Silver Spring Networks Reports First Quarter 2013 Financial Results

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Silver Spring Networks Reports First Quarter 2013 Financial Results

Q1 Non-GAAP Revenue Growth of 24%


16.5 Million Cumulative Network Endpoints Delivered to Date

REDWOOD CITY, Calif.--(BUSINESS WIRE)-- Silver Spring Networks, Inc. (NYS: SSNI) today announced preliminary unaudited financial results for its first quarter ended March 31, 2013.

Non-GAAP revenue (billings) for the first quarter was $73.8 million, up 24% year-over-year, driven by growth in product and service revenue. GAAP revenue was $53.7 million as compared to $55.5 million a year ago.

Non-GAAP gross profit margins were 29.2%, down as expected when compared to 38.4% a year ago, due to changes in non-GAAP revenue mix. GAAP gross profit margins were 18.9% as compared to 18.2% a year ago.

Non-GAAP net loss was $8.4 million as compared with a non-GAAP net loss of $5.3 million a year ago. GAAP net loss was $64.4 million as compared with a GAAP net loss of $18.4 million a year ago. GAAP net loss includes non-cash charges of $42.1 million in connection with Silver Spring's initial public offering. In addition, Silver Spring recorded a non-cash deemed dividend of $105.0 million related to anti-dilution provisions of certain shares of preferred stock that were triggered by the initial public offering.

Silver Spring ended the quarter with cash of $142.4 million.

"We had a good first quarter with 24% growth and we signed some terrific new customers," said Scott Lang, Chairman, President, and Chief Executive Officer. "We are seeing strong global market interest for our leading networking platform, solutions and services as utilities look to modernize their power grid with technology. We are committed to extending our technology leadership and delivering significant benefits for our customers."

Business Highlights (through May 1, 2013)

  • 16.5 million cumulative network endpoints delivered from inception through March 31, 2013 - up 27% from a year ago.
  • Dominion Virginia Power contract extension to network homes and businesses in Virginia.
  • Masers Energy project to bring smart grid and smart city benefits to Malaysia.
  • SP PowerAssets (Singapore Power) agreement for an advanced metering project in Singapore.
  • CPS Energy, the largest municipal utility in the United States, contract for networking platform, advanced metering and distribution automation solutions.
  • Extending networking platform and solutions for the unique needs of municipal and cooperative utilities.
  • Priced initial public offering on March 12, 2013 and closed the offering on March 18, 2013, raising $86.2 million, net of commissions.

Conference Call

Silver Spring will host a conference call today at 1:30 pm PT (4:30 pm ET) to review its results for the first quarter ended March 31, 2013 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 888-218-8059 (U.S.) or 913-312-0390 (International), access code 4825924 or via webcast at http://ir.silverspringnet.com.

About Silver Spring Networks

Silver Spring Networks is a leading networking platform and solutions provider for smart energy networks. Silver Spring's pioneering IPv6 networking platform, with 16.5 million Silver Spring enabled devices delivered, is connecting utilities to homes and business throughout the world with the goal of achieving greater energy efficiency for the planet. Silver Spring's innovative solutions enable utilities to gain operational efficiencies, improve grid reliability, and empower consumers to monitor and manage energy consumption. Silver Spring Networks' customers include major utilities around the globe such as Baltimore Gas & Electric, CitiPower & Powercor, Commonwealth Edison, CPS Energy, Florida Power & Light, Jemena Electricity Networks Limited, Pacific Gas & Electric, Pepco Holdings, Progress Energy, and Singapore Power, among others. To learn more, please visit www.silverspringnet.com.

Non-GAAP Financial Measures

Silver Spring believes that its results of operations under generally accepted accounting principles, or GAAP, when considered in isolation, may only provide limited insight into the performance of its business in any given period. As a result, Silver Spring manages its business, makes planning decisions, evaluates its performance and allocates resources by assessing non-GAAP measures such as non-GAAP revenue (billings), cost of non-GAAP revenue (billings), non-GAAP gross profit (loss), non-GAAP operating loss, non-GAAP net loss, non-GAAP earnings (loss) per share, and adjusted EBITDA, in addition to other financial measures presented in accordance with GAAP. Silver Spring believes that these non-GAAP 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. These non-GAAP measures 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), operating loss, net loss, 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.

Non-GAAP revenue (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. Non-GAAP revenue excludes amounts for undelivered products, services to be performed in the future, and amounts paid or payable to customers. Non-GAAP revenue is initially recorded as deferred revenue and is recognized as GAAP revenue when all revenue recognition criteria have 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.

Cost of non-GAAP revenue (billings) represents the cost associated with products and services that have been delivered to the customer, excluding stock-based compensation and amortization of intangibles. 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 non-GAAP cost of revenue by adding cost of revenue to the change in deferred cost of revenue, less stock-based compensation and amortization of intangibles included in cost of revenue, in a given period.

Non-GAAP gross profit (loss) is the difference between non-GAAP revenue and cost of non-GAAP revenue.

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

Non-GAAP net loss represents net loss adjusted for non-GAAP revenue and cost of non-GAAP revenue, and excludes expenses related to the amortization of intangible assets, legal settlements, stock-based compensation, changes in fair value of preferred stock warrant liabilities and embedded derivatives, and loss on extinguishment of promissory notes.

