[x]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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77-0203595
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State or Other Jurisdiction of
Incorporation or Organization
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I.R.S. Employer Identification No.
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2901 Patrick Henry Drive
Santa Clara, CA
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95054
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Address of Principal Executive Offices
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Zip Code
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
x
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Emerging growth company
o
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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ITEM 1.
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UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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March 31,
2018 |
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December 31,
2017 |
||||
ASSETS
|
|
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|
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|
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CURRENT ASSETS:
|
|
|
|
||||
Cash and cash equivalents
|
$
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5,846
|
|
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$
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7,261
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|
Short-term investments
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11,960
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|
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11,967
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|
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Restricted investments
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1,250
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|
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1,250
|
|
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Accounts receivable, net
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2,556
|
|
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2,296
|
|
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Inventories
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3,566
|
|
|
3,251
|
|
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Deferred cost of revenues
|
529
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1,039
|
|
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Other current assets
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1,516
|
|
|
1,152
|
|
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Total current assets
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27,223
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28,216
|
|
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Property and equipment, net
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453
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|
458
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|
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Intangible assets, net
|
668
|
|
|
725
|
|
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Other long‑term assets
|
558
|
|
|
987
|
|
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Total assets
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$
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28,902
|
|
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$
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30,386
|
|
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|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
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|
||||
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|
||||
CURRENT LIABILITIES:
|
|
|
|
||||
Accounts payable
|
$
|
2,570
|
|
|
$
|
2,317
|
|
Accrued liabilities
|
2,256
|
|
|
1,878
|
|
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Deferred revenues
|
849
|
|
|
1,812
|
|
||
Total current liabilities
|
5,675
|
|
|
6,007
|
|
||
|
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|
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LONG-TERM LIABILITIES:
|
|
|
|
||||
Other long-term liabilities
|
616
|
|
|
652
|
|
||
Total long-term liabilities
|
616
|
|
|
652
|
|
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|
|
|
|
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STOCKHOLDERS’ EQUITY:
|
|
|
|
||||
Common stock
|
49
|
|
|
48
|
|
||
Additional paid-in capital
|
359,715
|
|
|
359,339
|
|
||
Treasury stock
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(28,130
|
)
|
|
(28,130
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)
|
||
Accumulated other comprehensive loss
|
(1,681
|
)
|
|
(1,821
|
)
|
||
Accumulated deficit
|
(307,342
|
)
|
|
(305,963
|
)
|
||
