10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-35828

Silver Spring Networks, Inc.

(Exact name of registrant as specified in its charter)

Delaware	43-1966972
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

230 W. Tasman Drive

San Jose, California 95134

(Address of principal executive offices) (Zip Code)

(669) 770-4000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o		Accelerated filer	x
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

As of August 3, 2016, there were approximately 51,590,417 shares of the Registrant’s Common Stock outstanding.

1

TABLE OF CONTENTS

			Page
Note About Forward-Looking Statements		3
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income (Loss)	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43
Item 4.	Controls and Procedures	43
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults upon Senior Securities	67
Item 4.	Mine Safety Disclosures	67
Item 5.	Other Information	67
Item 6.	Exhibits	68
Signatures		70

2

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our revenue, billings, backlog, and other aspects of our future results of operations, financial position and cash flows, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “would,” “could,” “should,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A “Risk Factors.”  Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations.

3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SILVER SPRING NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for par value)

	June 30,			December 31,
	2016			2015
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	67,979		$	65,264
Short-term investments		45,085			59,181
Accounts receivable		46,998			47,813
Inventory		2,486			4,545
Deferred cost of revenue		201,654			196,868
Prepaid expenses and other current assets		14,195			10,835
Total current assets		378,397			384,506
Property and equipment, net		28,072			14,106
Goodwill and intangible assets		13,590			14,390
Deferred cost of revenue, non-current		25,905			38,882
Deferred tax assets, non-current		976			1,069
Other long-term assets		2,466			4,772
Total assets	$	449,406		$	457,725
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	31,983		$	30,623
Deferred revenue		294,883			305,471
Accrued and other liabilities		36,319			42,751
Total current liabilities		363,185			378,845
Deferred revenue, non-current		77,051			96,342
Other liabilities, non-current		21,444			16,403
Total liabilities		461,680			491,590
Commitments and contingencies (Note 12)
Stockholders’ deficit:
Common stock, $0.001 par value; 1,000,000 shares authorized; 51,589    and 50,621 shares issued and outstanding as of    June 30, 2016 and December 31, 2015, respectively		608,290			594,352
Accumulated other comprehensive loss		(1,726	)		(1,772	)
Accumulated deficit		(618,838	)		(626,445	)
Total stockholders’ deficit		(12,274	)		(33,865	)
Total liabilities and stockholders’ deficit	$	449,406		$	457,725

See accompanying Notes to Condensed Consolidated Financial Statements.

4

SILVER SPRING NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts, unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
Revenue:
Product revenue	$	69,917	$	54,711		$	102,769	$	159,746
Services revenue		52,035		22,456			67,803		61,061
Total revenue, net		121,952		77,167			170,572		220,807
Cost of revenue:
Product cost of revenue		41,439		40,533			57,419		97,150
Services cost of revenue		15,970		16,678			31,613		32,246
Total cost of revenue		57,409		57,211			89,032		129,396
Gross profit		64,543		19,956			81,540		91,411
Operating expenses:
Research and development		17,933		16,050			33,418		31,744
Sales and marketing		8,622		8,912			18,172		18,209
General and administrative		11,239		10,455			22,085		22,584
Restructuring		—		1,078			39		1,272
Total operating expenses		37,794		36,495			73,714		73,809
Operating income (loss)		26,749		(16,539	)		7,826		17,602
Other income, net		333		74			774		362
Income (loss) before income taxes		27,082		(16,465	)		8,600		17,964
Provision (benefit) for income taxes		961		(290	)		993		(766	)
Net income (loss)	$	26,121	$	(16,175	)	$	7,607	$	18,730
Net income (loss) per share
Basic	$	0.51	$	(0.32	)	$	0.15	$	0.38
Diluted	$	0.50	$	(0.32	)	$	0.14	$	0.37
Weighted average shares used to compute net income (loss) per share
Basic		51,224		49,862			50,992		49,586
Diluted		52,766		49,862			52,492		51,095

See accompanying Notes to Condensed Consolidated Financial Statements.

5

SILVER SPRING NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Net income (loss)	$	26,121		$	(16,175	)	$	7,607		$	18,730
Other comprehensive (loss) income:
Change in foreign currency translation - net of adjustment		(114	)		174			(199	)		(774	)
Net unrealized gain on available for sale investments    (net of tax effect of $0 and $0)		19			(89	)		245			89
Other comprehensive (loss) income		(95	)		85			46			(685	)
Comprehensive income (loss)	$	26,026		$	(16,090	)	$	7,653		$	18,045

See accompanying Notes to Condensed Consolidated Financial Statements.

