0001193125-17-024180.txt : 20170313 0001193125-17-024180.hdr.sgml : 20170313 20170130213256 ACCESSION NUMBER: 0001193125-17-024180 CONFORMED SUBMISSION TYPE: CORRESP PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20170130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILVER SPRING NETWORKS INC CENTRAL INDEX KEY: 0001180079 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: CORRESP BUSINESS ADDRESS: STREET 1: 230 W. TASMAN DRIVE CITY: SAN JOSE STATE: CA ZIP: 95134 BUSINESS PHONE: 669-770-4000 MAIL ADDRESS: STREET 1: 230 W. TASMAN DRIVE CITY: SAN JOSE STATE: CA ZIP: 95134 CORRESP 1 filename1.htm CORRESP

LOGO

January 30, 2017

VIA EDGAR

United States Securities and Exchange Commission

Division of Corporation Finance

100 F Street, NE

Washington, DC 20549

 

Attention:    Stephen Krikorian, Accounting Branch Chief Office of Information Technologies and Services
   Melissa Walsh, Staff Accountant
Re:    Silver Spring Networks, Inc.
   Form 10-K for the Fiscal Year Ended December 31, 2015
   Filed March 9, 2016
   Form 10-Q for the Quarterly Period Ended September 30, 2016
   Filed November 9, 2016
   Form 8-K filed November 3, 2016
   File No. 001-35828

Ladies and Gentlemen:

Silver Spring Networks, Inc. (the “Company”) hereby responds to the comments of the staff of the Securities and Exchange Commission (the “Staff”) contained in the Staff’s letter dated January 10, 2017 (the “Comment Letter”) regarding the Company’s Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2015 filed on March 9, 2016 (the “Form 10-K”), Quarterly Report on Form 10-Q for the Quarterly Period Ended September 30, 2016 filed on November 9, 2016 (the “Form 10-Q”), and Form 8-K filed on November 3, 2016 (the “Form 8-K”) (File No. 001-35828). The numbered paragraphs below correspond to the numbered comments in that letter; the Staff’s comment is presented in bold italics.

1. We note from your response to prior comment 3 that your non-GAAP performance measures address the unique circumstances of your customer deployments. However, your presentations of non-GAAP gross profit and gross margin on billings (including gross profit and gross margin on product billings and gross profit and gross margin on services billings), non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP income (loss) per share, and adjusted EBITDA cannot reflect any changes in management decisions associated with the non-GAAP billings and non-GAAP cost of billings. These non-GAAP measures are inconsistent with the guidance in Question 100.04 of the Compliance and Disclosure Interpretations on Non-GAAP Financial Measures. Please revise your future presentation of these non-GAAP measures.


United States Securities and Exchange Commission

January 30, 2017

Page 2

 

Response to Comment 1:

The Company acknowledges the Staff’s comment and confirms it will revise its future presentation of these non-GAAP measures. Following a discussion with the Staff, the Company proposed revising its presentation for the results for the fourth quarter of 2016 substantially as set forth on Exhibit A, and for the results for the first quarter of 2017 and future quarters substantially as set forth on Exhibit B. After further discussions with the Staff, the Company has determined that it will not issue a press release in the form of Exhibit A but will issue a press release substantially in the form of Exhibit B beginning with the results for the fourth quarter of 2016.

* * * * * * *

As requested, in connection with responding to the Comment Letter, the Company acknowledges that:

 

    The Company is responsible for the adequacy and accuracy of the disclosure in the filing;

 

    Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

 

    The Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

* * * * * * *

Should the Staff have additional questions or comments regarding this response to the Comment Letter, please do not hesitate to contact the undersigned at 669-770-4643, or Rick Arnold at 669-770-4556.

 

Sincerely,
SILVER SPRING NETWORKS, INC.

/s/ Kenneth P. Gianella

 

Kenneth P. Gianella

Chief Financial Officer (interim)

 

cc: Michael Bell, Chief Executive Officer

Richard S. Arnold, Jr., General Counsel

Deanna M. Butler, V.P., Associate General Counsel

Silver Spring Networks, Inc.

Robert A. Freedman

Fenwick & West LLP


Exhibit A


LOGO

Silver Spring Networks Reports Fourth Quarter 2016 Financial Results

San Jose, CA – February XX, 2017 – Silver Spring Networks, Inc. (NYSE: SSNI) today announced preliminary financial results for its fourth quarter ended December 31, 2016.

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

GAAP Results:

 

  Revenue was $X million, up (down) X%.

 

  Cost of revenue was $X million, up (down) X%.

 

  Gross profit was $X million, up (down) X%. Gross margin was X%, versus X%.

 

  Operating expense was $X million, versus $X million.

 

  Operating income (loss) was $X million, versus $X million.

 

  Tax expense (benefit) was $X million. Other income (loss) was $X million.

 

  Basic share count was X million shares. Fully-diluted share count was X million shares.

 

  Quarter-ending cash, cash equivalents, and short-term investments were $X million.

Non-GAAP Metrics:

 

  Billings were $X million, up (down) X%.

 

  Cost of billings was $X million, up (down) X%.

 

  Non-GAAP operating expense was $X million, versus $X million.

Historically-reported non-GAAP Metrics1:

 

  Gross profit on billings was $X million, up (down) X%.

 

  Gross margin on billings was X%, versus X%.

 

  Non-GAAP operating income (loss) was $X million, versus $X million.
   

 

1  For future earnings reports, Silver Spring Networks will no longer report certain non-GAAP metrics including gross profit on billings, gross margin on billings and non-GAAP operating income (loss). Silver Spring Networks will continue to report billings, cost of billings, and non-GAAP operating expense. Silver Spring Networks will also provide additional GAAP measures used internally by management to adjust GAAP measures in order to assess its business performance, which can be used by investors to derive metrics comparable to historically-reported non-GAAP metrics.

 

1


[CEO quote]

Business Highlights (through December 31, 2016, unless otherwise stated):

 

  Highlight 1.

 

  Highlight 2.

 

  Highlight 3.

 

  Highlight X.

Full Year 2016 Results

GAAP Results:

 

  Revenue was $X million, up (down) X%.

 

  Cost of revenue was $X million, up (down) X%.

 

  Gross profit was $X million, up (down) X%. Gross margin was X%, versus X%.

 

  Operating expense was $X million, versus $X million.

 

  Operating income (loss) was $X million, versus $X million.