Total Echelon Corporation stockholders’ equity
|
22,611
|
|
|
23,473
|
|
||
Noncontrolling interest in subsidiary
|
—
|
|
|
254
|
|
||
Total stockholders’ equity
|
22,611
|
|
|
23,727
|
|
||
Total liabilities and stockholders’ equity
|
$
|
28,902
|
|
|
$
|
30,386
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
|
|
|
||||
Revenues
|
$
|
7,837
|
|
|
$
|
7,703
|
|
Cost of revenues
(1)
|
3,460
|
|
|
3,292
|
|
||
Gross profit
|
4,377
|
|
|
4,411
|
|
||
Operating expenses:
|
|
|
|
||||
Product development
(1)
|
3,005
|
|
|
2,227
|
|
||
Sales and marketing
(1)
|
1,310
|
|
|
1,462
|
|
||
General and administrative
(1)
|
1,705
|
|
|
1,924
|
|
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Total operating expenses
|
6,020
|
|
|
5,613
|
|
||
Loss from operations
|
(1,643
|
)
|
|
(1,202
|
)
|
||
Interest and other income (expense), net
|
258
|
|
|
(65
|
)
|
||
Loss before provision for income taxes
|
(1,385
|
)
|
|
(1,267
|
)
|
||
Income tax benefit
|
(6
|
)
|
|
(6
|
)
|
||
|
|
|
|
||||
Net loss
|
$
|
(1,379
|
)
|
|
$
|
(1,261
|
)
|
|
|
|
|
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Basic and diluted net loss per share
|
$
|
(0.30
|
)
|
|
$
|
(0.28
|
)
|
|
|
|
|
||||
Shares used in computing net loss per share:
|
|
|
|
||||
Basic
|
4,527
|
|
|
4,434
|
|
||
Diluted
|
4,527
|
|
|
4,434
|
|
(1)
|
See
Note 4
for summary of amounts included representing stock-based compensation expense.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
|
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|
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Net loss
|
$
|
(1,379
|
)
|
|
$
|
(1,261
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
||||
Foreign currency translation adjustment
|
140
|
|
|
83
|
|
||
Unrealized holding gain (loss) on available-for-sale securities
|
—
|
|
|
(1
|
)
|
||
Total other comprehensive income (loss)
|
140
|
|
|
82
|
|
||
Comprehensive loss
|
$
|
(1,239
|
)
|
|
$
|
(1,179
|
)
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2018
|
|
2017
|
||||
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
|
|
|
|
||||
Net loss
|
$
|
(1,379
|
)
|
|
$
|
(1,261
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
119
|
|
|
110
|
|
||
Reduction in allowance for doubtful accounts
|
—
|
|
|
(7
|
)
|
||
Increase in accrued investment income
|
(44
|
)
|
|
(16
|
)
|
||
Stock-based compensation
|
444
|
|
|
467
|
|
||
Gain on liquidation of joint venture
|
(424
|
)
|
|
—
|
|
||
Change in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(270
|
)
|
|
(224
|
)
|
||
Inventories
|
(315
|
)
|
|
54
|
|
||
Deferred cost of revenues
|
48
|
|
|
(159
|
)
|
||
Other current assets
|
65
|
|
|
(124
|
)
|
||
Accounts payable
|
290
|
|
|
42
|
|
||
Accrued liabilities
|
135
|
|
|
(545
|
)
|
||
Deferred revenues
|
(3
|
)
|
|
185
|
|
||
Deferred rent
|
(19
|
)
|
|
(18
|
)
|
||
Net cash used in operating activities
|
(1,353
|
)
|
|
(1,496
|
)
|
||
|
|
|
|
||||
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
|
|
|
|
||||
Purchases of available‑for‑sale short‑term investments
|
(5,948
|
)
|
|
(5,979
|
)
|
||
Proceeds from maturities and sales of available‑for‑sale short‑term investments
|
6,000
|
|
|
6,000
|
|
||
Change in other long‑term assets
|
9
|
|
|
11
|
|
||
Capital expenditures
|
(87
|
)
|
|
(16
|
)
|
||
Net cash provided by (used in) investing activities
|
(26
|
)
|
|
16
|
|
||
|
|
|
|
||||
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
|
|
|
|
||||
Repurchase of common stock from employees for payment of taxes on vesting of restricted stock units and upon exercise of stock options
|
(66
|
)
|
|
(17
|
)
|
||
Net cash used in financing activities
|
(66
|
)
|
|
(17
|
)
|
||
|
|
|
|
||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
30
|
|
|
19
|
|
||
|
|
|
|
||||
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
(1,415
|
)
|
|
(1,478
|
)
|
||
|
|
|
|
||||
CASH AND CASH EQUIVALENTS:
|
|
|
|
||||
Beginning of period
|
7,261
|
|
|
9,803
|
|
||
End of period
|
$
|
5,846
|
|
|
$
|
8,325
|
|
|
|
|
|
||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
||||
Cash paid for income taxes
|
$
|
35
|
|
|
$
|
37
|
|
•
|
The Company’s sales are currently concentrated, as approximately
40.4%
of revenues for the
three
months ended
March 31, 2018
, were derived from
two
customers, Avnet Europe Comm VA ("Avnet"), the Company's primary distributor of its IIoT products in Europe and Japan; and Engenuity Systems, Inc., a reseller of the Company's products focused primarily in the United States. Customers in any of the Company’s target market sectors may experience unexpected reductions in demand for their products and consequently reduce their purchases from the Company, resulting in either the loss of a significant customer or a notable decrease in the level of sales to a significant customer. In addition, if any of these customers are unable to obtain the necessary capital to operate their business, they may be unable to satisfy their payment obligations to the Company.
