Somewhere I read that Nasdaq knocks on the door of non-compliant companies after 30 days (not 100% sure if this is correct). So if Sege can "maintain" a PPS below $1, I suppose he will have to respond to shareholders at the CC. Echelon's shareholder meeting is typically in May as well.
At this point, I unfortunately have to disagree with your assessment of this stock being beaten up. Book value will be around ~90c as of Q1/15, or even lower depending on additional costs for a shutdown or sale of their Holley JV. If we add the $20 M revenue gap to break-even plus the lack of progress in Q4/14, then the current PPS around book value seems just fair. Finally, their cash level is gradually getting to a point where an acquisition can't close the gap.
What's surprising to me is that they couldn't capitalize on their migration strategy for their legacy LonWorks market so far. It sounded like a strategy that could turn the company toward break-even.
The window for a turnaround is closing. Nice (meaningless) talk about potential contracts or a potential acquisition at the CC will only be appreciated if Echelon can grow non-ENEL revenues by _at least_ 10% relative to Q4/14 and total revenues beyond $10 M, That might get a pump organizer to add a few blocks, and some participating analyst clowns to issue an upgrade.
Looks like we'll see a reverse split prior to Q1/15 already ....
As regard cost-cutting, I think that's the only thing they have done ok. The company shrank from ~320 employees in 2010 to 106 employes as of Feb 28, 2015. But don't get me wrong, it's pathetic having to refer to downsizing as the only positive this management can take credit for over four years ...
2015 10-K: "... As of Feb 28, 2015 , we had 106 employees worldwide, of which 32 were in product development, 30 were in sales and marketing, 22 were in general and administrative, 18 were in operations, and 4 were in customer support and training. About 69 employees are located at our headquarters in California and 9 employees are located in other offices throughout the United States. Our remaining employees are located in eleven countries worldwide, with the largest concentrations in China, Hong Kong, the Netherlands, and the United Kingdom. ...."
Echelon is still in the Holley JV, which they intent to hive off. This may get them down to around 90 employees. But after that, it will be hard to downsize the company any further. They can hardly hive off their bread-and-butter business selling LonWorks platform products. Echelon's core business involving both hardware and software design is simply not designed for this kind of revenues.
As regards hiring an investment bank, I totally agree. Sege is (b.)(s.)'ing for seven quarters now about IIoT and the 4 billion devices out there by some day in the 2020s, but he can't form one coherent argument on how to grow their non-ENEL revenues by 50% to break even. All these "in line with expectations" results Q after Q is totally meaningless when they have no idea how to keep the boat from sinking over mid term.
If by Q1/15 there's still no break-even plan, we might even trade below book value. They are just running low of cash for any meaningful acquisition that could help them close the revenue gap.
Echelon made 33% of its 2014 revenues from non-ENEL EMEA. The EUR is down ~25%. Someone along the cash flow chain lost 25%, that's for sure --- Echelon's end customers, Echelon's OEM's, or Echelon itself. My bet is, all three will share the burden. Although Echelon carries out almost all of its business in USD, I assume they will have to give concessions to maintain whatever remained of their market share ... ENEL, I suppose, is hooked for a while so they will have to assume the ForEx burden for their ~$3 M payments to Echelon in 2014.
No mention of Oshman Turst, neither in the 2014 10-K nor in the 2013 10-K. As regards Enel, actually I would have taken it as more positive to see Enel piecing out of ELON. But nothing makes sense to me when it comes to Enel anyway. Why Silivio Gallo has held on to Enel's investment in this ex-smart meter stock is a mystery for me -- he should be the one to know the competitive situation in Europe best.
Ain't looking good here. ELON is $20 M short of revenue just to break even on cash flow, and likely $25 M to break even for shareholders. Now it's two years since Sege announced they had "fleshed out" their new strategy addressing the device legacy market. TWO YEARS and literally ZERO evidence that this can generate NEW revenues -- pathetic to the n'th degree, given there are 120 M +++ LonWorks devices out there. Now Sege is talking about a $1 M lighting RFP in which they participate. This is almost meaningless in the context of their break-even target between $55 M to $65 M. They need one of those contracts every quarter just for lighting to become a sustainable vertical business.
Worse, they are 8 cents away from non-compliance with Nasdaq. AFAIK, after 30 days of non-compliance, Nasdaq will send them a letter asking them to respond with a strategy how to get back into compliance, and my gut tells me this will include a hefty reverse split of at least 1 : 5 ... and that will soften the potential effect of a pump-n-dump.
An acquisition to the tune of $25 M can still turn the boat, but with every Q of procrastination and $2 M less in cash, they are burning out this option, too.
I guess the best we can hope for at this point is they are being acquired in the $1.25 to $1.5 a share range, or a pump-n-dump due to a $1++ M lighting contract, some meaningful partnership, and/or an acquisition on Echelon's part. That would hopefully get us into a similar PPS range.
