Silver Spring Networks Reports Third Quarter 2015 Financial Results

$0.10 non-GAAP Earnings Per Share on $75 million Top-Line
51% Growth in non-GAAP Gross Profit
29% Growth in Endpoints Delivered
$4 Million in Positive Cash Flow from Operations

REDWOOD CITY, Calif.--()--Silver Spring Networks, Inc. (NYSE:SSNI) today announced financial results for its third quarter ended September 30, 2015.

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

  • Non-GAAP revenue $74.7 million, up 5%.
  • GAAP revenue $69.5 million, up 148%.
  • Non-GAAP gross margin 44%, up 13 points.
  • GAAP gross margin 47%, up 42 points.
  • Non-GAAP net income $4.9 million versus a net loss of ($7.0) million.
  • GAAP net loss ($0.6) million versus ($37.3) million.
  • Non-GAAP earnings per share $0.10 versus ($0.14) loss per share.
  • GAAP loss per share ($0.01) versus ($0.77) loss per share.
  • $121.9 million net cash and short-term investments balance, on $4.3 million in cash flow from operations.

“We had another great quarter, expanding our footprint by delivering over 800,000 endpoints, achieving record gross margins, and generating solid cash flow,” said Scott Lang, Executive Chairman. “Our third quarter results demonstrate the strength of our business model and the leadership position we have built over the past decade.”

“I am excited to join Silver Spring Networks,” said Mike Bell, President and CEO. My first few months as CEO have reinforced my view of the strength of Silver Spring’s technology platform, business model and established leadership position at some of the world’s leading utilities and most iconic cities. I see significant potential for continued innovation and growth in our core smart grid and smart city markets, and longer term look to leverage our technology and platform into the broader Internet of Things opportunity.”

Business Highlights (through November 3, 2015, unless otherwise stated):

  • Delivered record 44% non-GAAP gross margin performance in the third quarter, due to growth, favorable product mix and manufacturing efficiencies.
  • Selected by Halifax, Nova Scotia Canada, to deploy our smart street light solution to network and control 43,000 LED luminaires over its 400,000 residents and over 12,000 square mile geographic area.
  • Expanded smart cities opportunity through an agreement with Acuity Brands, to jointly develop an intelligent lighting platform for utilities, cities and large campus operators.
  • Consumers Energy of Michigan launched its innovative consumer engagement and energy efficiency program, offering advanced capabilities to nearly 3 million residential electric and natural gas customers, on Silver Spring’s CustomerIQ Suite.
  • AusNet Services successfully connected their first installations of Silver Spring-powered advanced metering just 5 months after contract signing.
  • Unveiled several new innovative products, including SLV6, our next generation smart city control and management platform with more than 100 new features to expand support for smart city deployments and create more value for existing street light networks, and Operations Optimizer, the next generation of the flagship solution from Detectent that supports AMI Operations, Grid Operations, Revenue Assurance and Customer Programs.
  • 22.3 million cumulative network endpoints delivered from inception through September 30, 2015, up 13% from a year ago.

Conference Call

Silver Spring will host a conference call today at 1:15 pm PT (4:15 pm ET) to review its results for the Third quarter ended September 30, 2015 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.silverspringnet.com. A dial-in replay of the conference call will be available until November 23, 2015 and can be accessed at 877-660-6853 (domestic) or 201-612-7415 (international) passcode 13622294. An audio webcast replay of the conference call will be available for one year 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 over 22.3 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 and Other 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, recurring non-GAAP revenue, recurring non-GAAP revenue per endpoint, cost of non-GAAP revenue, non-GAAP gross profit (loss), non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP income (loss) per share, adjusted EBITDA, and total backlog, in addition to other financial measures presented in accordance with GAAP. Silver Spring believes that these non-GAAP and other 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 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), gross margin, 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.

Non-GAAP revenue 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 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 non-GAAP revenue by adding revenue to the change in deferred revenue in a given period.

Recurring non-GAAP revenue is non-GAAP revenue from managed services and SaaS, as well as customer support and other service offerings. Recurring non-GAAP revenue is primarily recurring in nature and includes 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 GAAP revenue to recurring non-GAAP revenue by adding revenue to the change in deferred revenue in a given period.

