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Q4 2011 Earnings Call
February 09, 2012 5:00 pm ET
Annie Leschin -
William R. Slakey - Chief Financial Officer
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
Paul Coster - JP Morgan Chase & Co, Research Division
Previous Statements by ELON
» Echelon's CEO Discusses Q3 2011 Results - Earnings Call Transcript
» Echelon's CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Echelon's CEO Discusses Q1 2011 Results - Earnings Call Transcript
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?
William R. Slakey
Thanks, Ron. Good afternoon, everyone and thank you for joining us. Let me start by saying I'm excited to be a part of the Echelon team and I look forward to meeting many of you at upcoming events and conferences.
In my remarks, please note that all references to non-GAAP amounts exclude stock-based compensation and restructuring charges. For ease of reference, we have prepared a complete non-GAAP statement of operations for the quarter ended December 31, 2011, which can be found on the Investor Relations section of our website. I'd also like to note that we have made a change to the way we will report revenues going forward. In keeping with Echelon's systems and subsystems strategy and recent changes to the sales organization, we will now report revenues separately for system sales and subsystems sales rather than associate revenue with the markets we sell into. For example, in the fourth quarter, system sales equated to our previous utility sales. And subsystem sales were a combination of our commercial sales and Enel revenue. Going forward, sales of components and subsystems to partners such as ELO in Brazil and Holley in China will be categorized as subsystem sales rather than utility sales. Additionally, we will continue to report Enel revenue separately to you into its affiliate status.
So starting with Slide 12, as Ron discussed, financial results for 2011 included very strong revenue growth and a significant reduction in the non-GAAP operating loss. Results for Q4 included a non-GAAP operating loss that was slightly better than the company's guidance in November. I will discuss guidance for Q1 in a moment.
Turning to Slide 14. Revenues for the fourth quarter were $40.5 million, up 4.4% from $38.8 million in the fourth quarter of 2010. The majority of this growth was driven by system sales of $26.4 million, up from $25.3 million a year ago. Fourth quarter subsystem sales were $14.2 million, comprised of $12 million in commercial revenues and $2.2 million from Enel. In aggregate, subsystem revenues increased slightly from $13.5 million in the fourth quarter of 2010, driven by higher revenue from Enel.
Turning to Slide 15, for the year, total company revenues increased 41% to $156.5 million. Systems revenue increased 74% to $99.4 million, and accounted for 64% of total revenue. Subsystems revenue increased 6% to $57.1 million and accounted for 36% of total revenue.
Moving to Slide 16. Fourth quarter non-GAAP gross margin was 40.0%, down from 44.3% a year ago and from 41.4% in the third quarter. The sequential decline in gross margins was due primarily to higher shipments of the CNX 3000 module in meters that we delivered to Fortum.