Silver Spring Networks Reports Fourth Quarter Financial Results

$0.08 non-GAAP Earnings Per Share on $75 million Top-Line
47% non-GAAP Gross Margin
$6.3 Million in Cash Flow from Operations

REDWOOD CITY, Calif.--()--Silver Spring Networks, Inc. (NYSE:SSNI) today announced financial results for its fourth quarter and year ended December 31, 2015.

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

  • Non-GAAP revenue $75.0 million, up 7%.
  • GAAP revenue $199.2 million, up 157%.
  • Non-GAAP gross margin 47.1%, versus 41.3%.
  • GAAP gross margin 50.9%, versus 39.0%.
  • Non-GAAP net income $4.1 million versus $1.5 million.
  • GAAP net income $61.9 million versus $0.5 million.
  • Non-GAAP income per share $0.08, versus $0.03 per share.
  • GAAP income per share $1.19 versus $0.01 income per share.
  • $124.4 million cash, cash equivalents and short-term investments balance, on $6.3 million in cash flow from operations.

“We completed 2015 on a high note as shown in our fourth quarter results. We had another great quarter, delivering solid revenue growth, record gross margins, and positive cash flow,” said Mike Bell, President and CEO. “Our 2015 results, and our award with Con Edison, demonstrate the strength of our business model and the leadership position we have built in the smart grid and smart city markets. We see significant potential for continued innovation and growth in our core markets, and with Starfish, look to leverage Silver Spring’s technology and platform into the broader Internet of Things opportunity.”

Business Highlights (through February 16, 2016, unless otherwise stated):

  • Selected by Consolidated Edison, Inc. to deploy our fifth-generation network canopy and advanced metering infrastructure to 3.9 million electric and 1.3 million gas customers over its entire service territory.
  • Delivered record 47% non-GAAP gross margin performance in the fourth quarter due to growth, favorable product mix and manufacturing efficiencies.
  • Selected by CESC of India to deploy an advanced, multi-application smart energy and smart city network in the city of Kolkata. The initial phase anticipates connecting approximately 25,000 customers and automating the electricity distribution grid. CESC India also plans to leverage its network for broader Internet of Things (IoT) applications with Silver Spring’s Starfish program.
  • Selected by an existing utility customer to connect approximately 250,000 street lights using its already deployed Silver Spring multi-application advanced metering infrastructure canopy, subject to regulatory approval.
  • Launched Starfish Internet of Things services offering, Silver Spring’s international wireless IPv6 network service for the IoT. In addition to CESC in Kolkata, India, Silver Spring has announced initial availability in three North American cities, Chicago, San Antonio, and San Jose, and three European cities, Bristol, Copenhagen, and Glasgow.
  • Introduced the IoT Edge Router to enable simple and secure integration of smart city devices and applications such as smart parking stations, intelligent transportation systems, bicycle rental kiosks, and electric vehicle charging stations for forward-looking utilities and cities.
  • Named one of the Top 100 most innovative San Francisco Bay area companies in the Thompson Reuters Top 100 Global Innovators report.
  • Over 22.9 million cumulative network endpoints delivered from inception through December 31, 2015, up 13% from a year ago.

Full Year 2015 Results (all comparisons made against the prior year):

  • Non-GAAP revenue $281.9 million, up 2%.
  • GAAP revenue $489.6 million, up 156%.
  • Non-GAAP gross margin 43.5%, versus 33.6% a year ago.
  • GAAP gross margin 46.1%, versus 29.5% a year ago.
  • Non-GAAP net income $4.5 million versus a net loss of ($24.4) million.
  • GAAP net income $80.0 million versus a net loss of ($89.2) million.
  • Non-GAAP income per diluted share $0.09, versus ($0.50) loss per share.
  • GAAP income per diluted share $1.55, versus ($1.84) loss per share.
  • $124.4 million cash, cash equivalents and short-term investments balance, on $19.7 million in cash flow from operations.
  • Total backlog of $770 million as of December 31, 2015.

Supplemental Information

Concurrent with this press release, Silver Spring Networks will post a supplemental commentary with financial information to its website at ir.silverspringnet.com.