|
•
|
The Company utilizes third-party contract electronic manufacturers to manufacture, assemble, and test its products. If any of these third-parties were unable to obtain the necessary capital to operate their business, they may be unable to provide the Company with timely services or to make timely deliveries of products.
|
•
|
From time to time, the Company has experienced shortages or interruptions in supply for certain products or components used in the manufacture of the Company’s products that have been or will be discontinued. In order to ensure an adequate supply of these items, the Company has occasionally purchased quantities of these items that are in excess of the Company’s then current estimate of short-term requirements. If the long-term requirements do not materialize as originally expected, or if the Company develops alternative solutions that no longer employ these items and the Company is not able to dispose of these excess products or components, the Company could be subject to increased levels of excess and obsolete inventories.
|
•
|
In an effort to manage costs and inventory risks, the Company has decreased the inventory levels of certain products. If there is an unexpected increase in demand for these items, the Company might not be able to supply its customers with products in a timely manner.
|
•
|
Due to the nature of development efforts in general, the Company can experience delays in the introduction of new or improved products beyond its original projected shipping date for such products. These delays can result in increased development costs and delays in the ability to generate revenues from these new products. Furthermore, when such new products are developed, there is no guarantee that they will meet customer requirements or will otherwise be
|
|
Three Months Ended March 31, 2017
|
||||||||||
|
As Reported
|
|
New Revenue Standard Adjustment
|
|
As Adjusted
|
||||||
Statement of Operations:
|
|
|
|
|
|
||||||
Revenue
|
$
|
7,799
|
|
|
$
|
(96
|
)
|
|
$
|
7,703
|
|
Net loss
|
(1,199
|
)
|
|
(62
|
)
|
|
(1,261
|
)
|
|||
Basic and diluted loss per share
|
$
|
(0.27
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.28
|
)
|
|
December 31, 2017
|
||||||||||
|
As Reported
|
|
New Revenue Standard Adjustment
|
|
As Adjusted
|
||||||
Balance Sheets:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
$
|
2,721
|
|
|
$
|
(425
|
)
|
|
$
|
2,296
|
|
Deferred cost of goods sold
|
1,767
|
|
|
(728
|
)
|
|
1,039
|
|
|||
Deferred revenues
|
4,805
|
|
|
(2,993
|
)
|
|
1,812
|
|
|||
Stockholders' equity
|
21,887
|
|
|
1,840
|
|
|
23,727
|
|
|
Three Months Ended
|
||||||
|
March 31, 2018
|
|
March 31, 2017
|
||||
|
|
|
|
||||
Beginning balance
|
$
|
1,812
|
|
|
$
|
1,057
|
|
Deferred revenues added
|
146
|
|
|
220
|
|
||
Elimination of deferred revenues due to joint venture liquidation
|
(986
|
)
|
|
—
|
|
||
Previously deferred revenues recognized
|
(123
|
)
|
|
(109
|
)
|
||
Ending balance
|
$
|
849
|
|
|
$
|
1,168
|
|
•
|
In accordance with Subtopic 340-40 "Other Assets and Deferred Costs - Contracts with Customers," the Company has elected to expense the incremental costs of obtaining a contract when the amortization period for such contracts would have been one year or less.
|
•
|
In accordance with ASC 606-10-50-14, the Company has elected not to disclose the remaining performance obligations where the underlying contract's original expected duration is one year or less and revenue from the
|
•
|
The Company has made an accounting policy election to exclude all taxes by governmental authorities from the measurement of the transaction price.