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

Cost of non-GAAP revenue 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 non-GAAP revenue 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.

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

Non-GAAP operating income (loss) represents operating income (loss) adjusted for non-GAAP revenue and cost of non-GAAP revenue 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 non-GAAP revenue.

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; future deployments; future innovation; 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: 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; 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, 2015. 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.

 

SILVER SPRING NETWORKS

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

     
Three Months Ended Nine Months Ended
September 30, September 30,
2015   2014   2015   2014  
Revenue:
Product revenue $ 50,093 $ 16,321 $ 209,839 $ 69,299
Service revenue   19,412     11,720     80,473     44,578  
Net revenue 69,505 28,041 290,312 113,877
 
Cost of revenue:
Product cost of revenue 21,377 10,791 118,527 42,120
Service cost of revenue   15,141     15,947     47,387     45,598  
Total cost of revenue 36,518 26,738 165,914 87,718
Gross profit 32,987 1,303 124,398 26,159
 
Operating expenses:
Research and development 15,837 16,986 47,581 52,053
Sales and marketing 7,900 10,248 26,109 28,325
General and administrative 9,305 9,601 31,889 33,156
Restructuring   339     1,888     1,611     1,888  
Total operating expenses   33,381     38,723     107,190     115,422  
 
Operating (loss) income (394 ) (37,420 ) 17,208 (89,263 )
Other (expense) income, net   (99 )   7     263     55  
(Loss) income before income taxes (493 ) (37,413 ) 17,471 (89,208 )
(Provision) benefit for income taxes   (129 )   140     637     (463 )
Net (loss) income $ (622 ) $ (37,273 ) $ 18,108   $ (89,671 )
Net (loss) income per share:
Basic $ (0.01 ) $ (0.77 ) $ 0.36   $ (1.86 )
Diluted $ (0.01 ) $ (0.77 ) $ 0.35   $ (1.86 )
Weighted average shares used to compute net (loss) income per share:
Basic   50,188     48,551     49,789     48,189  
Diluted   50,188     48,551     51,257     48,189  
 
 
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 (loss) and non-GAAP net income (loss) per share.
 
Three Months Ended Nine Months Ended
September 30, September 30,
2015   2014   2015   2014  
Net (loss) income $ (622 ) $ (37,273 ) $ 18,108 $ (89,671 )
Change in deferred revenue, net of foreign currency translation 5,192 42,847 (83,376 ) 92,465
Change in deferred cost of revenue, net of foreign currency translation (6,712 ) (25,244 ) 40,292 (62,302 )
Amortization of intangibles 421 299 1,252 395
Stock-based compensation 5,853 10,476 21,537 31,470
Acquisition-related charges 559 2,045
Income tax benefit related to Detectent acquisition (114 ) (1,128 )
Restructuring 339 1,888 1,611 1,888
Legal settlements               (100 )
Non-GAAP net income (loss) $ 4,916   $ (7,007 ) $ 341   $ (25,855 )
Non-GAAP net income (loss) per share:
Basic $ 0.10   $ (0.14 ) $ 0.01   $ (0.54 )
Diluted $ 0.10   $ (0.14 ) $ 0.01   $ (0.54 )
Weighted average shares used to compute Non-GAAP net income (loss) per share:
Basic   50,188     48,551     49,789     48,189  
Diluted   51,713     48,551     51,257     48,189  
 
   
SILVER SPRING NETWORKS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
September 30, December 31,
2015   2014 (a )
ASSETS
Current assets:
Cash and cash equivalents $ 63,455 $ 60,457
Short-term investments 58,460 60,339
Accounts receivable 44,125 54,740
Inventory 3,761 6,722
Deferred cost of revenue 196,602 29,585
Deferred tax assets 357 5,278
Prepaid expenses and other current assets   9,596     5,146  
Total current assets 376,356 222,267
Property and equipment, net 12,326 12,860
Goodwill and intangible assets 14,885 8,221
Deferred cost of revenue, non-current 96,128 303,445
Deferred tax assets, non-current 25,033 354
Other long-term assets   5,088     1,047  
Total assets $ 529,816   $ 548,194  
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 28,083 $ 27,530
Deferred revenue 320,241 91,688
Deferred tax liability 24,879 249
Accrued and other liabilities   34,257     24,421  
Total current liabilities 407,460 143,888
Deferred revenue, non-current 205,759 517,905
Deferred tax liability, non-current 5,146
Other liabilities   15,850     15,074  
Total liabilities   629,069     682,013  
Total stockholders’ deficit   (99,253 )   (133,819 )
Total liabilities and stockholders’ deficit $ 529,816   $ 548,194  
 