 

  Tax expense (benefit) was $X million. Other income (loss) was $X million.

 

  Basic share count was X million shares. Fully-diluted share count was X million shares.

 

  Quarter-ending cash, cash equivalents, and short-term investments were $X million.

Non-GAAP Metrics:

 

  Billings were $X million, up (down) X%.

 

  Cost of billings was $X million, up (down) X%.

 

  Non-GAAP operating expense was $X million, versus $X million.

Historically-reported non-GAAP Metrics1:

 

  Gross profit on billings was $X million, up (down) X%.

 

  Gross margin on billings was X%, versus X%.

 

  Non-GAAP operating income (loss) was $X million, versus $X million.

Conference Call

Silver Spring Networks will host a conference call today at X:XX pm PT (X:XX pm ET) to review its results for the fourth quarter ended December 31, 2016 and its outlook for the future. During the course of this call, Silver Spring Networks may also disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live at XXX-XXX-XXXX (U.S.) or XXX-XXX-XXXX (International) or via webcast at http://ir.ssni.com. A dial-in replay of the conference call will be available until XXXX, 2017 and can be accessed at XXX-XXX-XXXX (domestic) or XXX-XXX-XXXX (international) passcode XXXXXXX. An audio webcast replay of the conference call will be available for one year at http://ir.ssni.com.

 

2


About Silver Spring Networks

Silver Spring Networks enables the Internet of Important Things™ by reliably and securely connecting things that matter. Cities, utilities, and companies on five continents use the company’s cost-effective, high-performance IoT network and data platform to operate more efficiently, get greener, and enable innovative services that can improve the lives of millions of people. With more than XX.X million devices delivered, Silver Spring Networks provides a proven standards-based platform safeguarded with military grade security. Silver Spring Networks’ customers include Baltimore Gas & Electric, CitiPower & Powercor, ComEd, Consolidated Edison, CPS Energy, Florida Power & Light, Pacific Gas & Electric, Pepco Holdings, and Singapore Power. Silver Spring Networks has also deployed networks in Smart Cities including Copenhagen, Glasgow, Paris, Providence, and Stockholm. To learn more, visit www.ssni.com.

Non-GAAP and Other Financial Metrics

Silver Spring Networks supplements the results of operations presented in accordance with generally accepted accounting principles, or GAAP, with certain non-GAAP metrics. Silver Spring Networks manages its business, makes planning decisions, evaluates its performance and allocates resources by assessing non-GAAP and other financial metrics such as billings, cost of billings, gross profit on billings, gross margin on billings, non-GAAP operating expense, non-GAAP operating income (loss), and total backlog. Silver Spring Networks believes that these non-GAAP and other financial metrics, when taken together with the corresponding GAAP financial measures, offer valuable supplemental information regarding the performance of its business, and will help investors better understand the sales volumes, gross margin and profitability trends, as well as the cash flow characteristics, of its business. The non-GAAP metrics 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, gross margin, operating expense, operating net income (loss) or any other performance measure derived in accordance with GAAP. Silver Spring Networks 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.

Billings represents amounts invoiced for products for which ownership, typically evidenced by title and risk of loss, has transferred or services that have been provided to the customer, and for which payment is expected to be made in accordance with normal payment terms. Billings excludes amounts for undelivered products, services to be performed in the future, and amounts paid or payable to customers. Billings are initially recorded as deferred revenue and are then recognized as revenue when all revenue recognition criteria has been met under Silver Spring Networks’ accounting policies as described in Silver Spring Networks’ filings with the Securities and Exchange Commission. Silver Spring Networks reconciles revenue to billings by adding revenue to the change in deferred revenue in a given period.

 

3


Cost of billings 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 Networks reconciles cost of revenue to cost of billings 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 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.

Total backlog represents future product and service billings that Silver Spring Networks 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.

Historically-reported non-GAAP Metrics1

Gross profit (loss) on billings is the difference between billings and cost of billings.

Gross margin on billings is gross profit (loss) on billings as a percentage of billings.

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

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding XXX, YYY, and ZZZ. 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: XXX, YYY, ZZZ;

 

4


and other risk factors set forth from time to time in Silver Spring Networks’ 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 Networks’ expectations as of February XX, 2017. Silver Spring Networks 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 Networks.

For additional information, please contact:

Mark McKechnie

Investor Relations

669-770-4664

markm@ssni.com

Amy Nunnemacher

Global Communications

669-770-4183

pr@ssni.com

 

5


SILVER SPRING NETWORKS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2016      2015     2016      2015  

Revenue:

          

Product

   $                    $ 143,202      $                    $ 353,041   

Services

        56,045           136,518   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total revenue

        199,247           489,559   

Cost of revenue:

          

Product

        83,903           202,430   

Services

        13,999           61,386   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total cost of revenue

        97,902           263,816   

Gross profit

        101,345           225,743   

Operating expenses:

          

Research and development

        13,714           61,295   

Sales and marketing

        7,343           33,452   

General and administrative

        14,483           46,372   

Impairment of intangible assets

        —             —     

Restructuring

        60           1,671   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total operating expenses

        35,600           142,790   
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income (loss)

        65,745           82,953   

Other income (loss), net

        (159        104   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income (loss) before income taxes

        65,586           83,057   

(Provision) benefit for income taxes

        (3,708        (3,071
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income (loss)

   $                    $ 61,878      $                    $ 79,986   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income (loss) per share:

          

Basic

   $                    $ 1.23      $                    $ 1.60   
  

 

 

    

 

 

   

 

 

    

 

 

 

Diluted

   $                    $ 1.19      $                    $ 1.55   
  

 

 

    

 

 

   

 

 

    

 

 

 

Weighted average shares used to compute net income (loss) per share:

  

       

Basic

        50,481           49,963   
  

 

 

    

 

 

   

 

 

    

 

 

 

Diluted

        52,167           51,524   
  

 

 

    

 

 

   

 

 

    

 

 

 

 

6


SILVER SPRING NETWORKS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     December 31,
2016
     December 31,
2015 (a)
 

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $                    $ 65,264   

Short-term investments

        59,181   

Accounts receivable

        47,813   

Inventory

        4,545   

Deferred cost of revenue

        196,868   

Prepaid expenses and other current assets

        10,835   
  

 

 

    

 

 

 

Total current assets

        384,506   

Property and equipment, net

        14,106   

Goodwill and intangible assets

        14,390   

Deferred cost of revenue, non-current

        38,882   

Deferred tax assets, non-current

        1,069   

Other long-term assets

        4,772   
  

 

 

    

 

 

 

Total assets

   $                    $ 457,725   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

     

Current liabilities:

     

Accounts payable

   $                    $ 30,623   

Deferred revenue

        305,471   

Accrued and other liabilities

        42,751   
  

 

 

    

 

 

 

Total current liabilities

        378,845   

Deferred revenue, non-current

        96,342   

Other liabilities, non-current

        16,403   
  

 

 

    

 

 

 

Total liabilities

        491,590   
  

 

 

    

 

 

 

Total stockholders’ deficit

        (33,865
  

 

 

    

 

 

 

Total liabilities and stockholders’ deficit

   $                    $ 457,725   
  

 

 

    

 

 

 

 

(a) Derived from audited consolidated financial statements.