|
•
|
Level 1 - Quoted prices for identical instruments in active markets;
|
•
|
Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
|
•
|
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||||
|
|
|
Quoted Prices in Active Markets for Identical Assets
|
|
Significant Other Observable Inputs
|
|
Significant Unobservable Inputs
|
||||||||
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market funds
(1)
|
$
|
3,576
|
|
|
$
|
3,576
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. government securities
(2)
|
13,210
|
|
|
—
|
|
|
13,210
|
|
|
—
|
|
||||
Total
|
$
|
16,786
|
|
|
$
|
3,576
|
|
|
$
|
13,210
|
|
|
$
|
—
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||||
|
|
|
Quoted Prices in Active Markets for Identical Assets
|
|
Significant Other Observable Inputs
|
|
Significant Unobservable Inputs
|
||||||||
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market funds
(1)
|
$
|
4,515
|
|
|
$
|
4,515
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. government securities
(2)
|
13,217
|
|
|
—
|
|
|
13,217
|
|
|
—
|
|
||||
Total
|
$
|
17,732
|
|
|
$
|
4,515
|
|
|
$
|
13,217
|
|
|
$
|
—
|
|
(2)
|
Represents the portfolio of available for sale securities that is included in restricted investments and short-term investments in the Company’s condensed consolidated balance sheets
|
|
Amortized Cost
|
|
Aggregate Fair Value
|
|
Unrealized Holding Gains
|
|
Unrealized Holding Losses
|
||||||||
U.S. government securities
|
$
|
11,963
|
|
|
$
|
11,960
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
Amortized Cost
|
|
Aggregate Fair Value
|
|
Unrealized Holding Gains
|
|
Unrealized Holding Losses
|
||||||||
U.S. government securities
|
$
|
11,970
|
|
|
$
|
11,967
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
|
|
|
||||
Cost of revenues
|
$
|
58
|
|
|
$
|
29
|
|
Product development
|
94
|
|
|
124
|
|
||
Sales and marketing
|
88
|
|
|
102
|
|
||
General and administrative
|
204
|
|
|
212
|
|
||
Total
|
$
|
444
|
|
|
$
|
467
|
|
|
March 31, 2018
|
|
March 31, 2017
|
||
|
|
|
|
||
Avnet
|
27.3
|
%
|
|
25.3
|
%
|
Engenuity
|
13.1
|
%
|
|
9.5
|
%
|
|
40.4
|
%
|
|
34.8
|
%
|
|
Foreign currency translation adjustment
|
|
Unrealized gain (loss) on available-for-sale debt securities
|
|
Accumulated Other Comprehensive Income (Loss)
|
||||||
Beginning balance at December 31, 2017
|
$
|
(1,818
|
)
|
|
$
|
(3
|
)
|
|
$
|
(1,821
|
)
|
Change during January - March 2018
|
140
|
|
|
—
|
|
|
140
|
|
|||
Balance at March 31, 2018
|
$
|
(1,678
|
)
|
|
$
|
(3
|
)
|
|
$
|
(1,681
|
)
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
|
|
|
|
||||
Purchased materials
|
$
|
624
|
|
|
$
|
148
|
|
Finished goods
|
2,942
|
|
|
3,103
|
|
||
|
$
|
3,566
|
|
|
$
|
3,251
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
|
|
|
|
||||
Accrued payroll and related costs
|
$
|
980
|
|
|
$
|
1,088
|
|
Warranty reserve
|
209
|
|
|
142
|
|
||
Restructuring charges
|
185
|
|
|
185
|
|
||
Payable to joint venture partner (see Note 13 - Joint Venture)
|
438
|
|
|
—
|
|
||
Other accrued liabilities
|
444
|
|
|
463
|
|
||
|
$
|
2,256
|
|
|
$
|
1,878
|
|
|
December 31, 2017
|
|
Costs Incurred
|
|
Cash Payments
|
|
March 31, 2018
|
||||||||
Termination benefits
|
$
|
185
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
185
|
|
|
December 31, 2016
|
|
Costs Incurred
|
|
Cash Payments
|
|
March 31, 2017
|
||||||||
Termination benefits
|
$
|
273
|
|
|
$
|
—
|
|
|
$
|
(48
|
)
|
|
$
|
225