(a) Derived from audited consolidated financial statements
 
       
SILVER SPRING NETWORKS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2015   2014   2015   2014  
OPERATING ACTIVITIES
Net (loss) income $ (622 ) $ (37,273 ) $ 18,108 $ (89,671 )
Adjustments to reconcile net (loss) income
to net cash provided by (used in) operating activities:
Deferred taxes 172 11 (935 ) 917
Depreciation and amortization 1,990 1,771 5,892 4,704
Stock-based compensation 5,853 10,476 21,537 31,470
Other non-cash adjustments 230 386 354 511
Changes in assets and liabilities:
Accounts receivable (2,568 ) (9,791 ) 11,073 1,795
Inventory 810 56 3,043 (161 )
Prepaid expenses and other assets (1,396 ) 924 (4,192 ) (2,590 )
Contingent consideration related to
Detectent acquisition held in escrow (4,000 )
Deferred cost of revenue (6,686 ) (25,175 ) 40,308 (62,510 )
Accounts payable 2,239 237 (131 ) (3,165 )
Customer deposits (1,307 ) (71 ) 151 33
Deferred revenue 4,841 42,310 (84,190 ) 92,413
Accrued and other liabilities   716     405     6,412     3,865  

Net cash provided by (used in) operating activities

  4,272     (15,734 )   13,430     (22,389 )
 
INVESTING ACTIVITIES
Payments for business acquisition,
net of cash and cash equivalents acquired (7,098 ) (8,750 )
Proceeds from sales of available-for-sale investments 4,086 7,151 11,486 42,459
Proceeds from maturities of available-for-sale investments 1,500 9,250 6,750
Purchases of available-for-sale investments (7,287 ) (7,120 ) (18,910 ) (46,621 )
Purchases of property and equipment   (1,617 )   (524 )   (3,529 )   (4,222 )
Net cash used in investing activities   (3,318 )   (493 )   (8,801 )   (10,384 )
 
FINANCING ACTIVITIES
Payments on capital lease obligations (238 ) (397 ) (994 ) (1,145 )
Proceeds from issuance of common stock, net of repurchases 1,619 2,099 3,655 6,846
Taxes paid related to net share settlement of equity awards   (456 )   (147 )   (3,968 )   (5,410 )
Net cash provided by (used in) financing activities   925     1,555     (1,307 )   291  
Effect of exchange rate changes on cash and cash equivalents (184 ) (324 )
 
Net increase (decrease) in cash and cash equivalents 1,695 (14,672 ) 2,998 (32,482 )
Cash and cash equivalents - beginning of period   61,760     64,786     60,457     82,596  
Cash and cash equivalents - end of period $ 63,455   $ 50,114   $ 63,455   $ 50,114  
 