 

7


SILVER SPRING NETWORKS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(in thousands)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2016      2015     2016      2015  

OPERATING ACTIVITIES

          

Net income (loss)

   $                    $ 61,878      $                    $ 79,986   

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

          

Deferred taxes

        (557        (1,492

Depreciation and amortization

        1,930           7,822   

Stock-based compensation

        4,942           26,479   

Other non-cash adjustments

        412           766   

Changes in assets and liabilities:

          

Accounts receivable

        (3,675        7,398   

Inventory

        (853        2,190   

Prepaid expenses and other assets

        (936        (5,128

Contingent consideration related to Detectent acquisition held in escrow

        —             (4,000

Deferred cost of revenue

        56,978           97,286   

Accounts payable

        3,232           3,101   

Customer deposits

        (599        (448

Deferred revenue

        (124,115        (208,305

Accrued and other liabilities

        7,620           14,032   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net cash provided by (used in) operating activities

        6,257           19,687   
  

 

 

    

 

 

   

 

 

    

 

 

 

INVESTING ACTIVITIES

          

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

        —             (7,098

Proceeds from sales of available-for-sale investments

        4,204           15,690   

Proceeds from maturities of available-for-sale investments

        —             9,250   

Purchases of available-for-sale investments

        (5,270        (24,180

Purchases of property and equipment

        (1,821        (5,350
  

 

 

    

 

 

   

 

 

    

 

 

 

Net cash provided by (used in) investing activities

        (2,887        (11,688
  

 

 

    

 

 

   

 

 

    

 

 

 

FINANCING ACTIVITIES

          

Payments on capital lease obligations

        (169        (1,163

Proceeds from issuance of common stock

        139           3,794   

Excess tax benefit from share-based payment awards

        153           153   

Taxes paid related to net share settlement of equity awards

        (1,820        (5,788
  

 

 

    

 

 

   

 

 

    

 

 

 

Net cash provided by (used in) financing activities

        (1,697        (3,004
  

 

 

    

 

 

   

 

 

    

 

 

 

Effect of exchange rate changes on cash and cash equivalents

        136           (188

Net increase (decrease) in cash and cash equivalents

        1,809           4,807   

Cash and cash equivalents - beginning of period

        63,455           60,457   
  

 

 

    

 

 

   

 

 

    

 

 

 

Cash and cash equivalents - end of period

   $                    $ 65,264      $                    $ 65,264   
  

 

 

    

 

 

   

 

 

    

 

 

 

 

8


SILVER SPRING NETWORKS, INC.

UNAUDITED RECONCILIATION OF REVENUE BETWEEN GAAP AND NON-GAAP (QUARTERLY)

(in thousands, except percentages)

 

     Q4
2015
    Q1
2016
    Q2
2016
    Q3
2016
    Q4
2016
     YoY%
Change
 

REVENUE AND BILLINGS BY TYPE

             

Revenue:

             

Product

   $ 143,202      $ 32,852      $ 69,917      $ 50,463      $                   

Services

             

Managed services and SaaS

     37,142        11,068        24,570        14,090        

Professional services

     18,903        4,700        27,465        9,633        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Total services

     56,045        15,768        52,035        23,723        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Total revenue

   $ 199,247      $ 48,620      $ 121,952      $ 74,186      $        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Change in deferred revenue:

             

Product

   $ (95,194   $ 12,883      $ (23,804   $ (568   $        

Services

             

Managed services and SaaS

     (22,896     1,820        (9,650     1,641        

Professional services

     (6,169     5,591        (16,652     885        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Total services

     (29,065     7,411        (26,302     2,526        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Total change in deferred revenue

   $ (124,259   $ 20,294      $ (50,106   $ 1,958      $        

Billings:

             

Product

   $ 48,008      $ 45,735      $ 46,113      $ 49,895      $        

Services

             

Managed services and SaaS

     14,246        12,888        14,920        15,731        

Professional services

     12,734        10,291        10,813        10,518        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Total services

     26,980        23,179        25,733        26,249        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Total Billings

   $ 74,988      $ 68,914      $ 71,846      $ 76,144      $        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

REVENUE AND BILLINGS BY SOLUTION

             

Revenue:

             

Advanced metering infrastructure

   $ 181,892      $ 40,514      $ 105,181      $ 66,203      $        

New solutions

     17,355        8,106        16,771        7,983        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Total revenue

   $ 199,247      $ 48,620      $ 121,952      $ 74,186      $        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

% Advanced metering infrastructure

     91     83     86     89     

% New solutions

     9     17     14     11     

Change in deferred revenue:

             

Advanced metering infrastructure

   $ (123,525   $ 16,957      $ (45,184   $ (2,078   $        

New solutions

     (734     3,337        (4,922     4,036        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Total change in deferred revenue

   $ (124,259   $ 20,294      $ (50,106   $ 1,958      $        

Billings:

             

Advanced metering infrastructure

   $ 58,367      $ 57,471      $ 59,997      $ 64,125      $        

New solutions

     16,621        11,443        11,849        12,019        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Total Billings

   $ 74,988      $ 68,914      $ 71,846      $ 76,144      $        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

% Advanced metering infrastructure

     78     83     84     84     

% New solutions

     22     17     16     16     

REVENUE AND BILLINGS BY GEOGRAPHY

             

Revenue:

             

United States

   $ 177,896      $ 45,222      $ 118,539      $ 43,381      $        

International

     21,351        3,398        3,413        30,805        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Total revenue

   $ 199,247      $ 48,620      $ 121,952      $ 74,186      $        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

