaid expenses and other assets 1,013 (1,396 ) 2,957 (4,192 )
Landlord incentives related to lease 4,513 6,788

Contingent consideration related to Detectent acquisition held in escrow
(4,000 )
Deferred cost of revenue 9,359 (6,686 ) 17,595 40,308
Accounts payable (10,082 ) 2,239 (8,908 ) (131 )
Customer deposits 1,037 (1,307 ) 1,031 151
Deferred revenue 1,927 4,841 (28,061 ) (84,190 )
Accrued and other liabilities   631     716     (4,400 )   6,412  
Net cash provided by operating activities   5,145     4,272     12,677     13,430  
 
INVESTING ACTIVITIES

Payments for business acquisition, net of cash and cash equivalents acquired
(7,098 )
Proceeds from sales of available-for-sale investments 16,273 4,086 39,217 11,486
Proceeds from maturities of available-for-sale investments 8,720 1,500 10,970 9,250
Purchases of available-for-sale investments (45,401 ) (7,287 ) (56,355 ) (18,910 )
Purchases of property and equipment   (6,125 )   (1,617 )   (23,369 )   (3,529 )
Net cash (used in) investing activities   (26,533 )   (3,318 )   (29,537 )   (8,801 )
 
FINANCING ACTIVITIES
Payments on capital lease obligations (238 ) (285 ) (994 )
Proceeds from issuance of common stock 2,010 1,619 4,238 3,655
Taxes paid related to net share settlement of equity awards   (549 )   (456 )   (4,169 )   (3,968 )
Net cash provided by (used in) financing activities   1,461     925     (216 )   (1,307 )
Effect of exchange rate changes on cash and cash equivalents (4 ) (184 ) (140 ) (324 )
 
Net (decrease) increase in cash and cash equivalents (19,931 ) 1,695 (17,216 ) 2,998
Cash and cash equivalents - beginning of period   67,979     61,760     65,264     60,457  
Cash and cash equivalents - end of period $ 48,048   $ 63,455   $ 48,048   $ 63,455  
 
 
SILVER SPRING NETWORKS, INC.
UNAUDITED RECONCILIATION OF NET REVENUE BETWEEN GAAP AND NON-GAAP
(in thousands, except percentages)
           
Q3 Q4 Q1 Q2 Q3 YoY%

TYPE
2015 2015 2016 2016 2016 Change
Net revenue:
Product $ 50,093 $ 143,202 $ 32,852 $ 69,917 $ 50,463 1 %
Services
Managed services and SaaS 11,223 37,142 11,068 24,570 14,090 26 %
Professional services   8,189     18,903     4,700     27,465     9,633   18 %
Total services   19,412     56,045     15,768     52,035     23,723   22 %
Total net revenue $ 69,505   $ 199,247   $ 48,620   $ 121,952   $ 74,186   7 %
% Product 72 % 72 % 68 % 57 % 68 %
% Services 28 % 28 % 32 % 43 % 32 %
Change in deferred net revenue:
Change in deferred product revenue $ 1,785 $ (95,194 ) $ 12,883 $ (23,804 ) $ (568 )
Change in deferred services revenue:
Managed services and SaaS 1,397 (22,896 ) 1,820 (9,650 ) 1,641
Professional services   2,010     (6,169 )   5,591     (16,652 )   885  
Total change in deferred services revenue   3,407     (29,065 )   7,411     (26,302 )   2,526  
Total change in deferred revenue $ 5,192 $ (124,259 ) $ 20,294 $ (50,106 ) $ 1,958
Billings (1)
Product $ 51,878 $ 48,008 $ 45,735 $ 46,113 $ 49,895 -4 %
Services
Managed services and SaaS 12,620 14,246 12,888 14,920 15,731 25 %
Professional services   10,199     12,734     10,291     10,813     10,518   3 %
Total services   22,819     26,980     23,179     25,733     26,249   15 %
Total Billings (1) $ 74,697   $ 74,988   $ 68,914   $ 71,846   $ 76,144   2 %
% Product 69 % 64 % 66 % 64 % 66 %
% Services 31 % 36 % 34 % 36 % 34 %
 

RECURRING REVENUE PER ENDPOINT
Recurring revenue (TTM) $ 45,374 $ 71,947 $ 70,041 $ 84,003 $ 86,870

Change in deferred revenue, net of foreign currency translations
  4,349     (19,531 )   (17,292 )   (29,329 )   (29,085 )
Recurring Billings (TTM) (1) $ 49,723   $ 52,416   $ 52,749   $ 54,674   $ 57,785  
Cumulative network endpoints delivered 22,321 22,954 23,652 24,399 24,968
Recurring revenue per endpoint delivered $ 2.03 $ 3.13 $ 2.96 $ 3.44 $ 3.48 71 %
Recurring billings per endpoint delivered (1) $ 2.23 $ 2.28 $ 2.23 $ 2.24 $ 2.31 4 %
 