 
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

2014   2014   2015   2015   2015   Change
GAAP net revenue:
Product net revenue $ 16,321 $ 60,034 $ 105,035 $ 54,711 $ 50,093 207 %
Service net revenue
Managed services and SaaS (a) 7,546 10,569 12,974 10,608 11,223 49 %
Professional services (a)   4,174     6,808     25,631     11,848     8,189   96 %
Total service net revenue   11,720     17,377     38,605     22,456     19,412   66 %
Total GAAP net revenue $ 28,041   $ 77,411   $ 143,640   $ 77,167   $ 69,505   148 %
% Product 58 % 78 % 73 % 71 % 72 %
% Service 42 % 22 % 27 % 29 % 28 %
Change in deferred net revenue:
Change in deferred product revenue $ 33,238 $ (9,991 ) $ (64,034 ) $ (10,015 ) $ 1,785
Change in deferred service revenue:
Managed services and SaaS 3,960 984 (419 ) 2,387 1,397
Professional services   5,649     1,962     (16,088 )   (399 )   2,010  
Total change in deferred service revenue   9,609     2,946     (16,507 )   1,988     3,407  
Total change in deferred revenue $ 42,847 $ (7,045 ) $ (80,541 ) $ (8,027 ) $ 5,192
Non-GAAP revenue:
Product net revenue 49,559 50,043 41,001 44,696 51,878 5 %
Service net revenue:
Managed services and SaaS (a) 11,506 11,553 12,555 12,995 12,620 10 %
Professional services (a)   9,823     8,770     9,543     11,449     10,199   4 %
Total service net revenue   21,329     20,323     22,098     24,444     22,819   7 %
Total non-GAAP net revenue $ 70,888   $ 70,366   $ 63,099   $ 69,140   $ 74,697   5 %
% Product 70 % 71 % 65 % 65 % 69 %
% Service 30 % 29 % 35 % 35 % 31 %

RECURRING REVENUE PER ENDPOINT

Recurring GAAP revenue (TTM) (a) $ 32,987 $ 35,220 $ 39,673 $ 41,697 $ 45,374
Changes in deferred revenue, net of foreign currency translations   9,688     9,284     6,851     6,912     4,349  
Recurring non-GAAP revenue (TTM) (a) $ 42,675   $ 44,504   $ 46,524   $ 48,609   $ 49,723  
Cumulative network endpoints delivered 19,714 20,266 20,814 21,506 22,321
Recurring GAAP revenue per endpoint delivered (a) $ 1.67 $ 1.74 $ 1.91 $ 1.94 $ 2.03 21 %
Recurring non-GAAP revenue per endpoint delivered (a) $ 2.16 $ 2.20 $ 2.24 $ 2.26 $ 2.23 3 %
 

SOLUTION

GAAP net revenue
Advanced metering infrastructure $ 21,417 $ 72,456 $ 112,865 $ 66,907 $ 60,149 181 %
New solutions   6,624     4,955     30,775     10,260     9,356   41 %
Total GAAP net revenue $ 28,041   $ 77,411   $ 143,640   $ 77,167   $ 69,505   148 %
% Advanced metering infrastructure 76 % 94 % 79 % 87 % 87 %
% New solutions 24 % 6 % 21 % 13 % 13 %
Change in deferred net revenue
Advanced metering infrastructure $ 39,828 $ (12,441 ) $ (64,828 ) $ (10,976 ) $ 3,586
New solutions   3,019     5,396     (15,713 )   2,949     1,606  
Total change in deferred net revenue $ 42,847 $ (7,045 ) $ (80,541 ) $ (8,027 ) $ 5,192
Non-GAAP net revenue
Advanced metering infrastructure $ 61,245 $ 60,015 $ 48,037 $ 55,931 $ 63,735 4 %
New solutions   9,643     10,351     15,062     13,209     10,962   14 %
Total Non-GAAP net revenue $ 70,888   $ 70,366   $ 63,099   $ 69,140   $ 74,697   5 %
% Advanced metering infrastructure 86 % 85 % 76 % 81 % 85 %
% New solutions 14 % 15 % 24 % 19 % 15 %
 

GEOGRAPHY

GAAP net revenue
United States $ 15,700 $ 30,017 $ 122,582 $ 72,360 $ 53,113 238 %
International   12,341     47,394     21,058     4,807     16,392   33 %
Total GAAP net revenue $ 28,041   $ 77,411   $ 143,640   $ 77,167   $ 69,505   148 %
% United States 56 % 39 % 85 % 94 % 76 %
% International 44 % 61 % 15 % 6 % 24 %
Change in deferred net revenue
United States $ 48,248 $ 29,176 $ (66,533 ) $ (17,955 ) $ 12,467
International   (5,401 )   (36,221 )   (14,008 )   9,928     (7,275 )
Total change in deferred net revenue $ 42,847 $ (7,045 ) $ (80,541 ) $ (8,027 ) $ 5,192
Non-GAAP net revenue
United States $ 63,948 $ 59,193 $ 56,049 $ 54,405 $ 65,580 3 %
International   6,940     11,173     7,050     14,735     9,117   31 %
Total non-GAAP net revenue $ 70,888   $ 70,366   $ 63,099   $ 69,140   $ 74,697   5 %
% United States 90 % 84 % 89 % 79 % 88 %
% International 10 % 16 % 11 % 21 % 12 %
 
(a) Certain amounts have been reclassified in 2014 from Professional services to Managed services and SaaS related to product support which is recurring in nature to conform to current period presentation.
 