Silver Spring Networks announced preliminary fourth quarter and full year 2015 results and hosted a conference call on February 8, 2016, during which Silver Spring provided a review of its expected results for the fourth quarter and full year ending December 31, 2015, and its outlook for the future. A dial-in replay of the conference call will be available until April 1, 2016 and can be accessed at 877-660-6853 or 201-612-7415 Conference ID 13630388. An audio webcast replay of the conference call is available for one year at 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 22.9 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, Consolidated 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 expense, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP income tax provision (benefit), non-GAAP net income (loss), non-GAAP income (loss) per share, adjusted EBITDA, and total backlog, 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 expense, operating loss, net income (loss), net income (loss) per share or any other performance measure derived in accordance with GAAP. Silver Spring may consider whether other significant non-recurring items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses.

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

Non-GAAP operating income (loss) represents operating income (loss) adjusted for 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 income tax provision (benefit) represents income tax provision (benefit) excluding income tax benefit related to acquisitions.

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

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

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

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

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding the momentum in Silver Spring Networks’ business; future deployments; future innovation; future product availability; 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; the expansion of our target markets, including the IoT market; lengthy sales cycles with no assurances that a prospective customer will select Silver Spring’s products and services; amounts included in backlog may not result in billings or revenue; adverse publicity about, or consumer or political opposition to, the smart grid; security breaches involving smart grid products or services; the ability to integrate technology into third-party devices and Silver Spring’s relationship with third-party manufacturers; execution and customer adoption risks related to new product introductions and innovation, including our new fifth generation networking platform and products; the ability to attract and retain personnel, including members of Silver Spring’s management team; changes in strategy; technological changes that make Silver Spring’s products and services less competitive; competition, particularly from larger companies with more resources than Silver Spring; international business uncertainties; the ability to acquire and integrate other businesses; and other risk factors set forth from time to time in Silver Spring’s filings with the SEC, copies of which are available free of charge at the SEC’s website at www.sec.gov. All forward-looking statements in this press release reflect Silver Spring’s expectations as of February 16, 2016. Silver Spring undertakes no obligation, and expressly disclaims any obligation, to update any forward-looking statements in this press release in light of new information or future events. In addition, the preliminary financial results set forth in this press release are estimates based on information currently available to Silver Spring.

                 
SILVER SPRING NETWORKS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2015 2014 2015 2014
Revenue:
Product revenue $ 143,202 $ 60,034 $ 353,041 $ 129,333
Service revenue   56,045     17,377     136,518     61,955  
Net revenue 199,247 77,411 489,559 191,288
 
Cost of revenue:
Product cost of revenue 83,903 35,038 202,430 77,158
Service cost of revenue   13,999     12,195     61,386     57,793  

Total cost of revenue

97,902 47,233 263,816 134,951
Gross profit 101,345 30,178 225,743 56,337
 
Operating expenses:
Research and development 13,714 12,718 61,295 64,771
Sales and marketing 7,343 8,063 33,452 36,388
General and administrative 14,483 8,104 46,372 41,260
Restructuring   60     (99 )   1,671     1,789  
Total operating expenses   35,600     28,786     142,790     144,208  
 
Operating income (loss) 65,745 1,392 82,953 (87,871 )
Other (expense) income, net   (159 )   68     104     123  
Income (loss) before income taxes 65,586 1,460 83,057 (87,748 )
Provision for income taxes   (3,708 )   (959 )   (3,071 )   (1,422 )
Net income (loss) $ 61,878   $ 501   $ 79,986   $ (89,170 )
Net income (loss) per share:
Basic $ 1.23   $ 0.01   $ 1.60   $ (1.84 )
Diluted $ 1.19   $ 0.01   $ 1.55   $ (1.84 )
Weighted average shares used to compute net income (loss) per share:
Basic   50,481     48,929     49,963     48,377  
Diluted   52,167     50,191     51,524     48,377  
 
 

Reconciliation of GAAP to Non-GAAP results (in thousands, except per share data)