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Three Months Ended
March 31, |
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
Revenues
|
$
|
7,837
|
|
|
$
|
7,703
|
|
|
$
|
134
|
|
|
1.7
|
%
|
Gross margin
|
55.9
|
%
|
|
57.3
|
%
|
|
---
|
|
|
(1.4 ppt)
|
|
|||
Operating expenses
|
$
|
6,020
|
|
|
$
|
5,613
|
|
|
$
|
407
|
|
|
7.3
|
%
|
Net loss
|
$
|
(1,379
|
)
|
|
$
|
(1,261
|
)
|
|
$
|
(118
|
)
|
|
9.4
|
%
|
|
Balance as of
|
|
|
|
|
|||||||||
|
March 31,
2018 |
|
December 31,
2017 |
|
$ Change
|
|
% Change
|
|||||||
Cash, cash equivalents, and short-term investments *
|
$
|
19,056
|
|
|
$
|
20,478
|
|
|
$
|
(1,422
|
)
|
|
(6.9
|
)%
|
•
|
Revenues:
Our revenues
increase
d by
1.7%
during the
first
quarter of
2018
as compared to the same period in
2017
. The
increase
in revenues between the two quarterly periods was mainly due to an increase in sales to customers in the Americas, partially offset by a slight reduction in sales made to customers in the EMEA and APJ regions. For further analysis please see the topic Revenues in the Results of Operations discussion later in this section.
|
•
|
Gross margin:
Our gross margins
decrease
d by
1.4
percentage points during the
first
quarter of
2018
as compared to the same period in
2017
. These fluctuations were primarily due to an increase in the indirect costs in our cost of goods sold departments. For further analysis please see the topic Gross Profit and Gross Margin in the Results of Operations discussion later in this section.
|
•
|
Operating expenses:
Our operating expenses
increase
d by
7.3%
during the
three
months ended
March 31, 2018
, respectively, as compared to the same period in
2017
. The
increase
was primarily due to an increase in our product
|
•
|
Net loss:
We generated a net loss of
$1.4 million
during the
first
quarter of
2018
compared to
$1.3 million
during the same period in
2017
. This
increase
in our net loss was mainly attributable to an increase in our operating expenses.
|
•
|
Cash, cash equivalents, and short-term investments:
During the first
three
months of
2018
, our cash, cash equivalents, and short-term investment balance
decrease
d by
6.9%
, from
$20.5 million
at
December 31, 2017
to
$19.1 million
at
March 31, 2018
. This
decrease
was primarily the result of cash used in operations of
$1.4 million
(driven primarily by our net loss of $1.4 million).
|
|
Three Months Ended
March 31, |
||||
|
2018
|
|
2017
|
||
Revenues
|
100.0
|
%
|
|
100.0
|
%
|
Cost of revenues
|
44.1
|
|
|
42.7
|
|
Gross profit
|
55.9
|
|
|
57.3
|
|
Operating expenses:
|
|
|
|
||
Product development
|
38.3
|
|
|
28.9
|
|
Sales and marketing
|
16.7
|
|
|
19.0
|
|
General and administrative
|
21.8
|
|
|
25.0
|
|
Total operating expenses
|
76.8
|
|
|
72.9
|
|
Loss from operations
|
(21.0
|
)
|
|
(15.6
|
)
|
Interest and other income (expense), net
|
3.3
|
|
|
(0.8
|
)
|
Loss before provision for income taxes
|
(17.7
|
)
|
|
(16.5
|
)
|
Income tax expense (benefit)
|
(0.1
|
)
|
|
(0.1
|
)
|
Net loss
|
(17.6
|
)%
|
|
(16.4
|
)%
|
|
Three Months Ended
|
|
|
|
|
|||||||||
(Dollars in thousands)
|
March 31, 2018
|
|
March 31, 2017
|
|
2018 over 2017 $ Change
|
|
2018 over 2017 % Change
|
|||||||
|
|
|
|
|
|
|
|
|||||||
Total revenues
|
$
|
7,837
|
|
|
$
|
7,703
|
|
|
$
|
134
|
|
|
1.7
|
%
|
|
Three Months Ended
|
|
|
|
|
|||||
(Dollars in thousands)
|
March 31, 2018
|
|
March 31, 2017
|
|
2018 over 2017 $ Change
|
|
2018 over 2017 % Change
|
|||
|
|
|
|
|
|
|
|
|||
Gross Profit