           
SILVER SPRING NETWORKS, INC.
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
(in thousands, except percentages and headcount)
 
 
Q3 Q4 Q1 Q2 Q3 YoY%
CASH FLOW DATA 2014   2014   2015   2015   2015   Change
Operating cash flow $ (15,734 ) $ 13,624 $ (455 ) $ 9,613 $ 4,272 127 %
Operating cash flow - TTM (20,545 ) (8,765 ) (5,960 ) 7,048 27,054 232 %
BALANCE SHEET DATA
Cash, cash equivalents and short-term investments $ 110,466 $ 120,796 $ 111,215 $ 118,555 $ 121,915 10 %
Deferred net revenue
End of quarter 617,416 609,593 529,984 521,176 526,000
Less: Beginning of quarter (575,106 ) (617,416 ) (609,593 ) (529,984 ) (521,176 )
Foreign currency translation adjustment and other   537     778     (932 )   781     368  
Change in deferred net revenue, net of foreign currency translation and other $ 42,847   $ (7,045 ) $ (80,541 ) $ (8,027 ) $ 5,192  
Deferred cost of revenue

 

End of quarter $ 338,633 $ 333,030 $ 300,524 $ 286,044 $ 292,730
Less: Beginning of quarter (313,458 ) (338,633 ) (333,030 ) (300,524 ) (286,044 )
Foreign currency translation adjustment   69     68     (10 )   (8 )   26  
Change in deferred cost of revenue, net of foreign currency translation $ 25,244   $ (5,535 ) $ (32,516 ) $ (14,488 ) $ 6,712  
 
STOCK-BASED COMPENSATION
Cost of goods sold $ 2,770 $ 218 $ 1,723 $ 2,209 $ 1,197 -57 %
Research and development 3,042 785 2,180 2,832 1,771 -42 %
Sales and marketing 1,783 479 1,238 1,287 914 -49 %
General and administrative   2,881     909     1,882     2,333     1,971   -32 %
$ 10,476   $ 2,391   $ 7,023   $ 8,661   $ 5,853   -44 %
EMPLOYEES 589 576 623 640 645 10 %
HOMES & BUSINESSES
Cumulative network endpoints delivered* 19,714 20,266 20,814 21,506 22,321 13 %
*Endpoints refer to communication modules in electric meters
 
         
SILVER SPRING NETWORKS
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 2014   2014   2015   2015   2015   Change
Net revenue
GAAP net revenue $ 28,041 $ 77,411 $ 143,640 $ 77,167 $ 69,505 148 %
Change in deferred revenue, net of foreign currency translation   42,847     (7,045 )   (80,541 )   (8,027 )   5,192  
Non-GAAP net revenue $ 70,888   $ 70,366   $ 63,099   $ 69,140   $ 74,697   5 %
 
Gross profit
GAAP gross profit $ 1,303 $ 30,178 $ 71,455 $ 19,956 $ 32,987 2432 %
Change in deferred revenue, net of foreign currency translation 42,847 (7,045 ) (80,541 ) (8,027 ) 5,192
Change in deferred cost of revenue, net of foreign currency translation (25,244 ) 5,535 32,516 14,488 (6,712 )
Amortization of intangible assets 182 140 262 260 260
Stock-based compensation 2,770 218 1,723 2,209 1,197
Acquisition-related charges (a)           11     60     14  
Non-GAAP gross profit $ 21,858   $ 29,026   $ 25,426   $ 28,946   $ 32,938   51 %
GAAP gross margin % (as a % of GAAP net revenue) 5 % 39 % 50 % 26 % 47 %
Non-GAAP gross margin % (as a % of non-GAAP net revenue) 31 % 41 % 40 % 42 % 44 %
 