% United States

     89     93     97     58     

% International

     11     7     3     42     

Change in deferred revenue:

             

United States

   $ (116,859   $ 8,468      $ (57,666   $ 21,085      $        

International

     (7,400     11,826        7,560        (19,127     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Total change in deferred revenue

   $ (124,259   $ 20,294      $ (50,106   $ 1,958      $        

Billings:

             

United States

   $ 61,037      $ 53,690      $ 60,873      $ 64,466      $        

International

     13,951        15,224        10,973        11,678        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

Total Billings

   $ 74,988      $ 68,914      $ 71,846      $ 76,144      $        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

% United States

     81     78     85     85     

% International

     19     22     15     15     

 

9


SILVER SPRING NETWORKS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP MEASURES (QUARTERLY)

(in thousands)

 

    Three Months Ended December 31, 2016  
    Cost of Revenue     Change in Deferred
Revenue and
Deferred Cost of
Revenue (a)
    Stock-based
Compensation
    Amortization of
Intangible Assets
    Acquisition-
Related Costs
    Cost of Billings  

Cost of Revenue:

           

Product

           

Services

           

Managed services and SaaS

           

Professional services

           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total services

           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Cost of Revenue

           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Operating
Expenses
    Stock-based
Compensation
    Amortization and
Impairment of
Intangible Assets
    Restructuring &
Litigation
    Acquisition-
Related Costs
    Non-GAAP
Operating
Expenses
 

Operating Expenses:

           

Research and development

           

Sales and marketing

           

General and administrative

           

Impairment of acquisition-related intangible assets

           

Restructuring

           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Expenses

           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Three Months Ended December 31, 2015  
    Cost of Revenue     Change in Deferred
Revenue and
Deferred Cost of
Revenue (a)
    Stock-based
Compensation
    Amortization of
Intangible Assets
    Acquisition-
Related Costs
    Cost of Billings  

Cost of Revenue:

           

Product

  $ 83,903      $ (56,982   $ (250   $ (259   $ —        $ 26,412   

Services

           

Managed services and SaaS

    7,592        —          (256     —          (15     7,321   

Professional services

    6,407        —          (500     —          —          5,907   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total services

  $ 13,999      $ —        $ (756   $ —        $ (15   $ 13,228   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Cost of Revenue

  $ 97,902      $ (56,982   $ (1,006   $ (259   $ (15   $ 39,640   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Operating
Expenses
    Stock-based
Compensation
    Amortization and
Impairment of
Intangible Assets
    Restructuring &
Litigation
    Acquisition-
Related Costs
    Non-GAAP
Operating
Expenses
 

Operating Expenses:

           

Research and development

  $ 13,714      $ (1,277   $ —        $ —        $ (311   $ 12,126   

Sales and marketing

    7,343        (665     (155     —          (64     6,459   

General and administrative

    14,483        (1,994     (8     (3,595     (116     8,770   

Impairment of acquisition-related intangible assets

    —          —          —          —          —          —     

Restructuring

    60        —          —          (60     —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Expenses

  $ 35,600      $ (3,936   $ (163   $ (3,655   $ (491   $ 27,355   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Amounts presented net of foreign currency translation.    

 

10


SILVER SPRING NETWORKS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP MEASURES (YEAR TO DATE)

(in thousands)

 

    Twelve Months Ended December 31, 2016  
    Cost of Revenue     Change in Deferred
Revenue and
Deferred Cost of
Revenue (a)
    Stock-based
Compensation
    Amortization of
Intangible Assets
    Acquisition-
Related Costs
    Cost of Billings  

Cost of Revenue:

           

Product

           

Services

           

Managed services and SaaS

           

Professional services

           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total services

           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Cost of Revenue

           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Operating
Expenses
    Stock-based
Compensation
    Amortization and
Impairment of
Intangible Assets
    Restructuring &
Litigation
    Acquisition-
Related Costs
    Non-GAAP
Operating
Expenses
 

Operating Expenses:

           

Research and development

           

Sales and marketing

           

General and administrative

           

Impairment of acquisition-related intangible assets

           

Restructuring

           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Expenses

           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Twelve Months Ended December 31, 2015  
    Cost of Revenue     Change in Deferred
Revenue and
Deferred Cost of
Revenue (a)
    Stock-based
Compensation
    Amortization of
Intangible Assets
    Acquisition-
Related Costs
    Cost of Billings  

Cost of Revenue:

           

Product

  $ 202,430      $ (97,274   $ (1,288   $ (1,041   $ —        $ 102,827   

Services

           

Managed services and SaaS

    31,663        —          (1,937     —          (100     29,626   

Professional services

    29,723        —          (2,910     —          —          26,813   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total services

  $ 61,386      $ —        $ (4,847   $ —        $ (100   $ 56,439   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Cost of Revenue

  $ 263,816      $ (97,274   $ (6,135   $ (1,041   $ (100   $ 159,266   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Operating
Expenses
    Stock-based
Compensation
    Amortization and
Impairment of
Intangible Assets
    Restructuring &
Litigation
    Acquisition-
Related Costs
    Non-GAAP
Operating
Expenses
 

Operating Expenses:

           

Research and development

  $ 61,295      $ (8,060   $ —        $ —        $ (451   $ 52,784   

Sales and marketing

    33,452        (4,105     (601     —          (87     28,659   

General and administrative

    46,372        (8,179     (32     (3,595     (1,913     32,653   

Impairment of acquisition-related intangible assets

    —          —          —          —          —          —     

Restructuring

    1,671        —          —          (1,671     —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Expenses

  $ 142,790      $ (20,344   $ (633   $ (5,266   $ (2,451   $ 114,096   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Amounts presented net of foreign currency translation.

 

11


SILVER SPRING NETWORKS, INC.