|
$4,377
|
|
$4,411
|
|
$
|
(34
|
)
|
|
(0.8
|
)%
|
Gross Margin
|
55.9%
|
|
57.3%
|
|
N/A
|
|
|
(1.4
|
)
|
|
Three Months Ended
|
|
|
|
|
|||||||||
(Dollars in thousands)
|
March 31, 2018
|
|
March 31, 2017
|
|
2018 over 2017 $ Change
|
|
2018 over 2017 % Change
|
|||||||
Product Development
|
$
|
3,005
|
|
|
$
|
2,227
|
|
|
$
|
778
|
|
|
34.9
|
%
|
|
Three Months Ended
|
|
|
|
|
|||||||||
(Dollars in thousands)
|
March 31, 2018
|
|
March 31, 2017
|
|
2018 over 2017 $ Change
|
|
2018 over 2017 % Change
|
|||||||
Sales and Marketing
|
$
|
1,310
|
|
|
$
|
1,462
|
|
|
$
|
(152
|
)
|
|
(10.4
|
)%
|
|
Three Months Ended
|
|
|
|
|
|||||||||
(Dollars in thousands)
|
March 31, 2018
|
|
March 31, 2017
|
|
2018 over 2017 $ Change
|
|
2018 over 2017 % Change
|
|||||||
General and Administrative
|
$
|
1,705
|
|
|
$
|
1,924
|
|
|
$
|
(219
|
)
|
|
(11.4
|
)%
|
|
Three Months Ended
|
|
|
|
|
|||||||||
(Dollars in thousands)
|
March 31, 2018
|
|
March 31, 2017
|
|
2018 over 2017 $ Change
|
|
2018 over 2017 % Change
|
|||||||
Interest and Other Income (Expense), Net
|
$
|
258
|
|
|
$
|
(65
|
)
|
|
$
|
323
|
|
|
(496.9
|
)%
|
|
Three Months Ended
|
|
|
|
|
|||||||||
(Dollars in thousands)
|
March 31, 2018
|
|
March 31, 2017
|
|
2018 over 2017 $ Change
|
|
2018 over 2017 % Change
|
|||||||
Income Tax Expense (Benefit)
|
$
|
(6
|
)
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
—
|
%
|
|
March 31,
|
December 31,
|
||||||||||
|
2018
|
2017
|
2016
|
2015
|
||||||||
Cash, cash equivalents, and short-term investments*
|
$
|
19,056
|
|
$
|
20,478
|
|
$
|
23,036
|
|
$
|
26,070
|
|
Trade accounts receivable, net
|
2,556
|
|
2,296
|
|
2,695
|
|
4,030
|
|
||||
Working capital
|
21,548
|
|
22,209
|
|
23,083
|
|
26,713
|
|
||||
Stockholders’ equity
|
22,611
|
|
23,727
|
|
24,678
|
|
28,921
|
|
•
|
the risk of competition and emerging technologies (see “If we do not develop and maintain adequate distribution channels, our revenues will be harmed” for additional information on the risks associated with competing for market share);
|
•
|
the risk that we will not be able to develop adequate sales channels for these new products and services (see “Our IIoT revenues may not meet expectations, which could cause volatility in the price of our stock” for additional information on the risks associated with establishing new sales channels);
|
•
|
the risk that we misjudge the market and fail to develop solutions that meet the requirements of our existing or potential customers;
|
•
|
the risk that our solutions will suffer security breaches or otherwise allow unauthorized access to, or acquisition of, data;
|
•
|
the risk that our products will not perform adequately due to defect or misuse by customers (see “Liabilities resulting from defects in or misuse of our products, whether or not covered by insurance, may delay our revenues and increase our liabilities and expenses” for additional information on the risks associated with defective or misused products); and
|
•
|
the risk that our supply chain for components is unable to meet our demand (see “Because we depend on a limited number of key suppliers and in certain cases, a sole supplier, the failure of any key supplier to produce timely and compliant products could result in a failure to ship products, or could subject us to higher prices, which would harm our results of operations and financial position” for additional information on the risks associated with manufacturing).