The following tables reconcile the Company's net income (loss) and net income (loss) 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 Twelve Months Ended
December 31, December 31,
2015 2014 2015 2014
Net income (loss) $ 61,878 $ 501 $ 79,986 $ (89,170 )
Change in deferred revenue, net of foreign currency translation (124,259 ) (7,045 ) (207,635 ) 85,420
Change in deferred cost of revenue, net of foreign currency translation 56,982 5,535 97,274 (56,767 )
Amortization of intangibles 422 219 1,674 614
Stock-based compensation 4,942 2,391 26,479 33,861
Acquisition-related charges 506 2,551
Income tax benefit related to Detectent acquisition (1,128 )
Restructuring 60 (99 ) 1,671 1,789
Legal settlements   3,595         3,595     (100 )
Non-GAAP net income (loss) $ 4,126   $ 1,502   $ 4,467   $ (24,353 )
Non-GAAP net income (loss) per share:
Basic $ 0.08   $ 0.03   $ 0.09   $ (0.50 )
Diluted $ 0.08   $ 0.03   $ 0.09   $ (0.50 )
Weighted average shares used to compute Non-GAAP net income (loss) per share:
Basic   50,481     48,929     49,963     48,377  
Diluted   52,167     50,191     51,524     48,377  
 
         
SILVER SPRING NETWORKS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
December 31, December 31,
2015 2014 (a)
ASSETS
Current assets:
Cash and cash equivalents $ 65,264 $ 60,457
Short-term investments 59,181 60,339
Accounts receivable 47,813 54,740
Inventory 4,545 6,722
Deferred cost of revenue 196,868 29,585
Deferred tax assets 5,278
Prepaid expenses and other current assets   10,835     5,146  
Total current assets 384,506 222,267
Property and equipment, net 14,106 12,860
Goodwill and intangible assets 14,390 8,221
Deferred cost of revenue, non-current 38,882 303,445
Deferred tax assets, non-current 1,069 354
Other long-term assets   4,772     1,047  
Total assets $ 457,725   $ 548,194  
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 30,623 $ 27,530
Deferred revenue 305,471 91,688
Deferred tax liability 249
Accrued and other liabilities   41,913     24,421  
Total current liabilities 378,007 143,888
Deferred revenue, non-current 96,342 517,905
Deferred tax liability, non-current 5,146
Other liabilities   17,241     15,074  
Total liabilities   491,590     682,013  
Total stockholders’ deficit   (33,865 )   (133,819 )
Total liabilities and stockholders’ deficit $ 457,725   $ 548,194  
 
(a) Derived from audited consolidated financial statements
 
                 
SILVER SPRING NETWORKS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
 
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2015 2014 2015 2014
OPERATING ACTIVITIES
Net income (loss) $ 61,878 $ 501 $ 79,986 $ (89,170 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Deferred taxes (557 ) (1,245 ) (1,492 ) (328 )
Depreciation and amortization 1,930 1,763 7,822 6,467
Stock-based compensation 4,942 2,391 26,479 33,861
Other non-cash adjustments 412 (80 ) 766 431
Changes in assets and liabilities:
Accounts receivable (3,675 ) 13,759 7,398 15,554
Inventory (853 ) (2,110 ) 2,190 (2,271 )
Prepaid expenses and other assets (936 ) 2,784 (5,128 ) 194
Contingent consideration related to
Detectent acquisition held in escrow (4,000 )
Deferred cost of revenue 56,978 5,603 97,286 (56,907 )
Accounts payable 3,232 (955 ) 3,101 (4,120 )
Customer deposits (599 ) 288 (448 ) 321
Deferred revenue (124,115 ) (7,823 ) (208,305 ) 84,590
Accrued and other liabilities   7,620     (1,355 )   14,032     2,510  
Net cash provided by (used in) operating activities   6,257     13,521     19,687     (8,868 )
 
INVESTING ACTIVITIES

Payments for business acquisition, net of cash and cash equivalents acquired

24 (7,098 ) (8,726 )
Proceeds from sales of available-for-sale investments 4,204 10,991 15,690 53,450
Proceeds from maturities of available-for-sale investments 9,250 6,750
Purchases of available-for-sale investments (5,270 ) (11,050 ) (24,180 ) (57,671 )
Purchases of property and equipment   (1,821 )   (1,851 )   (5,350 )   (6,073 )
Net cash used in investing activities   (2,887 )   (1,886 )   (11,688 )   (12,270 )
 
FINANCING ACTIVITIES
Payments on capital lease obligations (169 ) (405 ) (1,163 ) (1,550 )
Proceeds from issuance of common stock, net of repurchases 139 174 3,794 7,020
Excess tax benefit from share-based payment awards 153 103 153 103
Taxes paid related to net share settlement of equity awards   (1,820 )   (1,043 )   (5,788 )   (6,453 )
Net cash used in financing activities   (1,697 )   (1,171 )   (3,004 )   (880 )
Effect of exchange rate changes on cash and cash equivalents 136 (121 ) (188 ) (121 )
 