UNAUDITED SUPPLEMENTAL FINANCIAL DATA AND OTHER INFORMATION

(in thousands, except percentages and headcount)

 

     Q4      Q1      Q2      Q3      Q4      YoY%  
     2015      2016      2016      2016      2016      Change  

SUPPLEMENTAL FINANCIAL DATA

                 

STOCK-BASED COMPENSATION

                 

Cost of goods sold

   $ 1,006       $ 1,328       $ 1,389       $ 2,082       $                   

Research and development

     1,277         2,025         2,241         2,593         

Sales and marketing

     665         831         726         943         

General and administrative

     1,994         2,716         2,685         2,280         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

TOTAL STOCK-BASED COMPENSATION

   $ 4,942       $ 6,900       $ 7,041       $ 7,898       $        
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

CASH FLOW DATA

                 

Operating cash flow

   $ 6,257       $ 3,730       $ 3,802       $ 5,145       $        

Operating cash flow - trailing twelve months

     19,687         23,872         18,061         18,934         

BALANCE SHEET DATA

                 

Cash, cash equivalents and short-term investments

   $ 124,445       $ 125,369       $ 113,064       $ 113,358       $        

OTHER INFORMATION

                 

HOMES & BUSINESSES

                 

Network endpoints delivered during quarter*

     633         698         747         569         

Cumulative network endpoints delivered*

     22,954         23,652         24,399         24,968         

*Endpoints refer to communication modules in electric meters

                 

EMPLOYEES

     652         673         708         709         

 

12


SILVER SPRING NETWORKS, INC.

UNAUDITED SUPPLEMENTAL TRENDED GAAP FINANCIAL DATA

(in thousands)

 

     Q4     Q1     Q2     Q3     Q4  
     2015     2016     2016     2016     2016  

Gross profit

   $ 101,345      $ 16,997      $ 64,543      $ 28,242      $                

Other GAAP financial data related to gross profit:

          

Change in deferred revenue, net of foreign currency translation

     (124,259     20,294        (50,106     1,958     

Change in deferred cost of revenue, net of foreign currency translation

     56,982        (8,668     16,992        9,404     

Amortization of intangible assets

     259        169        195        79     

Stock-based compensation

     1,006        1,328        1,389        2,082     

Acquisition-related charges

     15        15        16        15     

Operating expenses

   $ 35,600      $ 35,920      $ 37,794      $ 42,461      $                

Other GAAP financial data included in operating expenses:

          

Amortization of intangible assets

     (163     (252     (180     (114  

Stock-based compensation

     (3,936     (5,572     (5,652     (5,816  

Acquisition-related charges

     (491     (501     (494     (493  

Impairment of intangible assets

     —          —          —          (2,204  

Restructuring

     (60     (39     —          —       

Legal settlements

     (3,595     —          —          —       

Other statement of operations line items

          

Other loss (income), net

   $ 159      $ (441   $ (333   $ (113   $                

Provision (benefit) for income taxes

     3,708        32        961        1,143     

 

13


SILVER SPRING NETWORKS, INC.

UNAUDITED RECONCILIATION BETWEEN GAAP AND HISTORICALLY-REPORTED NON-GAAP MEASURES(a)

(in thousands, except percentages)

 

    Three Months Ended December 31, 2016  
    Gross Profit     Gross
Margin
    Change in
Deferred Revenue
and Deferred Cost
of Revenue (b)
    Stock-based
Compensation
    Amortization
of
Intangible
Assets
    Acquisition-
Related

Costs
    Gross
Profit

on
Billings (b)
    Gross
Margin

on
Billings (b)
 

Product

               

Services

               

Managed services and SaaS

               

Professional services

               
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total services

               
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total gross profit

               
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    Three Months Ended December 31, 2015  
    Gross Profit     Gross
Margin
    Change in
Deferred Revenue
and Deferred Cost
of Revenue (b)
    Stock-based
Compensation
    Amortization
of
Intangible
Assets
    Acquisition-
Related
Costs
    Gross
Profit

on
Billings (b)
    Gross
Margin
on
Billings (b)
 

Product

  $ 59,299        41.4   $ (38,212   $ 250      $ 259      $ —        $ 21,596        45.0

Services

               

Managed services and SaaS

    29,550        79.6     (22,896     256        —          15        6,925        48.6

Professional services

    12,496        66.1     (6,169     500        —          —          6,827        53.6
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total services

    42,046        75.0     (29,065     756        —          15        13,752        51.0
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total gross profit

  $ 101,345        50.9   $ (67,277   $ 1,006      $ 259      $ 15      $ 35,348        47.1
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    Twelve Months Ended December 31, 2016  
    Gross Profit     Gross
Margin
    Change in
Deferred Revenue
and Deferred Cost
of Revenue (b)
    Stock-based
Compensation
    Amortization
of
Intangible
Assets
    Acquisition-
Related
Costs
    Gross
Profit

on
Billings (b)
    Gross
Margin
on
Billings (b)
 

Product

               

Services

               

Managed services and SaaS

               

Professional services

               
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total services

               
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total gross profit

               
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    Twelve Months Ended December 31, 2015  
    Gross Profit     Gross
Margin
    Change in
Deferred Revenue
and Deferred Cost
of Revenue (b)
    Stock-based
Compensation
    Amortization
of
Intangible
Assets
    Acquisition-
Related
Costs
    Gross
Profit

on
Billings (b)
    Gross
Margin
on
Billings (b)
 

Product

  $ 150,611        42.7   $ (70,184   $ 1,288      $ 1,041      $ —        $ 82,756        44.6

Services

               

Managed services and SaaS

    40,284        56.0     (19,531     1,937        —          100        22,790        43.5

Professional services

    34,848        54.0     (20,646     2,910        —          —          17,112        39.0
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total services

    75,132        55.0     (40,177     4,847        —          100        39,902        41.5
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total gross profit

  $ 225,743        46.1   $ (110,361   $ 6,135      $ 1,041      $ 100      $ 122,658        43.5
 

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

(a) For future earnings reports, Silver Spring Networks will no longer report certain non-GAAP metrics including gross profit on billings, gross margin on billings and non-GAAP operating income (loss). Silver Spring Networks will continue to report billings, cost of billings, and non-GAAP operating expense. Silver Spring Networks will also provide additional GAAP measures used internally by management to adjust GAAP measures in order to assess its business performance, which can be used by investors to derive metrics comparable to historically-reported non-GAAP metrics.
(b) Amounts presented net of foreign currency translation.

 

14


SILVER SPRING NETWORKS, INC.