Operating (loss) income
GAAP operating (loss) income $ (37,420 ) $ 1,392 $ 34,141 $ (16,539 ) $ (394 ) 99 %
Change in deferred revenue, net of foreign currency translation 42,847 (7,045 ) (80,541 ) (8,027 ) 5,192
Change in deferred cost of revenue, net of foreign currency translation (25,244 ) 5,535 32,516 14,488 (6,712 )
Amortization of intangible assets 299 219 409 422 421
Stock-based compensation 10,476 2,391 7,023 8,661 5,853
Acquisition-related charges (a) 735 751 559
Restructuring   1,888     (99 )   194     1,078     339  
Non-GAAP operating (loss) income $ (7,154 ) $ 2,393   # $ (5,523 ) $ 834   $ 5,258   173 %
GAAP operating margin % (as a % of GAAP revenue) -133 % 2 % 24 % -21 % -1 %
Non-GAAP operating margin % (as a % of non-GAAP net revenue) -10 % 3 % -9 % 1 % 7 %
 
Adjusted EBITDA
GAAP net (loss) income $ (37,273 ) $ 501 $ 34,905 $ (16,175 ) $ (622 ) 98 %
Change in deferred revenue, net of foreign currency translation 42,847 (7,045 ) (80,541 ) (8,027 ) 5,192
Change in deferred cost of revenue, net of foreign currency translation (25,244 ) 5,535 32,516 14,488 (6,712 )
Other (income) expense, net (7 ) (68 ) (288 ) (74 ) 99
(Benefit) provision for income taxes (140 ) 959 (476 ) (290 ) 129
Depreciation and amortization 1,771 1,763 1,949 1,953 1,990
Stock-based compensation 10,476 2,391 7,023 8,661 5,853
Acquisition-related charges (a) 735 751 559
Restructuring   1,888     (99 )   194     1,078     339  
Adjusted EBITDA $ (5,682 ) $ 3,937   $ (3,983 ) $ 2,365   $ 6,827   220 %
 
Net (loss) income
GAAP net (loss) income $ (37,273 ) $ 501 $ 34,905 $ (16,175 ) $ (622 ) 98 %
Change in deferred revenue, net of foreign currency translation 42,847 (7,045 ) (80,541 ) (8,027 ) 5,192
Change in deferred cost of revenue, net of foreign currency translation (25,244 ) 5,535 32,516 14,488 (6,712 )
Amortization of intangible assets 299 219 409 422 421
Stock-based compensation 10,476 2,391 7,023 8,661 5,853
Acquisition-related charges (a) 735 751 559
Income tax benefit related to Detectent acquisition (890 ) (124 ) (114 )
Restructuring   1,888     (99 )   194     1,078     339  
Non-GAAP net (loss) income $ (7,007 ) $ 1,502   $ (5,649 ) $ 1,074   $ 4,916   170 %
GAAP net margin % (as a % of GAAP revenue) -133 % 1 % 24 % -21 % -1 %
Non-GAAP net margin % (as a % of non-GAAP net revenue) -10 % 2 % -9 % 2 % 7 %
 
GAAP net (loss) income per share
Basic $ (0.77 ) $ 0.01 $ 0.71 $ (0.32 ) $ (0.01 )
Diluted $ (0.77 ) $ 0.01 $ 0.69 $ (0.32 ) $ (0.01 )
Weighted average number of shares used in computation
Basic 48,551 48,929 49,306 49,862 50,188
Diluted 48,551 50,191 50,899 49,862 50,188
 
Non-GAAP net (loss) income per share
Basic $ (0.14 ) $ 0.03 $ (0.11 ) $ 0.02 $ 0.10
Diluted $ (0.14 ) $ 0.03 $ (0.11 ) $ 0.02 $ 0.10
Weighted average number of shares used in computation
Basic 48,551 48,929 49,306 49,862 50,188
Diluted 48,551 50,191 49,306 51,390 51,713
 
(a) Acquisition-related charges in 2014 were not included.
 