Net increase (decrease) in cash and cash equivalents 1,809 10,343 4,807 (22,139 )
Cash and cash equivalents - beginning of period   63,455     50,114     60,457     82,596  
Cash and cash equivalents - end of period $ 65,264   $ 60,457   $ 65,264   $ 60,457  
 
                         
SILVER SPRING NETWORKS, INC.
UNAUDITED RECONCILIATION OF NET REVENUE BETWEEN GAAP AND NON-GAAP
(in thousands, except percentages)
 
 
Q4 Q1 Q2 Q3 Q4 YoY%

TYPE

2014 2015 2015 2015 2015 Change
GAAP net revenue:
Product net revenue $ 60,034 $ 105,035 $ 54,711 $ 50,093 $ 143,202 139 %
Service net revenue
Managed services and SaaS (a) 10,569 12,974 10,608 11,223 37,142 251 %
Professional services (a)   6,808     25,631     11,848     8,189     18,903   178 %
Total service net revenue   17,377     38,605     22,456     19,412     56,045   223 %
Total GAAP net revenue $ 77,411   $ 143,640   $ 77,167   $ 69,505   $ 199,247   157 %
% Product 78 % 73 % 71 % 72 % 72 %
% Service 22 % 27 % 29 % 28 % 28 %
Change in deferred net revenue:
Change in deferred product revenue $ (9,991 ) $ (64,034 ) $ (10,015 ) $ 1,785 $ (95,194 )
Change in deferred service revenue:
Managed services and SaaS 984 (419 ) 2,387 1,397 (22,896 )
Professional services   1,962     (16,088 )   (399 )   2,010     (6,169 )
Total change in deferred service revenue   2,946     (16,507 )   1,988     3,407     (29,065 )
Total change in deferred revenue $ (7,045 ) $ (80,541 ) $ (8,027 ) $ 5,192 $ (124,259 )
Non-GAAP revenue:
Product net revenue 50,043 41,001 44,696 51,878 48,008 -4 %
Service net revenue:
Managed services and SaaS (a) 11,553 12,555 12,995 12,620 14,246 23 %
Professional services (a)   8,770     9,543     11,449     10,199     12,734   45 %
Total service net revenue   20,323     22,098     24,444     22,819     26,980   33 %
Total non-GAAP net revenue $ 70,366   $ 63,099   $ 69,140   $ 74,697   $ 74,988   7 %
% Product 71 % 65 % 65 % 69 % 64 %
% Service 29 % 35 % 35 % 31 % 36 %
 

RECURRING REVENUE PER ENDPOINT

Recurring GAAP revenue (TTM) (a) $ 35,220 $ 39,673 $ 41,697 $ 45,374 $ 71,947

Changes in deferred revenue, net of foreign currency translations

  9,284     6,851     6,912     4,349     (19,531 )
Recurring non-GAAP revenue (TTM) (a) $ 44,504   $ 46,524   $ 48,609   $ 49,723   $ 52,416  
Cumulative network endpoints delivered 20,266 20,814 21,506 22,321 22,954
Recurring GAAP revenue per endpoint delivered (a) $ 1.74 $ 1.91 $ 1.94 $ 2.03 $ 3.13 80 %
Recurring non-GAAP revenue per endpoint delivered (a) $ 2.20 $ 2.24 $ 2.26 $ 2.23 $ 2.28 4 %
 

SOLUTION

GAAP net revenue
Advanced metering infrastructure $ 72,456 $ 112,865 $ 66,907 $ 60,149 $ 181,892 151 %
New solutions   4,955     30,775     10,260     9,356     17,355   250 %
Total GAAP net revenue $ 77,411   $ 143,640   $ 77,167   $ 69,505   $ 199,247   157 %
% Advanced metering infrastructure 94 % 79 % 87 % 87 % 91 %
% New solutions 6 % 21 % 13 % 13 % 9 %
Change in deferred net revenue
Advanced metering infrastructure $ (12,441 ) $ (64,828 ) $ (10,976 ) $ 3,586 $ (123,525 )
New solutions   5,396     (15,713 )   2,949     1,606     (734 )
Total change in deferred net revenue $ (7,045 ) $ (80,541 ) $ (8,027 ) $ 5,192 $ (124,259 )
Non-GAAP net revenue
Advanced metering infrastructure $ 60,015 $ 48,037 $ 55,931 $ 63,735 $ 58,367 -3 %
New solutions   10,351     15,062     13,209     10,962     16,621   61 %
Total Non-GAAP net revenue $ 70,366   $ 63,099   $ 69,140   $ 74,697   $ 74,988   7 %
% Advanced metering infrastructure 85 % 76 % 81 % 85 % 78 %
% New solutions 15 % 24 % 19 % 15 % 22 %
 