UNAUDITED RECONCILIATION BETWEEN GAAP AND HISTORICALLY-REPORTED NON-GAAP MEASURES(a)

(in thousands)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2016      2015     2016      2015  

Operating income

   $                    $ 65,745      $                    $ 82,953   

Change in deferred revenue, net of foreign currency translation

        (124,259        (207,635

Change in deferred cost of revenue, net of foreign currency translation

        56,982           97,274   

Amortization of intangibles

        422           1,674   

Stock-based compensation

        4,942           26,479   

Acquisition-related charges

        506           2,551   

Restructuring

        60           1,671   

Legal settlements

        3,595           3,595   

Impairment of intangible assets

        —             —     
  

 

 

    

 

 

   

 

 

    

 

 

 

Non-GAAP operating income

   $         $ 7,993      $         $ 8,562   
  

 

 

    

 

 

   

 

 

    

 

 

 

Weighted average shares:

          

Basic

        50,481           49,963   
  

 

 

    

 

 

   

 

 

    

 

 

 

Diluted

        52,167           51,524   
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(a) For future earnings reports, Silver Spring Networks will no longer report certain non-GAAP metrics including gross profit on billings, gross margin on billings and non-GAAP operating income (loss). Silver Spring Networks will continue to report billings, cost of billings, and non-GAAP operating expense. Silver Spring Networks will also provide additional GAAP measures used internally by management to adjust GAAP measures in order to assess its business performance, which can be used by investors to derive metrics comparable to historically-reported non-GAAP metrics.

 

15


Exhibit B


LOGO

Silver Spring Networks Reports First Quarter 2017 Financial Results

San Jose, CA – May XX, 2017 – Silver Spring Networks, Inc. (NYSE: SSNI) today announced preliminary financial results for its first quarter ended March 31, 2017.

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

GAAP Results:

 

  Revenue was $X million, up (down) X%.

 

  Cost of revenue was $X million, up (down) X%.

 

  Operating expense was $X million, up (down) X%.

 

  Tax expense (benefit) was $X million. Other income (loss) was $X million.

 

  Basic share count was X million shares. Fully-diluted share count was X million shares.

 

  Quarter-ending cash, cash equivalents, and short-term investments were $X million.

Non-GAAP metrics:

 

  Billings were $X million, up (down) X%.

 

  Cost of billings was $X million, up (down) X%.

 

  Non-GAAP operating expense was $X million, up (down) X%.

[CEO quote]

 

1


Business Highlights (through March 31, 2017, unless otherwise stated):

 

  Highlight 1.

 

  Highlight 2.

 

  Highlight 3.

 

  Highlight X.

Conference Call

Silver Spring Networks will host a conference call today at X:XX pm PT (X:XX pm ET) to review its results for the first quarter ended March 31, 2017 and its outlook for the future. During the course of this call, Silver Spring Networks may also disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live at XXX-XXX-XXXX (U.S.) or XXX-XXX-XXXX (International) or via webcast at http://ir.ssni.com. A dial-in replay of the conference call will be available until XXXX, 2017 and can be accessed at XXX-XXX-XXXX (domestic) or XXX-XXX-XXXX (international) passcode XXXXXXX. An audio webcast replay of the conference call will be available for one year at http://ir.ssni.com.

About Silver Spring Networks

Silver Spring Networks enables the Internet of Important Things™ by reliably and securely connecting things that matter. Cities, utilities, and companies on five continents use the company’s cost-effective, high-performance IoT network and data platform to operate more efficiently, get greener, and enable innovative services that can improve the lives of millions of people. With more than XX.X million devices delivered, Silver Spring Networks provides a proven standards-based platform safeguarded with military grade security. Silver Spring Networks’ customers include Baltimore Gas & Electric, CitiPower & Powercor, ComEd, Consolidated Edison, CPS Energy, Florida Power & Light, Pacific Gas & Electric, Pepco Holdings, and Singapore Power. Silver Spring Networks has also deployed networks in Smart Cities including Copenhagen, Glasgow, Paris, Providence, and Stockholm. To learn more, visit www.ssni.com.

Non-GAAP and Other Financial Metrics

Silver Spring Networks supplements the results of operations presented in accordance with generally accepted accounting principles, or GAAP, with certain non-GAAP metrics. Silver Spring Networks manages its business, makes planning decisions, evaluates its performance and allocates resources by assessing non-GAAP and other financial metrics such as billings, cost of billings, non-GAAP operating expense, and total backlog. Silver Spring Networks believes that these non-GAAP and other financial metrics, when taken together with the corresponding GAAP financial measures, offer valuable supplemental information regarding the performance of its business, and will help investors better understand the sales volumes and profitability trends, as well as the cash flow characteristics, of its business. The non-GAAP metrics should not be

 

2


considered in isolation from, are not a substitute for, and do not purport to be an alternative to, revenue, cost of revenue, operating expense, or any other performance measure derived in accordance with GAAP. Silver Spring Networks 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.

Billings represents amounts invoiced for products for which ownership, typically evidenced by title and risk of loss, has transferred or services that have been provided to the customer, and for which payment is expected to be made in accordance with normal payment terms. Billings excludes amounts for undelivered products, services to be performed in the future, and amounts paid or payable to customers. Billings are initially recorded as deferred revenue and are then recognized as revenue when all revenue recognition criteria has been met under Silver Spring Networks’ accounting policies as described in Silver Spring Networks’ filings with the Securities and Exchange Commission. Silver Spring Networks reconciles revenue to billings by adding revenue to the change in deferred revenue in a given period.

Cost of billings 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 Networks reconciles cost of revenue to cost of billings 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 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.

Total backlog represents future product and service billings that Silver Spring Networks 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 XXX, YYY, ZZZ. 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

 

3


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: XX, YY, ZZ and other risk factors set forth from time to time in Silver Spring Networks’ 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 Networks’ expectations as of May XX, 2017. Silver Spring Networks 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 Networks.