 
SILVER SPRING NETWORKS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(in thousands, except percentages)
 
Three Months Ended September 30, 2015
GAAP

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

Stock-based
Compensation

Amortization of
Intangible Assets

Acquisition-
Related Costs

Non-GAAP
Product revenue $ 50,093 $ 1,785 $ - $ - $ - $ 51,878
Service revenue
Managed services and SaaS 11,223 1,397 - - - 12,620
Professional services   8,189     2,010     -     -     -     10,199  
Total service net revenue $ 19,412   $ 3,407   $ -   $ -   $ -   $ 22,819  
Net revenue $ 69,505   $ 5,192   $ -   $ -   $ -   $ 74,697  
 
Product cost of revenue $ 21,377 $ 6,712 $ (252 ) $ (260 ) $ - $ 27,577
Service cost of revenue
Managed services and SaaS 8,086 - (438 ) - (14 ) 7,634
Professional services   7,055     -     (507 )   -     -     6,548  
Total service cost of revenue $ 15,141   $ -   $ (945 ) $ -   $ (14 ) $ 14,182  
Total cost of revenue $ 36,518   $ 6,712   $ (1,197 ) $ (260 ) $ (14 ) $ 41,759  
 
Gross profit $ 32,987 $ (1,520 ) $ 1,197 $ 260 $ 14 $ 32,938
Product gross margin % 57.3 % -11.5 % 0.5 % 0.5 % - 46.8 %
Service gross margin %
Managed service and SaaS gross margin % 28.0 % 8.0 % 3.5 % - 0.1 % 39.5 %
Professional services gross margin % 13.8 % 17.0 % 5.0 % - - 35.8 %
Total service gross margin % 22.0 % 11.6 % 4.1 % - 0.1 % 37.9 %
Total gross margin % 47.5 % -5.3 % 1.6 % 0.3 % 0.0 % 44.1 %
 
 
Three Months Ended September 30, 2014
GAAP

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

Stock-based
Compensation

Amortization of
Intangible Assets

Acquisition-
Related Costs

Non-GAAP
Product revenue $ 16,321 $ 33,238 $ - $ - $ - $ 49,559
Service revenue
Managed services and SaaS (a) 7,546 3,960 - - - 11,506
Professional services (a)   4,174     5,649     -     -     -     9,823  
Total service net revenue $ 11,720   $ 9,609   $ -   $ -   $ -   $ 21,329  
Net revenue $ 28,041   $ 42,847   $ -   $ -   $ -   $ 70,888  
 
Product cost of revenue $ 10,791 $ 25,244 $ (840 ) $ (182 ) $ - $ 35,013
Service cost of revenue
Managed services and SaaS (a) 6,677 - (325 ) - - 6,352
Professional services (a)   9,270     -     (1,605 )   -     -     7,665  
Total service cost of revenue $ 15,947   $ -   $ (1,930 ) $ -   $ -   $ 14,017  
Total cost of revenue $ 26,738   $ 25,244   $ (2,770 ) $ (182 ) $ -   $ 49,030  
 
Gross profit $ 1,303 $ 17,603 $ 2,770 $ 182 $ - $ 21,858
Product gross margin % 33.9 % -6.6 % 1.7 % 0.3 % 0 29.3 %
Service gross margin %
Managed service and SaaS gross margin % (a) 11.5 % 30.5 % 2.8 % - - 44.8 %
Professional services gross margin % (a) -122.1 % 127.7 % 16.3 % - - 22.0 %
Total service gross margin % -36.1 % 61.3 % 9.0 % 0.0 % - 34.3 %
Total gross margin % 4.6 % 22.0 % 3.9 % 0.3 % - 30.8 %
 
 
(a) Certain amounts have been reclassified in 2014 from Professional services to Managed services and SaaS related to product support which is recurring in nature to conform to current period presentation.
(b) Amounts presented net of foreign currency translation.
 