GEOGRAPHY

GAAP net revenue
United States $ 30,017 $ 122,582 $ 72,360 $ 53,113 $ 177,896 493 %
International   47,394     21,058     4,807     16,392     21,351   -55 %
Total GAAP net revenue $ 77,411   $ 143,640   $ 77,167   $ 69,505   $ 199,247   157 %
% United States 39 % 85 % 94 % 76 % 89 %
% International 61 % 15 % 6 % 24 % 11 %
Change in deferred net revenue
United States $ 29,176 $ (66,533 ) $ (17,955 ) $ 12,467 $ (116,859 )
International   (36,221 )   (14,008 )   9,928     (7,275 )   (7,400 )
Total change in deferred net revenue $ (7,045 ) $ (80,541 ) $ (8,027 ) $ 5,192 $ (124,259 )
Non-GAAP net revenue
United States $ 59,193 $ 56,049 $ 54,405 $ 65,580 $ 61,037 3 %
International   11,173     7,050     14,735     9,117     13,951   25 %
Total non-GAAP net revenue $ 70,366   $ 63,099   $ 69,140   $ 74,697   $ 74,988   7 %
% United States 84 % 89 % 79 % 88 % 81 %
% International 16 % 11 % 21 % 12 % 19 %
(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)
 
 
Q4 Q1 Q2 Q3 Q4 YoY%
CASH FLOW DATA 2014 2015 2015 2015 2015 Change
Operating cash flow $ 13,521 $ (455 ) $ 9,613 $ 4,272 $ 6,257 -54 %
Operating cash flow - TTM (8,868 ) (5,960 ) 7,048 27,054 19,687 322 %
BALANCE SHEET DATA
Cash, cash equivalents and short-term investments $ 120,796 $ 111,215 $ 118,555 $ 121,915 $ 124,445 3 %
Deferred net revenue
End of quarter 609,593 529,984 521,176 526,000 401,813
Less: Beginning of quarter (617,416 ) (609,593 ) (529,984 ) (521,176 ) (526,000 )
Foreign currency translation adjustment and other   778     (932 )   781     368     (72 )
Change in deferred net revenue, net of foreign currency translation and other $ (7,045 ) $ (80,541 ) $ (8,027 ) $ 5,192   $ (124,259 )
Deferred cost of revenue
End of quarter $ 333,030 $ 300,524 $ 286,044 $ 292,730 $ 235,750
Less: Beginning of quarter (338,633 ) (333,030 ) (300,524 ) (286,044 ) (292,730 )
Foreign currency translation adjustment   68     (10 )   (8 )   26     (2 )
Change in deferred cost of revenue, net of foreign currency translation $ (5,535 ) $ (32,516 ) $ (14,488 ) $ 6,712   $ (56,982 )
 
STOCK-BASED COMPENSATION
Cost of goods sold $ 218 $ 1,723 $ 2,209 $ 1,197 $ 1,006 361 %
Research and development 785 2,180 2,832 1,771 1,277 63 %
Sales and marketing 479 1,238 1,287 914 665 39 %
General and administrative   909     1,882     2,333     1,971     1,994   119 %
$ 2,391   $ 7,023   $ 8,661   $ 5,853   $ 4,942   107 %
EMPLOYEES 576 623 640 645 652 13 %
HOMES & BUSINESSES
Cumulative network endpoints delivered* 20,266 20,814 21,506 22,321 22,954 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)
 
 
Q4 Q1 Q2 Q3 Q4 YOY %
QUARTERLY RECONCILIATION OF RESULTS 2014 2015 2015 2015 2015 Change
Net revenue
GAAP net revenue $ 77,411 $ 143,640 $ 77,167 $ 69,505 $ 199,247 157 %
Change in deferred revenue, net of foreign currency translation   (7,045 )   (80,541 )   (8,027 )   5,192     (124,259 )
Non-GAAP net revenue $ 70,366   $ 63,099   $ 69,140   $ 74,697   $ 74,988   7 %
 