|
•
|
our ability to anticipate changes in customer or regulatory requirements and to develop, or improve, our products to meet these requirements in a timely manner;
|
•
|
the price and features of our products such as adaptability, scalability, functionality, ease of use, and the ability to integrate with other products;
|
•
|
our product reputation, quality, performance, and conformance with established industry standards;
|
•
|
our ability to expand our product line to address our customers’ requirements;
|
•
|
our ability to effectively manage and expand our distribution channels to address new markets for current and future products;
|
•
|
our ability to meet a customer’s required delivery schedules;
|
•
|
a customer’s willingness to do business with us because of our size and perceived concerns regarding our liquidity and financial strength relative to our competitors;
|
•
|
the risk of industry consolidation, which is particularly high in emerging markets such as the IIoT;
|
•
|
our customer service and support;
|
•
|
warranties, indemnities, and other contractual terms; and
|
•
|
customer relationships and market awareness.
|
•
|
orders may be cancelled;
|
•
|
the mix of products and services that we sell may change to a less profitable mix;
|
•
|
shipment, payment schedules, and product acceptance may be delayed;
|
•
|
our products may not be purchased by OEMs, systems integrators, service providers and end-users at the levels we project;
|
•
|
our ability to develop products that comply with future regulations and trade association guidelines;
|
•
|
the revenue recognition rules relating to certain of our products could require us to defer some or all of the revenue associated with product shipments until certain conditions, such as delivery and acceptance criteria for our software and/or hardware products, are met in a future period;
|
•
|
our CEMs may not be able to provide quality products on a timely basis, especially during periods where capacity in the CEM market is limited;
|
•
|
our products may not be manufactured in accordance with specifications or our established quality standards, or may not perform as designed;
|
•
|
downturns in any customer’s or potential customer’s business, or declines in general economic conditions, could cause significant reductions in capital spending, thereby reducing the levels of orders from our customers;
|
•
|
we may incur costs associated with any future business acquisitions; and
|
•
|
any future impairment charges related to our intangible assets that are required to be recorded under generally accepted accounting principles in the United States may negatively affect our earnings and financial condition.
|
•
|
achieve acceptance of our products in the IIoT market, particularly the outdoor lighting market, in order to increase our revenues;
|
•
|
manage our operating expenses to a reasonable percentage of revenues; and
|
•
|
manage our cash resources prudently.
|
•
|
moving raw material, in-process inventory, and capital equipment between locations, some of which may be in different parts of the world;
|
•
|
reestablishing acceptable manufacturing processes with a new work force; and
|
•
|
exposure to excess or obsolete inventory held by contract manufacturers for use in our products.