SOLUTION
Net revenue
Advanced metering infrastructure $ 60,149 $ 181,892 $ 40,514 $ 105,181 $ 66,203 10 %
New solutions   9,356     17,355     8,106     16,771     7,983   -15 %
Total net revenue $ 69,505   $ 199,247   $ 48,620   $ 121,952   $ 74,186   7 %
% Advanced metering infrastructure 87 % 91 % 83 % 86 % 89 %
% New solutions 13 % 9 % 17 % 14 % 11 %
Change in deferred net revenue
Advanced metering infrastructure $ 3,586 $ (123,525 ) $ 16,957 $ (45,184 ) $ (2,078 )
New solutions   1,606     (734 )   3,337     (4,922 )   4,036  
Total change in deferred net revenue $ 5,192 $ (124,259 ) $ 20,294 $ (50,106 ) $ 1,958
Billings (1)
Advanced metering infrastructure $ 63,735 $ 58,367 $ 57,471 $ 59,997 $ 64,125 1 %
New solutions   10,962     16,621     11,443     11,849     12,019   10 %
Total Billings (1) $ 74,697   $ 74,988   $ 68,914   $ 71,846   $ 76,144   2 %
% Advanced metering infrastructure 85 % 78 % 83 % 84 % 84 %
% New solutions 15 % 22 % 17 % 16 % 16 %
 

GEOGRAPHY
Net revenue
United States $ 53,113 $ 177,896 $ 45,222 $ 118,539 $ 43,381 -18 %
International   16,392     21,351     3,398     3,413     30,805   88 %
Total net revenue $ 69,505   $ 199,247   $ 48,620   $ 121,952   $ 74,186   7 %
% United States 76 % 89 % 93 % 97 % 58 %
% International 24 % 11 % 7 % 3 % 42 %
Change in deferred net revenue
United States $ 12,467 $ (116,859 ) $ 8,468 $ (57,666 ) $ 21,085
International   (7,275 )   (7,400 )   11,826     7,560     (19,127 )
Total change in deferred net revenue $ 5,192 $ (124,259 ) $ 20,294 $ (50,106 ) $ 1,958
Billings (1)
United States $ 65,580 $ 61,037 $ 53,690 $ 60,873 $ 64,466 -2 %
International   9,117     13,951     15,224     10,973     11,678   28 %
Total Billings (1) $ 74,697   $ 74,988   $ 68,914   $ 71,846   $ 76,144   2 %
% United States 88 % 81 % 78 % 85 % 85 %
% International 12 % 19 % 22 % 15 % 15 %
 
(1) We have revised the presentation of several of our non-GAAP financial measures previously reported.
 
           
SILVER SPRING NETWORKS, INC.
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
(in thousands, except percentages and headcount)
 
 
Q3 Q4 Q1 Q2 Q3 YoY%
CASH FLOW DATA 2015 2015 2016 2016 2016 Change
Operating cash flow $ 4,272 $ 6,257 $ 3,730 $ 3,802

(a)
$ 5,145 20 %
Operating cash flow - TTM 27,054 19,687 23,872 18,061

(a)
18,934 -30 %
 
BALANCE SHEET DATA
Cash, cash equivalents and short-term investments $ 121,915 $ 124,445 $ 125,369 $ 113,064 $ 113,358 -7 %
Deferred net revenue
Beginning of quarter $ 521,176 $ 526,000 $ 401,813 $ 421,987 $ 371,934
Add: billings during the quarter 74,697 74,988 68,914 71,846 76,144
Less: revenue recognized during the quarter (69,505 ) (199,247 ) (48,620 ) (121,952 ) (74,186 )
Foreign currency translation adjustment and other   (368 )   72     (120 )   53     4  
End of quarter $ 526,000   $ 401,813   $ 421,987   $ 371,934   $ 373,896  
Deferred cost of revenue
Beginning of quarter $ 286,044 $ 292,730 $ 235,750 $ 244,486 $ 227,559
Add: cost of billings during the quarter 41,759 39,640 38,779 38,817 34,364
Add: stock-based compensation, amortization of intangible assets, and acquisition related charges deferred during the quarter 1,471 1,280 1,512 1,600 2,176
Less: cost of revenue during the quarter (36,518 ) (97,902 ) (31,623 ) (57,409 ) (45,944 )
Foreign currency translation adjustment and other   (26 )   2     68     65     55  
End of quarter $ 292,730   $ 235,750   $ 244,486   $ 227,559   $ 218,210  
 