Gross profit
GAAP gross profit $ 30,178 $ 71,455 $ 19,956 $ 32,987 $ 101,345 236 %
Change in deferred revenue, net of foreign currency translation (7,045 ) (80,541 ) (8,027 ) 5,192 (124,259 )
Change in deferred cost of revenue, net of foreign currency translation 5,535 32,516 14,488 (6,712 ) 56,982
Amortization of intangible assets 140 262 260 260 259
Stock-based compensation 218 1,723 2,209 1,197 1,006
Acquisition-related charges (a)       11     60     14     15  
Non-GAAP gross profit $ 29,026   $ 25,426   $ 28,946   $ 32,938   $ 35,348   22 %
GAAP gross margin % (as a % of GAAP net revenue) 39 % 50 % 26 % 47 % 51 %
Non-GAAP gross margin % (as a % of non-GAAP net revenue) 41 % 40 % 42 % 44 % 47 %
 
Operating expenses
GAAP operating expenses $ 28,786 $ 37,314 $ 36,495 $ 33,381 $ 35,600 24 %
Amortization of intangible assets (79 ) (147 ) (162 ) (161 ) (163 )
Stock-based compensation (2,173 ) (5,300 ) (6,452 ) (4,656 ) (3,936 )
Acquisition-related charges (a) (724 ) (691 ) (545 ) (491 )
Restructuring 99 (194 ) (1,078 ) (339 ) (60 )
Legal settlements                   (3,595 )
Non-GAAP operating expenses $ 26,633   $ 30,949   $ 28,112   $ 27,680   $ 27,355   3 %
GAAP operating expense % (as a % of GAAP net revenue) 37 % 26 % 47 % 48 % 18 %
Non-GAAP operating expense % (as a % of non-GAAP net revenue) 38 % 49 % 41 % 37 % 36 %
 
Operating income (loss)
GAAP operating income (loss) $ 1,392 $ 34,141 $ (16,539 ) $ (394 ) $ 65,745 4623 %
Change in deferred revenue, net of foreign currency translation (7,045 ) (80,541 ) (8,027 ) 5,192 (124,259 )
Change in deferred cost of revenue, net of foreign currency translation 5,535 32,516 14,488 (6,712 ) 56,982
Amortization of intangible assets 219 409 422 421 422
Stock-based compensation 2,391 7,023 8,661 5,853 4,942
Acquisition-related charges (a) 735 751 559 506
Restructuring (99 ) 194 1,078 339 60
Legal settlements                   3,595  
Non-GAAP operating income (loss) $ 2,393   $ (5,523 ) $ 834   $ 5,258   $ 7,993   234 %
GAAP operating margin % (as a % of GAAP net revenue) 2 % 24 % -21 % -1 % 33 %
Non-GAAP operating margin % (as a % of non-GAAP net revenue) 3 % -9 % 1 % 7 % 11 %
 
Income tax provision (benefit)
GAAP income tax provision (benefit) $ 959 $ (476 ) $ (290 ) $ 129 $ 3,708 287 %
Income tax benefit related to Detectent acquisition       890     124     114      
Non-GAAP income tax provision (benefit) $ 959   $ 414   $ (166 ) $ 243   $ 3,708   287 %
GAAP income tax provision % (as a % of GAAP net revenue) 1 % 0 % 0 % 0 % 2 %
Non-GAAP income tax provision % (as a % of non-GAAP net revenue) 1 % 1 % 0 % 0 % 5 %
 
Adjusted EBITDA
GAAP net income (loss) $ 501 $ 34,905 $ (16,175 ) $ (622 ) $ 61,878 12251 %
Change in deferred revenue, net of foreign currency translation (7,045 ) (80,541 ) (8,027 ) 5,192 (124,259 )
Change in deferred cost of revenue, net of foreign currency translation 5,535 32,516 14,488 (6,712 ) 56,982
Other (income) expense, net (68 ) (288 ) (74 ) 99 159
Provision (benefit) for income taxes 959 (476 ) (290 ) 129 3,708
Depreciation and amortization 1,763 1,949 1,953 1,990 1,930
Stock-based compensation 2,391 7,023 8,661 5,853 4,942
Acquisition-related charges (a) 735 751 559 506
Restructuring (99 ) 194 1,078 339 60
Legal settlements                   3,595  
Adjusted EBITDA $ 3,937   $ (3,983 ) $ 2,365   $ 6,827   $ 9,501   141 %
 