         
SILVER SPRING NETWORKS, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in thousands, except percentages)
 
Nine Months Ended September 30, 2015
GAAP

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

Stock-based
Compensation

Amortization of
Intangible Assets

Acquisition-
Related Costs

Non-GAAP
Product revenue $ 209,839 $ (72,264 ) $ - $ -

$

-

$ 137,575
Service revenue
Managed services and SaaS 34,805 3,365 - - - 38,170
Professional services   45,668     (14,477 )   -     -     -     31,191  
Total service net revenue $ 80,473   $ (11,112 ) $ -   $ -   $ -   $ 69,361  
Net revenue $ 290,312   $ (83,376 ) $ -   $ -   $ -   $ 206,936  
 
Product cost of revenue $ 118,527 $ (40,292 ) $ (1,039 ) $ (782 ) $ - $ 76,414
Service cost of revenue
Managed services and SaaS 24,071 - (1,680 ) - (85 ) 22,306
Professional services   23,316     -     (2,410 )   -     -     20,906  
Total service cost of revenue $ 47,387   $ -   $ (4,090 ) $ -   $ (85 ) $ 43,212  
Total cost of revenue $ 165,914   $ (40,292 ) $ (5,129 ) $ (782 ) $ (85 ) $ 119,626  
 
Gross profit $ 124,398 $ (43,084 ) $ 5,129 $ 782 $ 85 $ 87,310
Product gross margin % 43.5 % -0.4 % 0.8 % 0.6 % - 44.5 %
Service gross margin %
Managed service and SaaS gross margin % 30.8 % 6.1 % 4.4 % - 0.2 % 41.6 %
Professional services gross margin % 48.9 % -23.7 % 7.7 % - - 33.0 %
Total service gross margin % 41.1 % -9.4 % 5.9 % - 0.1 % 37.7 %
Total gross margin % 42.8 % -3.6 % 2.5 % 0.4 % 0.0 % 42.2 %
 
 
Nine Months Ended September 30, 2014
GAAP

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

Stock-based
Compensation

Amortization of
Intangible Assets

Acquisition-
Related Costs

Non-GAAP
Product revenue $ 69,299 $ 74,682 $ - $ - $ - $ 143,981
Service revenue
Managed services and SaaS (a) 24,651 8,300 - - - 32,951
Professional services (a)   19,927     9,483     -     -     -     29,410  
Total service net revenue $ 44,578   $ 17,783   $ -   $ -   $ -   $ 62,361  
Net revenue $ 113,877   $ 92,465   $ -   $ -   $ -   $ 206,342  
 
Product cost of revenue $ 42,120 $ 62,302 $ (1,914 ) $ (278 ) $ - $ 102,230
Service cost of revenue
Managed services and SaaS (a) 19,769 - (992 ) - - 18,777
Professional services (a)   25,829     -     (4,486 )   -     -     21,343  
Total service cost of revenue $ 45,598   $ -   $ (5,478 ) $ -   $ -   $ 40,120  
Total cost of revenue $ 87,718   $ 62,302   $ (7,392 ) $ (278 ) $ -   $ 142,350  
 
Gross profit $ 26,159 $ 30,163 $ 7,392 $ 278 $ - $ 63,992
Product gross margin % 39.2 % -11.7 % 1.3 % 0.2 % - 29.0 %
Service gross margin %
Managed service and SaaS gross margin % (a) 19.8 % 20.2 % 3.0 % - - 43.0 %
Professional services gross margin % (a) -29.6 % 41.8 % 15.3 % - - 27.4 %
Total service gross margin % -2.3 % 29.2 % 8.8 % - - 35.7 %
Total gross margin % 23.0 % 4.3 % 3.6 % 0.1 % - 31.0 %
 
 
(a) Certain amounts have been reclassified in 2014 from Professional services to Managed services and SaaS related to product support which is recurring in nature to conform to current period presentation.
(b) Amounts presented net of foreign currency translation.
 

Contacts

Silver Spring Networks, Inc.
Mark McKechnie, 650-839-4664
Investor Relations
mmckechnie@silverspringnet.com
Noel Hartzell, 650-839-4184
Global Communications
nhartzell@silverspringnet.com

Contacts

Silver Spring Networks, Inc.
Mark McKechnie, 650-839-4664
Investor Relations
mmckechnie@silverspringnet.com
Noel Hartzell, 650-839-4184
Global Communications
nhartzell@silverspringnet.com