STOCK-BASED COMPENSATION
Cost of goods sold $ 1,197 $ 1,006 $ 1,328 $ 1,389 $ 2,082 74 %
Research and development 1,771 1,277 2,025 2,241 2,593 46 %
Sales and marketing 914 665 831 726 943 3 %
General and administrative   1,971     1,994     2,716     2,685     2,280   16 %
$ 5,853   $ 4,942   $ 6,900   $ 7,041   $ 7,898   35 %
EMPLOYEES 645 652 673 708 709 10 %
HOMES & BUSINESSES
Cumulative network endpoints delivered* 22,321 22,954 23,652 24,399 24,968 12 %
*Endpoints refer to communication modules in electric meters
(a)  

After the release of earnings disclosing the results of the three and six months ended June 30, 2016, we identified an adjustment in which cash provided by operating activities and cash used in investing activities were overstated by $0.3 million. This adjustment was reflected in the condensed consolidated statements of cash flows for the six months ended June 30, 2016, included in our Form 10-Q filed on August 9, 2016. The amounts for Q2'16 in the table above have been revised as such to reflect this adjustment.
 
           
SILVER SPRING NETWORKS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data and percentages)
 
Q3 Q4 Q1 Q2 Q3 YOY %
QUARTERLY RECONCILIATION OF RESULTS 2015 2015 2016 2016 2016 Change
 
Gross profit $ 32,987 $ 101,345 $ 16,997 $ 64,543 $ 28,242 -14 %
Change in deferred revenue, net of foreign currency translation 5,192 (124,259 ) 20,294 (50,106 ) 1,958
Change in deferred cost of revenue, net of foreign currency translation (6,712 ) 56,982 (8,668 ) 16,992 9,404
Amortization of intangible assets 260 259 169 195 79
Stock-based compensation 1,197 1,006 1,328 1,389 2,082
Acquisition-related charges   14     15     15     16     15  
Gross profit on billings (1) $ 32,938   $ 35,348   $ 30,135   $ 33,029   $ 41,780   27 %
Gross margin % (as a % of net revenue) 47 % 51 % 35 % 53 % 38 %
Gross margin on billings (1) 44 % 47 % 44 % 46 % 55 %
 
Operating expenses $ 33,381 $ 35,600 $ 35,920 $ 37,794 $ 42,461 27 %
Amortization of intangible assets (161 ) (163 ) (252 ) (180 ) (114 )
Stock-based compensation (4,656 ) (3,936 ) (5,572 ) (5,652 ) (5,816 )
Acquisition-related charges (545 ) (491 ) (501 ) (494 ) (493 )

Impairment of intangible assets
(2,204 )
Restructuring (339 ) (60 ) (39 )
Legal settlements       (3,595 )            
Non-GAAP operating expenses $ 27,680   $ 27,355   $ 29,556   $ 31,468   $ 33,834   22 %
 
Operating (loss) income $ (394 ) $ 65,745 $ (18,923 ) $ 26,749 $ (14,219 ) -3509 %
Change in deferred revenue, net of foreign currency translation 5,192 (124,259 ) 20,294 (50,106 ) 1,958
Change in deferred cost of revenue, net of foreign currency translation (6,712 ) 56,982 (8,668 ) 16,992 9,404
Amortization of intangible assets 421 422 421 375 193
Stock-based compensation 5,853 4,942 6,900 7,041 7,898
Acquisition-related charges 559 506 516 510 508

Impairment of intangible assets
2,204
Restructuring 339 60 39
Legal settlements       3,595              
Non-GAAP operating income $ 5,258   $ 7,993   $ 579   $ 1,561   $ 7,946   51 %
 
Income tax provision $ 129 $ 3,708 $ 32 $ 961 $ 1,143 786 %
Income tax benefit related to Detectent acquisition   114                  
Non-GAAP income tax provision $ 243   $ 3,708   $ 32   $ 961   $ 1,143   370 %
 
Net (loss) income $ (622 ) $ 61,878 $ (18,514 ) $ 26,121 $ (15,249 ) -2352 %
Change in deferred revenue, net of foreign currency translation 5,192 (124,259 ) 20,294 (50,106 ) 1,958
Change in deferred cost of revenue, net of foreign currency translation (6,712 ) 56,982 (8,668 ) 16,992 9,404
Other expense (income), net 99 159 (441 ) (333 ) (113 )
Provision for income taxes 129 3,708 32 961 1,143
Depreciation and amortization 1,990 1,930 2,132 2,104 2,096
Stock-based compensation 5,853 4,942 6,900 7,041 7,898
Acquisition-related charges 559 506 516 510 508

Impairment of intangible assets
2,204
Restructuring 339 60 39
Legal settlements       3,595              
Adjusted EBITDA $ 6,827   $ 9,501   $ 2,290   $ 3,290   $ 9,849   44 %
 
(1) We have revised the presentation of several of our non-GAAP financial measures previously reported.
 