Net income (loss)
GAAP net income (loss) $ 501 $ 34,905 $ (16,175 ) $ (622 ) $ 61,878 12251 %
Change in deferred revenue, net of foreign currency translation (7,045 ) (80,541 ) (8,027 ) 5,192 (124,259 )
Change in deferred cost of revenue, net of foreign currency translation 5,535 32,516 14,488 (6,712 ) 56,982
Amortization of intangible assets 219 409 422 421 422
Stock-based compensation 2,391 7,023 8,661 5,853 4,942
Acquisition-related charges (a) 735 751 559 506
Income tax benefit related to Detectent acquisition (890 ) (124 ) (114 )
Restructuring (99 ) 194 1,078 339 60
Legal settlements                   3,595  
Non-GAAP net income (loss) $ 1,502   $ (5,649 ) $ 1,074   $ 4,916   $ 4,126   175 %
GAAP net margin % (as a % of GAAP net revenue) 1 % 24 % -21 % -1 % 31 %
Non-GAAP net margin % (as a % of non-GAAP net revenue) 2 % -9 % 2 % 7 % 6 %
 
GAAP net income (loss) per share
Basic $ 0.01 $ 0.71 $ (0.32 ) $ (0.01 ) $ 1.23
Diluted $ 0.01 $ 0.69 $ (0.32 ) $ (0.01 ) $ 1.19
Weighted average number of shares used in computation
Basic 48,929 49,306 49,862 50,188 50,481
Diluted 50,191 50,899 49,862 50,188 52,167
 
Non-GAAP net income (loss) per share
Basic $ 0.03 $ (0.11 ) $ 0.02 $ 0.10 $ 0.08
Diluted $ 0.03 $ (0.11 ) $ 0.02 $ 0.10 $ 0.08
Weighted average number of shares used in computation
Basic 48,929 49,306 49,862 50,188 50,481
Diluted 50,191 49,306 51,390 51,713 52,167
 
(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 December 31, 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 $ 143,202 $ (95,194 ) $ - $ - $ - $ 48,008
Service revenue
Managed services and SaaS 37,142 (22,896 ) - - - 14,246
Professional services   18,903     (6,169 )   -     -     -     12,734  
Total service net revenue $ 56,045   $ (29,065 ) $ -   $ -   $ -   $ 26,980  
Net revenue $ 199,247   $ (124,259 ) $ -   $ -   $ -   $ 74,988  
 
Product cost of revenue $ 83,903 $ (56,982 ) $ (250 ) $ (259 ) $ - $ 26,412
Service cost of revenue
Managed services and SaaS 7,592 - (256 ) - (15 ) 7,321
Professional services   6,407     -     (500 )   -     -     5,907  
Total service cost of revenue $ 13,999   $ -   $ (756 ) $ -   $ (15 ) $ 13,228  
Total cost of revenue $ 97,902   $ (56,982 ) $ (1,006 ) $ (259 ) $ (15 ) $ 39,640  
 
Gross profit $ 101,345 $ (67,277 ) $ 1,006 $ 259 $ 15 $ 35,348
Product gross margin % 41.4 % 2.5 % 0.5 % 0.5 % - 45.0 %
Service gross margin %
Managed service and SaaS gross margin % 79.6 % -32.9 % 1.8 % - 0.1 % 48.6 %
Professional services gross margin % 66.1 % -16.4 % 3.9 % - - 53.6 %
Total service gross margin % 75.0 % -26.9 % 2.8 % - 0.1 % 51.0 %
Total gross margin % 50.9 % -5.4 % 1.3 % 0.3 % 0.0 % 47.1 %
      Three Months Ended December 31, 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 $ 60,034 $ (9,991 ) $ - $ - $ - $ 50,043
Service revenue
Managed services and SaaS (a) 10,569 984 - - - 11,553
Professional services (a)   6,808     1,962     -     -     -     8,770  
Total service net revenue $ 17,377   $ 2,946   $ -   $ -   $ -   $ 20,323  
Net revenue $ 77,411   $ (7,045 ) $ -   $ -   $ -   $ 70,366  
 