They filed their 10-K.
I only looked up if Enel sold some of their shares. Nope, they apparently forgot about it.
10-K: "To our knowledge, Enel has not disposed of any of its 3.0 million shares."
Hafslund/Norway goes with Aidon and not ex-Echelon meters (now NES/S&T) for their 700 K meter rollout. Also, #$%$ Energy/Denmark announced they will use Landis' Gridstream smart meter management system, but they haven't decided for the smart meter provider.
You sound bitter. Good .... after all these years of ELON at $12 by Christmas. The problem is you are toolongFSLR as well and invested in FSLR way earlier than 2011. Good.
Thanks BABA. Absolutely. Not much I can add to what I have already said recently. With $40 M in cash _after_ Q1/15, the last word is not spoken here - that's my belief. There'll be an IIoT pump back into higher territory into at least the $1.3's. It just stands to reason. We seem to agree on this, given you stopped selling at $1.3. If ELON can come up with something that resembles a break-even plan --- unfortunately, nobody of us can really judge at this point whether they can --- we'll see $2, at least temporarily. Well, you won't. SFU bought in again at $5 and averaged down all the way to $2.2, and now you sell starting at $1.5.
Little left of your "ELON house" other than the toilet, isn't it .... Have fun on it :)
... while the PPS already came down to ~$1.7 as of Dec. 31, 2014.
Institutional Ownership ... 25.19%
Total Shares Outstanding (millions) ... 44
Total Value of Holdings (millions) ... $13
Increased Positions ... 21 ... 1,132,491
Decreased Positions ... 18 ... 417,269
Held Positions ... 15 ... 9,523,046
Total Institutional Shares ... 54 ... 11,072,806
New Positions ... 5 ... 477,947
Sold Out Positions ... 4 ... 63,346
Read more: http://www.nasdaq.com/symbol/elon/institutional-holdings
All is true what you say. The investment question for me was whether Echelon can come up with a plan that can generate the additional $20 M of revenues to break even. This would be good for a PPS in the low $2's, IMO. Unfortunately, Echelon did not give us any such plan in Q4/14, and their Q1/15 revenue guidance between $8.75 M and $9.6 M indicated a Q1/15 "in line with expectations" ... which implies a PPS trailing the book value into the $0's and toward a reverse-split.
I based my thinking that a revenue increase by $20 M is in fact possible on Echelon's massive LonWorks / Neuron installation base, which sets them apart from their large competitors --- Echelon is the brand name that is glued on 120M++ Neuron chips out there. The argument that these customers won't just pull out their LonTalk communications devices from the walls and replace them with BacNet or IPv6 or Wireless is somewhat convincing. Echelon's strategy offers a plug-n-play solution with BacNet and IPv6 and Wireless, which seems a persuasive solution for many customers -- not all, obviously; the competitive solution are gateways, but then again, I am talking here about a revenue increase of ~$20 M to break even in a market with a CAGR over the next couple years between 20% and 40%, depending on who we want to believe.
My take was Echelon can carve out a sizable migration and interoperability business. This, in addition to say $5 M+ a year from outdoor lights (LumeWave) and chips for the grid (e.g., for NES/S&T), and say $10 M from an acquisition to give them improved access to the American wireless market, should be good for an additional $20 M in revenues, one might think .... Although Q4/14 was not every encouraging that my thinking is correct, at this PPS it is very tempting to lower the average. 100% to 200% gain or close to nothing within 2 years, that's the deal at this point, IMO.
These are the 5550(b) requirements. At least one of those must be met. .... ELON should be good on (b.1) ... for the next little while :)
(b) Continued Listing Standards for Primary Equity Securities:
(1) Equity Standard: Stockholders' equity of at least $2.5 million;
(2) Market Value of Listed Securities Standard: Market Value of Listed Securities of at least $35 million; or
(3) Net Income Standard: Net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years.
No sarcasm necessary, unfortunately. The $1 PPS requirement is upon us if Sege can't release a business plan to break even soon'ish. IMO, given that shareholder equity is still far away from minimum requirements, the next step would be a hefty reverse split.
5550. Continued Listing of Primary Equity Securities
A Company that has its Primary Equity Security listed on the Capital Market must continue to meet all of the requirements set forth in Rule 5550(a) and at least one of the Standards set forth in Rule 5550(b). Failure to meet any of the continued listing requirements will be processed in accordance with the provisions set forth in the Rule 5800 Series.
(a) Continued Listing Requirements for Primary Equity Securities:
(1) At least two registered and active Market Makers, one of which may be a Market Maker entering a stabilizing bid;
(2) Minimum bid price of at least $1 per share;
(3) At least 300 Public Holders;
(4) At least 500,000 Publicly Held Shares; and
(5) Market Value of Publicly Held Shares of at least $1 million.