For additional information, please contact:

Mark McKechnie

Investor Relations

669-770-4664

markm@ssni.com

Amy Nunnemacher

Global Communications

669-770-4183

pr@ssni.com

 

4


SILVER SPRING NETWORKS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

     Three Months Ended
March 31,
 
     2017      2016  

Revenue:

     

Product

   $         $ 32,852   

Services

        15,768   
  

 

 

    

 

 

 

Total revenue

        48,620   

Cost of revenue:

     

Product

        15,980   

Services

        15,643   
  

 

 

    

 

 

 

Total cost of revenue

        31,623   

Gross profit

        16,997   

Operating expenses:

     

Research and development

        15,485   

Sales and marketing

        9,550   

General and administrative

        10,846   

Restructuring

        39   
  

 

 

    

 

 

 

Total operating expenses

        35,920   
  

 

 

    

 

 

 

Operating (loss) income

        (18,923

Other income (loss), net

        441   
  

 

 

    

 

 

 

(Loss) income before income taxes

        (18,482

(Provision) benefit for income taxes

        (32
  

 

 

    

 

 

 

Net income (loss)

   $         $ (18,514
  

 

 

    

 

 

 

Net income (loss) per share:

     

Basic

   $                    $ (0.36
  

 

 

    

 

 

 

Diluted

   $         $ (0.36
  

 

 

    

 

 

 

Weighted average shares used to compute net income (loss) per share:

  

  

Basic

        50,760   
  

 

 

    

 

 

 

Diluted

        50,760   
  

 

 

    

 

 

 

 

5


SILVER SPRING NETWORKS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     March 31,      December 31,  
     2017      2016 (a)  

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $                    $                

Short-term investments

     

Accounts receivable

     

Inventory

     

Deferred cost of revenue

     

Prepaid expenses and other current assets

     
  

 

 

    

 

 

 

Total current assets

     

Property and equipment, net

     

Goodwill and intangible assets

     

Deferred cost of revenue, non-current

     

Deferred tax assets, non-current

     

Other long-term assets

     
  

 

 

    

 

 

 

Total assets

   $         $     
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

     

Current liabilities:

     

Accounts payable

   $         $     

Deferred revenue

     

Accrued and other liabilities

     
  

 

 

    

 

 

 

Total current liabilities

     

Deferred revenue, non-current

     

Other liabilities, non-current

     
  

 

 

    

 

 

 

Total liabilities

     
  

 

 

    

 

 

 

Total stockholders’ deficit

     
  

 

 

    

 

 

 

Total liabilities and stockholders’ deficit

   $         $     
  

 

 

    

 

 

 

 

(a) Derived from audited consolidated financial statements.

 

6


SILVER SPRING NETWORKS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(in thousands)

 

     Three Months Ended
March 31,
 
     2017      2016 (a)  

OPERATING ACTIVITIES

     

Net income (loss)

   $                    $ (18,514

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

     

Deferred taxes

        —     

Depreciation and amortization

        2,132   

Stock-based compensation

        6,900   

Other non-cash adjustments

        60   

Changes in assets and liabilities:

     

Accounts receivable

        3,976   

Inventory

        470   

Prepaid expenses and other assets

        2,208   

Deferred cost of revenue

        (8,804

Accounts payable

        613   

Customer deposits

        (5

Deferred revenue

        20,054   

Accrued and other liabilities

        (5,360
  

 

 

    

 

 

 

Net cash provided by (used in) operating activities

        3,730   
  

 

 

    

 

 

 

INVESTING ACTIVITIES

     

Proceeds from sales of available-for-sale investments

        4,833   

Proceeds from maturities of available-for-sale investments

        1,000   

Purchases of available-for-sale investments

        (3,439

Purchases of property and equipment

        (4,485
  

 

 

    

 

 

 

Net cash provided by (used in) investing activities

        (2,091
  

 

 

    

 

 

 

FINANCING ACTIVITIES

     

Payments on capital lease obligations

        (144

Proceeds from issuance of common stock

        1,888   

Taxes paid related to net share settlement of equity awards

        (334
  

 

 

    

 

 

 

Net cash provided by (used in) financing activities

        1,410   
  

 

 

    

 

 

 

Effect of exchange rate changes on cash and cash equivalents

        98   

Net increase (decrease) in cash and cash equivalents

        3,147   

Cash and cash equivalents - beginning of period

        65,264   
  

 

 

    

 

 

 

Cash and cash equivalents - end of period

   $         $ 68,411   
  

 

 

    

 

 

 

 

(a) In the course of preparing the condensed consolidated financial statements for the quarter ended June 30, 2016, we determined that the cash provided from operating activities was understated and cash provided by investing activities was overstated by $2.3 million in the condensed consolidated statements of cash flows for the three months ended March 31, 2016, as included in the Company’s First Quarter Form 10-Q. The cash flows presented above reflects that the cash flows from operating activities and investing activities for the three months ended March 31, 2016 were corrected for this error.

 

7


SILVER SPRING NETWORKS, INC.

UNAUDITED RECONCILIATION OF REVENUE BETWEEN GAAP AND NON-GAAP (QUARTERLY)

(in thousands, except percentages)

 

     Q1
2016
    Q2
2016
    Q3
2016
    Q4
2016
     Q1
2017
     YoY%
Change
 

REVENUE AND BILLINGS BY TYPE

              

Revenue:

              

Product

   $ 32,852      $ 69,917      $ 50,463      $                      

Services

              

Managed services and SaaS

     11,068        24,570        14,090           

Professional services

     4,700        27,465        9,633           
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Total services

     15,768        52,035        23,723           
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Total revenue

   $ 48,620      $ 121,952      $ 74,186      $         $                   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Change in deferred revenue:

              

Product

   $ 12,883      $ (23,804   $ (568   $         $        

Services

              

Managed services and SaaS

     1,820        (9,650     1,641           

Professional services

     5,591        (16,652     885           
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Total services

     7,411        (26,302     2,526           
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Total change in deferred revenue

   $ 20,294      $ (50,106   $ 1,958      $         $        

Billings:

              

Product

   $ 45,735      $ 46,113      $ 49,895      $         $        

Services

              

Managed services and SaaS

     12,888        14,920        15,731           

Professional services

     10,291        10,813        10,518           
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Total services

     23,179        25,733        26,249           
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Total Billings

   $ 68,914      $ 71,846      $ 76,144      $         $        
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

REVENUE AND BILLINGS BY SOLUTION

              

Revenue:

              

Advanced metering infrastructure

   $ 40,514      $ 105,181      $ 66,203      $         $        

New solutions

     8,106        16,771        7,983           
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Total revenue

   $ 48,620      $ 121,952      $ 74,186      $         $        
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

% Advanced metering infrastructure

     83     86     89        

% New solutions

     17     14     11        

Change in deferred revenue:

              

Advanced metering infrastructure

   $ 16,957      $ (45,184   $ (2,078   $         $        

New solutions

     3,337        (4,922     4,036           
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Total change in deferred revenue

   $ 20,294      $ (50,106   $ 1,958      $         $        

Billings:

              

Advanced metering infrastructure

   $ 57,471      $ 59,997      $ 64,125      $         $        

New solutions

     11,443        11,849        12,019           
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Total Billings

   $ 68,914      $ 71,846      $ 76,144      $         $        
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