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

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

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, future growth 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: 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; 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 risks related to new product introductions and innovation; 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; dependence on a limited number of key suppliers and customers; competition, particularly from larger companies with more resources than Silver Spring; risks related to retention of management; 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 May 1, 2013. 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. While Silver Spring believes these estimates are meaningful, they could differ from the actual amounts that Silver Spring ultimately reports in its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2013. Silver Spring assumes no obligation and does not intend to update these estimates prior to filing its Form 10-Q for the fiscal quarter ended March 31, 2013.

 
SILVER SPRING NETWORKS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
  
Three Months Ended
March 31,
20132012
Revenue:
Product revenue$41,720$47,940
Service revenue 11,983  7,514 
Net revenue53,70355,454
 
Cost of revenue:
Product cost of revenue25,74333,380
Service cost of revenue 17,826  12,007 
Total cost of revenue43,56945,387
 

Gross profit

10,134

10,067
 
Operating expenses:
Research and development25,11915,970
Sales and marketing10,4538,291
General and administrative 14,136  7,505 
Total operating expenses

49,708

31,766

 
Operating loss(39,574)(21,699)
 
Other income (expense)
Interest expense(1,052)(924)
Conversion of promissory notes and remeasurement of warrants and derivatives (23,676) 4,249 
Other income (expense), net(24,728)3,325
 
Loss before provision for income taxes(64,302)(18,374)
 
Provision for income taxes 64  58 
Net loss(64,366)(18,432)
 
Deemed dividend to convertible preferred stockholders (105,000) - 
Net loss attributable to common stockholders$(169,366)$(18,432)
 
Net loss per share
Basic & diluted net loss per share attributable to common stockholders$(16.18)$(5.06)
 
Weighted average number of shares used in computation
Basic & diluted10,4693,641
 
Non-GAAP results (in thousands, except per share data)

The following tables reconcile the Company's net loss and loss per share as presented in its unaudited Condensed Consolidated Statements of Operations and prepared in accordance with GAAP to its non-GAAP net loss and non-GAAP loss per share.

 
 
Three Months Ended
March 31,
20132012
Net loss$(64,366)$(18,432)
Change in deferred revenue, net of foreign currency translation20,0684,049
Change in deferred cost of revenue, net of foreign currency translation(15,423)7,894
Amortization of intangibles in cost of revenue4848
Conversion of promissory notes and remeasurement of warrants and derivatives23,676(4,249)
Convertible notes accretion / interest935706
Stock-based compensation26,6684,717
 
Non-GAAP net income (loss)$(8,394)$(5,267)
 
Non-GAAP loss per share
Basic & diluted$(0.80)$(1.45)
 
Weighted average number of shares used in computation
Basic & diluted10,4693,641
 
SILVER SPRING NETWORKS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)
  
 
March 31,December 31,
2013

2012 (a)

ASSETS
Current assets:
Cash and cash equivalents$142,354$72,646
Accounts receivable49,98956,528
Inventory12,2957,731
Deferred cost of revenue73,69945,298
Prepaid expenses and other current assets 4,560  3,456 
 

Total current assets

282,897185,659
 
Property and equipment, net12,36812,701
Deferred cost of revenue, non-current186,873199,865
Deferred tax assets, non-current8,2738,265

Other long-term assets

3,89411,254
  
TOTAL ASSETS$494,305 $417,744 
 
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable$26,548$28,104
Accrued liabilities17,78214,831
Deferred revenue169,10589,838
Current portion of capital lease obligations1,4751,647
Deferred tax liability 7,897  7,897 
 

Total current liabilities

222,807142,317
 
Deferred revenue, non-current359,071418,218
Preferred stock warrant liability-11,261
Convertible promissory notes and embedded derivatives-56,319
Other liabilities16,42618,412
 
Convertible preferred stock:
$0.001 par value; no shares authorized, issued and outstanding, and aggregate liquidation preference of $0 as of March 31, 2013; 26,072 shares authorized, 22,366 shares issued and outstanding, and aggregate liquidation preference of $381,338 as of December 31, 2012-270,725
 
Stockholders' equity (deficit):
Preferred stock, $0.001 par value, 10,000 shares authorized and no shares issued or outstanding as of March 31, 2013; no shares authorized, issued or outstanding,as of December 31, 2012--
Common stock, $0.001 par value; 1,000,000 shares authorized, 46,551 shares issued and outstanding as of March 31, 2013; 80,000 shares authorized and 3,764 shares issued and outstanding as of December 31, 2012464
Additional paid-in capital510,86451,078
Accumulated other comprehensive income(89)(136)
Accumulated deficit (614,820) (550,454)
 
Total stockholders' deficit(103,999)(499,508)
  
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT$494,305 $417,744 
 
(a) Derived from audited consolidated financial statements
 
SILVER SPRING NETWORKS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
          
Three Months Ended
March 31,
20132012
 
OPERATING ACTIVITIES
 

Net loss

$(64,366)$(18,432)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization1,6771,787
Stock-based compensation26,6684,717
Conversion of promissory notes and remeasurement of warrants and derivatives23,676(4,249)
Other non-cash adjustments Read Full Story

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