|
•
|
timing of and costs associated with localizing products for foreign countries and lack of acceptance of non-local products in foreign countries;
|
•
|
that the nature and composition of our products may subject us to any number of additional legal requirements, which might include, but are not limited to, data privacy regulations, import/export regulations and other similar requirements;
|
•
|
challenges in managing international operations;
|
•
|
the burdens of complying with a wide variety of foreign laws and any related implementation costs;
|
•
|
the applicability of foreign laws that could affect our business or revenues, such as laws that purport to require that we return payments that we received from insolvent customers in certain circumstances; and unexpected changes in regulatory requirements, tariffs, and other trade barriers;
|
•
|
cultural differences that could make it more difficult to sell our products or could result in allegations that sales activities have violated the U.S. Foreign Corrupt Practices Act or similar laws that prohibit improper payments in connection with efforts to obtain business;
|
•
|
exchange rate fluctuations;
|
•
|
the imposition of tariffs or other trade barriers on the importation of our products;
|
•
|
potentially adverse tax consequences, including restrictions on repatriation of earnings;
|
•
|
economic and political conditions in the countries where we do business;
|
•
|
differing vacation and holiday patterns in other countries, particularly in Europe;
|
•
|
increased costs of labor, particularly in China;
|
•
|
labor actions generally affecting individual countries, regions, or any of our customers, which could result in reduced demand for, or could delay delivery or acceptance of, our products; and
|
•
|
international terrorism.
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
Total Number of Shares Purchased (1)
|
Average Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
|
|||||
January 1 - January 31
|
1,909
|
|
$
|
5.87
|
|
—
|
|
—
|
|
February 1 - February 28
|
571
|
|
$
|
4.74
|
|
—
|
|
—
|
|
March 1 - March 31
|
11,237
|
|
$
|
4.67
|
|
—
|
|
—
|
|
Total
|
13,717
|
|
$
|
4.84
|
|
—
|
|
—
|
|
(1)
|
Shares purchased represent those shares surrendered to us by employees in order to satisfy stock-for-stock option exercises, also commonly referred to as "net exercises", and/or withholding tax obligations related to stock-based compensation.
|
#
|
Filed herewith
|
**
|
The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of section 18 of the Exchange Act of 1934, as amended (the “Exchange Act”), and is not to be incorporated by reference into any filing of Echelon Corporation under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
|
+
|
The financial information contained in these XBRL documents is unaudited and is furnished, not filed with the Securities and Exchange Commission.
|
|
|
|
|
ECHELON CORPORATION
|
Date:
|
May 10, 2018
|
|
By:
|
/s/ C. Michael Marszewski
|
|
|
|
|
C. Michael Marszewski
Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)
|
#
|
Filed herewith
|
**
|
The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of section 18 of the Exchange Act of 1934, as amended (the “Exchange Act”), and is not to be incorporated by reference into any filing of Echelon Corporation under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
|
+
|
The financial information contained in these XBRL documents is unaudited and is furnished, not filed with the Securities and Exchange Commission.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Echelon Corporation;
|
2.
|
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly represent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
|
|
|
|
|
ECHELON CORPORATION
|
|
|
|
|
|
|
Date:
|
May 10, 2018
|
|
By:
|
|
/s/ Ronald A. Sege
|
|
|
|
|
|
Ronald A. Sege,
Chairman of the Board, President and Chief
Executive Officer (Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Echelon Corporation;
|
2.
|
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly represent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
|
|
|
|
|
ECHELON CORPORATION
|
|
|
|
|
|
|
Date:
|
May 10, 2018
|
|
By:
|
|
/s/ C. Michael Marszewski
|
|
|
|
|
|
C. Michael Marszewski,
Vice President and Chief Financial Officer (Principal Financial Officer)
|
|
|
|
|
|
ECHELON CORPORATION
|
|
|
|
|
|
|
Date:
|
May 10, 2018
|
|
By:
|
|
/s/ Ronald A. Sege
|
|
|
|
|
|
Ronald A. Sege,
Chairman of the Board, President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
ECHELON CORPORATION
|
|
|
|
|
|
|
Date:
|
May 10, 2018
|
|
By:
|
|
/s/ C. Michael Marszewski
|
|
|
|
|
|
C. Michael Marszewski,
Vice President and Chief Financial Officer
(Principal Financial Officer)
|
*
|
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Echelon Corporation and will be retained by Echelon Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
|
||||
|
This certification accompanies this Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant (whether made before or after the date of this Form 10-Q) under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, irrespective of any general incorporation language contained in such filing.
|