% Advanced metering infrastructure

     83     84     84        

% New solutions

     17     16     16        

REVENUE AND BILLINGS BY GEOGRAPHY

              

Revenue:

              

United States

   $ 45,222      $ 118,539      $ 43,381      $         $        

International

     3,398        3,413        30,805           
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Total revenue

   $ 48,620      $ 121,952      $ 74,186      $         $        
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

% United States

     93     97     58        

% International

     7     3     42        

Change in deferred revenue:

              

United States

   $ 8,468      $ (57,666   $ 21,085      $         $        

International

     11,826        7,560        (19,127        
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Total change in deferred revenue

   $ 20,294      $ (50,106   $ 1,958      $         $        

Billings:

              

United States

   $ 53,690      $ 60,873      $ 64,466      $         $        

International

     15,224        10,973        11,678           
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

Total Billings

   $ 68,914      $ 71,846      $ 76,144      $         $        
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

% United States

     78     85     85        

% International

     22     15     15        

 

8


SILVER SPRING NETWORKS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP MEASURES (QUARTERLY)

(in thousands)

 

     Three Months Ended March 31, 2017  
     Cost of Revenue      Change in
Deferred Revenue
and Deferred Cost
of Revenue (a)
     Stock-based
Compensation
     Amortization of
Intangible Assets
     Acquisition-
Related Costs
     Cost of Billings  

Cost of Revenue:

                 

Product

                 

Services

                 

Managed services and SaaS

                 

Professional services

                 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total services

                 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Cost of Revenue

                 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

    

Operating Expenses

  

Stock-based
Compensation

  

Amortization and
Impairment of
Intangible Assets

  

Restructuring &
Litigation

  

Acquisition-
Related Costs

  

Non-GAAP
Operating Expenses

Operating Expenses:

                 

Research and development

                 

Sales and marketing

                 

General and administrative

                 

Impairment of acquisition-related intangible assets

                 

Restructuring

                 
  

 

  

 

  

 

  

 

  

 

  

 

Total Operating Expenses

                 
  

 

  

 

  

 

  

 

  

 

  

 

 

     Three Months Ended March 31, 2016  
     Cost of Revenue      Change in
Deferred Revenue
and Deferred Cost
of Revenue (a)
     Stock-based
Compensation
    Amortization of
Intangible Assets
    Acquisition-
Related Costs
    Cost of Billings  

Cost of Revenue:

              

Product

   $ 15,980       $ 8,668       $ (351   $ (169   $ —        $ 24,128   

Services

              

Managed services and SaaS

     8,632         —           (381     —          (15     8,236   

Professional services

     7,011         —           (596     —          —          6,415   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total services

   $ 15,643       $ —         $ (977   $ —        $ (15   $ 14,651   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total Cost of Revenue

   $ 31,623       $ 8,668       $ (1,328   $ (169   $ (15   $ 38,779   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

     Operating Expenses      Stock-based
Compensation
    Amortization and
Impairment of
Intangible Assets
    Restructuring &
Litigation
    Acquisition-
Related Costs
    Non-GAAP
Operating Expenses
 

Operating Expenses:

             

Research and development

   $ 15,485         (2,025     —          —          (311   $ 13,149   

Sales and marketing

     9,550         (831     (244     —          (65     8,410   

General and administrative

     10,846         (2,716     (8     —          (125     7,997   

Impairment of acquisition-related intangible assets

     —           —          —          —          —          —     

Restructuring

     39         —          —          (39     —          —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Expenses

   $ 35,920       $ (5,572   $ (252   $ (39   $ (501   $ 29,556   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Amounts presented net of foreign currency translation.

 

9


SILVER SPRING NETWORKS, INC.

UNAUDITED SUPPLEMENTAL FINANCIAL DATA AND OTHER INFORMATION

(in thousands, except percentages and headcount)

 

     Q1
2016
     Q2
2016
     Q3
2016
     Q4
2016
     Q1
2017
     YoY%
Change
 

SUPPLEMENTAL FINANCIAL DATA

                 

STOCK-BASED COMPENSATION

                 

Cost of goods sold

   $ 1,328       $ 1,389       $ 2,082       $                    $                   

Research and development

     2,025         2,241         2,593            

Sales and marketing

     831         726         943            

General and administrative

     2,716         2,685         2,280            
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

TOTAL STOCK-BASED COMPENSATION

   $ 6,900       $ 7,041       $ 7,898       $         $        
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

CASH FLOW DATA

                 

Operating cash flow

   $ 3,730       $ 3,802       $ 5,145       $         $        

Operating cash flow - trailing twelve months

     23,872         18,061         18,934            

BALANCE SHEET DATA

                 

Cash, cash equivalents and short-term investments

   $ 125,369       $ 113,064       $ 113,358       $         $        

OTHER INFORMATION

                 

HOME & BUSINESSES

                 

Network endpoints delivered during quarter*

     698         747         569            

Cumulative network endpoints delivered*

     23,652         24,399         24,968            

*Endpoints refer to communication modules in electric meters

                 

EMPLOYEES

     673         708         709            

 

10


SILVER SPRING NETWORKS, INC.

UNAUDITED SUPPLEMENTAL TRENDED GAAP FINANCIAL DATA

(in thousands)

 

     Q1
2016
    Q2
2016
    Q3
2016
    Q4
2016
     Q1
2017
 

Gross profit

   $ 16,997      $ 64,543      $ 28,242      $                        $                    

Other GAAP financial data related to gross profit:

           

Change in deferred revenue, net of foreign currency translation

     20,294        (50,106     1,958        

Change in deferred cost of revenue, net of foreign currency translation

     (8,668     16,992        9,404        

Amortization of intangible assets

     169        195        79        

Stock-based compensation

     1,328        1,389        2,082        

Acquisition-related charges

     15        16        15        

Operating expenses

   $ 35,920      $ 37,794      $ 42,461      $         $     

Other GAAP financial data included in operating expenses:

           

Amortization of intangible assets

     (252     (180     (114     

Stock-based compensation

     (5,572     (5,652     (5,816     

Acquisition-related charges

     (501     (494     (493     

Impairment of intangible assets

     —          —          (2,204     

Restructuring

     (39     —          —          

Legal settlements

     —          —          —          

Other statement of operations line items

           

Other loss (income), net

   $ (441   $ (333   $ (113   $         $     

Provision (benefit) for income taxes

     32        961        1,143        

 

11

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