 

SILVER SPRING NETWORKS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in thousands, except percentages)
               
Three Months Ended September 30, 2016
Gross Profit Gross Margin

Change in Deferred Revenue and Deferred Cost of Revenue (a)

Stock-based Compensation

Amortization of Intangible Assets

Acquisition- Related Costs

Gross Profit on Billings (b)

Gross Margin on Billings (b)
Product $ 21,214 42.0 % $ 8,836 $ 515 $ 79 $ - $ 30,644 61.4 %
Services
Managed services and SaaS 4,612 32.7 % 1,641 719 - 15 6,987 44.4 %
Professional services   2,416 25.1 %   885     848   -   -   4,149 39.4 %
Total services   7,028 29.6 %   2,526     1,567   -   15   11,136 42.4 %
Total gross profit $ 28,242 38.1 % $ 11,362   $ 2,082 $ 79 $ 15 $ 41,780 54.9 %
 
 
Three Months Ended September 30, 2015
Gross Profit Gross Margin

Change in Deferred Revenue and Deferred Cost of Revenue (a)

Stock-based Compensation

Amortization of Intangible Assets

Acquisition-R elated Costs

Gross Profit on Billings (b)

Gross Margin on Billings (b)
Product $ 28,716 57.3 % $ (4,927 ) $ 252 $ 260 $ - $ 24,301 46.8 %
Services
Managed services and SaaS 3,137 28.0 % 1,397 438 - 14 4,986 39.5 %
Professional services   1,134 13.8 %   2,010     507   -   -   3,651 35.8 %
Total services   4,271 22.0 %   3,407     945   -   14   8,637 37.9 %
Total gross profit $ 32,987 47.5 % $ (1,520 ) $ 1,197 $ 260 $ 14 $ 32,938 44.1 %
 
 
Nine Months Ended September 30, 2016
Gross Profit Gross Margin

Change in Deferred Revenue and Deferred Cost of Revenue (a)

Stock-based Compensation

Amortization of Intangible Assets

Acquisition-R elated Costs

Gross Profit on Billings (b)

Gross Margin on Billings (b)
Product $ 66,564 43.4 % $ 6,239 $ 1,282 $ 443 $ - $ 74,528 52.6 %
Services
Managed services and SaaS 22,718 45.7 % (6,189 ) 1,689 - 46 18,264 41.9 %
Professional services   20,500 49.0 %   (10,176 )   1,828   -   -   12,152 38.4 %
Total services   43,218 47.2 %   (16,365 )   3,517   -   46   30,416 40.5 %
Total gross profit $ 109,782 44.9 % $ (10,126 ) $ 4,799 $ 443 $ 46 $ 104,944 48.4 %
 
 
Nine Months Ended September 30, 2015
Gross Profit Gross Margin

Change in Deferred Revenue and Deferred Cost of Revenue (a)

Stock-based Compensation

Amortization of Intangible Assets

Acquisition- Related Costs

Gross Profit on Billings (b)

Gross Margin on Billings (b)
Product $ 91,312 43.5 % $ (31,972 ) $ 1,039 $ 782 $ - $ 61,161 44.5 %
Services
Managed services and SaaS 10,734 30.8 % 3,365 1,680 - 85 15,864 41.6 %
Professional services   22,352 48.9 %   (14,477 )   2,410   -   -   10,285 33.0 %
Total services   33,086 41.1 %   (11,112 )   4,090   -   85   26,149 37.7 %
Total gross profit $ 124,398 42.8 % $ (43,084 ) $ 5,129 $ 782 $ 85 $ 87,310 42.2 %
 
(a) Amounts presented net of foreign currency translation.
(b) We have revised the presentation of several of our non-GAAP financial measures previously reported.

View source version on businesswire.com: http://www.businesswire.com/news/home/20161103006609/en/

Copyright Business Wire 2010

If you liked this article you might like

Tech, Energy and Financial Stocks Are Set to Reap Highest Returns for Investors in 2017

Tech, Energy and Financial Stocks Are Set to Reap Highest Returns for Investors in 2017

4 Stocks That Belong in Your Portfolio Now

4 Stocks That Belong in Your Portfolio Now

Insider Trading Alert - CMS, SSNI And FN Traded By Insiders

Insider Trading Alert - CMS, SSNI And FN Traded By Insiders

Silver Spring Networks (SSNI) Is Strong On High Volume Today

Silver Spring Networks (SSNI) Is Strong On High Volume Today

Insider Trading Alert - SSNI, NSH And HCAP Traded By Insiders

Insider Trading Alert - SSNI, NSH And HCAP Traded By Insiders