The Q4/14 transcript is online:
After two years of planning and prototyping, I was hoping they would come into 2015 with a full-fledged business plan how to move forward. Didn't happen. That last sentence of Sege in response to a question on visibility pretty much summarizes my worst-case.
"... So, I’d say it’s not, perhaps not quite as unpredictable as our Grid business but has some of the same dynamics. So we are now well positioned to participate in those, in the United States with our Lumewave acquisition. But I don’t think we’ll have more visibility until we’re actually awarded one of those, and that’s unpredictable. ..."
Geez , after all this time, he still does not think they will have more visibility until they have been awarded a contract and that's unpredictable ....
That was my worst-case thought: With their IzoT platform and FT6000 multi-protocol chips, they seem to have pump-n-dump ready products in the making; and with $43 M in cash, it just make sense to expect one of those pump-n-dumps in 2015. Hope this will drive the PPS back toward my cost point of $1.57. But, that'll be it for me again.
This guy read whole poems between Sege's lines .... if Echelon were on the brink of break-even, I'd be encouraged too .... unfortunately Echelon needs to grow by 50% to get close to a $0 EPS.
Quealy noted, “While the near term remains in transition, we continue to be impressed by the fiscal discipline and focus on the emerging Internet of Things platform. We are looking for tangible signs of traction (design wins, JVs, M&A) to become constructive on shares”
The analyst continued, “With the sale of the grid division completed last quarter, results now consist entirely of IIoT-based solutions. Here, growth initiatives continue to progress nicely, including tangible wins for the nascent IzoT platform and expanding opportunities (and pilots) in lighting (bolstered by acquisition of outdoor lighting control company Lumewave). While related wins likely follow a long and lumpy path, we remain encouraged by recent strategic momentum.”
They need to act fast ... but "fast" is not a term embraced by this management team.
Right now, they still have $25 M in cash for investment (they probably need $15 M to run the company). Add ~$ 10 M of shareholder dilution, which would amount to a meaningful investment of $35 M. The longer they wait, the more cash they will burn and this opportunity will also go down the tubes ....
Judging by the information provided on the call, it seems VERY unlikely that they can grow the business organically to break even.
Hope's still alive - that's my take away from this call.
On the positive side, ELON's y-o-y IIoT revenues (w/out ENEL) decreased only by ~$150K, and the new products should indeed generate new revenues. On the negative side, ELON is running at ~$38 M of yearly revenues, but according to Slakey they need $55 M to $65 M to break even. This means they need to increase revenues by 50%+ just to break even ... a long shot for investors to buy into ELON. I suppose they will have to close this gap sooner rather than later with an acquisition - unfortunately there was no question/comment on that possibility.
Echelon Corporation (ELON) today announced financial results for the fourth quarter ended December 31, 2014.
Q4 Revenues: $9.6 million
Q4 GAAP Net Loss: $2.6 million; GAAP Net Loss per Share: $0.06
Q4 Non-GAAP Net Loss: $2.2 million; Non-GAAP Net Loss per Share: $0.05
Echelon’s guidance for the first quarter of 2015 are as follows:
Total revenues are expected to be $8.6 million to $9.6 million.
Non-GAAP gross margin is expected to be in a range of 55% to 57% of revenue.
Operating expenses are expected to be in a range of $7.0 to $7.5 million.
Non-GAAP loss per share is expected to be between $0.04 to $0.07, based on 44 million fully diluted weighted average shares outstanding.
GAAP loss per share is expected to be between $0.06 to $0.09.
Cash burn for the quarter is expected to exceed non-GAAP loss by $1.0 to $2.0 million due to expected payments as a result of the sale of our Grid business.
Pretty much in line with expectations, which were really low. As regards outlook, the only thing what's good is lower OPEX.
Echelon (NASDAQ:ELON)‘s stock had its “hold” rating restated by Canaccord Genuity in a research note issued on Friday. They currently have a $1.75 price target on the stock. Canaccord Genuity’s price target points to a potential upside of 26.81% from the company’s current price.
When it comes to Echelon, the records of Canaccord's investment analysts has been just one notch higher than those of Piper Jaffray and Credit Suisse .... and those two have been pathetic, if not criminal.
Expectations are so low for tomorrow, I suppose anything that would indicate that their financial situation didn't deteriorate will be perceived as a positive. There might be even more than 1 analyst on the con call this time ... who knows.
My wish list:
- Total revenues in the higher range of ~9.75 M
- Stabilization of IoT revenues (w/out ENEL)
- Some indication that they actually made money from the Lumewave acquistion
- OPEX coming down to $7.5 M
- Gross margin of ~57%
- Non-GAAP loss of ~$2 M
I suppose that would stop the deterioration of the PPS toward book value.