Product cost of revenue $ 35,038 $ (5,535 ) $ 77 $ (140 ) $ - $ 29,440
Service cost of revenue
Managed services and SaaS (a) 6,031 - 72 - - 6,103
Professional services (a)   6,164     -     (367 )   -     -     5,797  
Total service cost of revenue $ 12,195   $ -   $ (295 ) $ -   $ -   $ 11,900  
Total cost of revenue $ 47,233   $ (5,535 ) $ (218 ) $ (140 ) $ -   $ 41,340  
 
Gross profit $ 30,178 $ (1,510 ) $ 218 $ 140 $ - $ 29,026
Product gross margin % 41.6 % -0.6 % -0.2 % 0.2 % 0 41.1 %
Service gross margin %
Managed service and SaaS gross margin % (a) 42.9 % 4.9 % -0.6 % - - 47.2 %
Professional services gross margin % (a) 9.5 % 20.3 % 4.2 % - - 33.9 %
Total service gross margin % 29.8 % 10.2 % 1.5 % 0.0 % - 41.5 %
Total gross margin % 39.0 % 1.8 % 0.3 % 0.2 % - 41.3 %
 
(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)

 

 

Twelve Months Ended December 31, 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 $ 353,041 $ (167,458 ) $ - $ - $ - $ 185,583
Service revenue
Managed services and SaaS 71,947 (19,531 ) - - - 52,416
Professional services   64,571     (20,646 )   -     -     -       43,925  
Total service net revenue $ 136,518   $ (40,177 ) $ -   $ -   $ -     $ 96,341  
Net revenue $ 489,559   $ (207,635 ) $ -   $ -   $ -     $ 281,924  
 
Product cost of revenue $ 202,430 $ (97,274 ) $ (1,288 ) $ (1,041 ) $ - $ 102,827
Service cost of revenue
Managed services and SaaS 31,663 - (1,937 ) - (100 ) 29,626
Professional services   29,723     -     (2,910 )   -     -       26,813  
Total service cost of revenue $ 61,386   $ -   $ (4,847 ) $ -   $ (100 )   $ 56,439  
Total cost of revenue $ 263,816   $ (97,274 ) $ (6,135 ) $ (1,041 ) $ (100 )   $ 159,266  
 
Gross profit $ 225,743 $ (110,361 ) $ 6,135 $ 1,041 $ 100 $ 122,658
Product gross margin % 42.7 % 0.7 % 0.7 % 0.6 % - 44.6 %
Service gross margin %
Managed service and SaaS gross margin % 56.0 % -16.4 % 3.7 % - 0.2 % 43.5 %
Professional services gross margin % 54.0 % -21.6 % 6.6 % - - 39.0 %
Total service gross margin % 55.0 % -18.8 % 5.0 % - 0.1 % 41.4 %
Total gross margin % 46.1 % -5.2 % 2.2 % 0.4 % 0.0 % 43.5 %
     

Twelve Months Ended December 31, 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 $ 129,333 $ 64,691 $ - $ - $ - $ 194,024
Service revenue
Managed services and SaaS (a) 35,220 9,284 - - - 44,504
Professional services (a)   26,735     11,445                 38,180  
Total service net revenue $ 61,955   $ 20,729   $ -     $ -     $ -   $ 82,684  
Net revenue $ 191,288   $ 85,420   $ -     $ -     $ -   $ 276,708  
 
Product cost of revenue $ 77,158 $ 56,767 $ (1,837 ) $ (417 ) $ - $ 131,671
Service cost of revenue
Managed services and SaaS (a) 25,800 - (919 ) - - 24,881
Professional services (a)   31,993     -     (4,853 )     -       -     27,140  
Total service cost of revenue $ 57,793   $ -   $ (5,772 )   $ -     $ -   $ 52,021  
Total cost of revenue $ 134,951   $ 56,767   $ (7,609 )   $ (417 )   $ -   $ 183,692  
 
Gross profit $ 56,337 $ 28,653 $ 7,609 $ 417 $ - $ 93,016
Product gross margin % 40.3 % -9.4 % 0.9 % 0.2 % - 32.1 %
Service gross margin %
Managed service and SaaS gross margin % (a) 26.7 % 15.3 % 2.1 % - - 44.1 %
Professional services gross margin % (a) -19.7 % 35.9 % 12.7 % - - 28.9 %
Total service gross margin % 6.7 % 23.4 % 7.0 % - - 37.1 %
Total gross margin % 29.5 % 1.3 % 2.7 % 0.2 % - 33.6 %
 
(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