6

SILVER SPRING NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(in thousands, unaudited)

	Six Months Ended June 30,
	2016			2015
Cash flows provided by operating activities:
Net income	$	7,607		$	18,730
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes		111			(1,107	)
Depreciation and amortization		4,236			3,902
Stock-based compensation		13,941			15,684
Other non-cash adjustments		113			124
Changes in operating assets and liabilities:
Accounts receivable		859			13,641
Inventory		2,061			2,233
Prepaid expenses and other current assets		1,944			(2,796	)
Leasehold improvements funded by lease incentives		2,275			—
Contingent payments related to Detectent acquisition, held in escrow		—			(4,000	)
Deferred cost of revenue		8,236			46,994
Accounts payable		1,174			(2,370	)
Customer deposits		(6	)		1,458
Deferred revenue		(29,988	)		(89,031	)
Accrued and other liabilities		(5,031	)		5,696
Net cash provided by operating activities		7,532			9,158
Cash flows used in investing activities:
Business acquisition, net of cash acquired		—			(7,098	)
Proceeds from sales of available-for-sale investments		22,944			7,400
Proceeds from maturities of available-for-sale investments		2,250			7,750
Purchases of available-for-sale investments		(10,954	)		(11,623	)
Purchases of property and equipment		(17,244	)		(1,912	)
Net cash used in investing activities		(3,004	)		(5,483	)
Cash flows used in financing activities:
Payments on capital lease obligations		(285	)		(756	)
Proceeds from issuance of common stock, net of repurchases		2,228			2,036
Taxes paid related to net share settlement of equity awards		(3,620	)		(3,512	)
Net cash used in financing activities		(1,677	)		(2,232	)
Effect of exchange rate changes on cash and cash equivalents		(136	)		(140	)
Net increase in cash and cash equivalents		2,715			1,303
Cash and cash equivalents—beginning of period		65,264			60,457
Cash and cash equivalents—end of period	$	67,979		$	61,760
Supplemental cash flow information—cash paid for income taxes	$	3,896		$	1,860
Supplemental cash flow information—cash paid for interest	$	7		$	34
Non-cash investing activities:
Unpaid purchases of property and equipment	$	3,032		$	1,049

See accompanying Notes to Condensed Consolidated Financial Statements.

7

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Silver Spring Networks, Inc. (the “Company”, “we”, “us” and “our”) have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, for interim financial information as well as the instructions to Form 10-Q and applicable rules and regulations of the U.S. Securities and Exchange Commission, or SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. The results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of the results that may be expected for the year ending December 31, 2016, or any future period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” “Quantitative and Qualitative Disclosures About Market Risk,” and the Consolidated Financial Statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015. The preparation of unaudited condensed consolidated financial statements necessarily requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the condensed consolidated balance sheet dates and the reported amounts of revenues and expenses for the periods presented. Actual results could differ materially from those estimates under different assumptions or conditions. As a result, the quarterly results may not be indicative of the full year results.

The condensed consolidated financial statements include the accounts of Silver Spring Networks, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Prior Period Adjustments

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 Form 10-Q for the quarter ended March 31, 2016. We performed the analysis required by Staff Accounting Bulletin 99, Materiality, to evaluate the materiality of the error, quantitatively and qualitatively, and concluded it was not material to our condensed consolidated financial statements for the three months ended March 31, 2016. The error is corrected in the statement of cash flows for the six months ended June 30, 2016.

2. Significant Accounting Policies and Estimates

There have been no material changes to our significant accounting policies described in Note 1, Description of Business, Basis of Presentation and Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2015 that have had a material impact on our condensed consolidated financial statements and related notes.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This standard is effective for annual reporting periods beginning after December 15, 2016. We are currently evaluating the effect that this new guidance will have on our financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current lease accounting. The guidance also eliminates current real estate-specific provisions for all entities. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. All entities will classify leases to determine how to recognize lease-related revenue and expense. The guidance becomes effective for fiscal years and interim reporting periods beginning after December 15, 2018. We are currently evaluating the effect that this new guidance will have on our financial statements and related disclosures.

8

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. Under this new guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The updated standard will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective and permits the use of either the full retrospective or cumulative effect transition method. In July 2015, the FASB decided to delay the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. As such, the updated standard will be effective for us in the first quarter of 2018, with the option to early adopt it in the first quarter of 2017. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

3. Net income (loss) per share

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding plus dilutive potential shares of common stock outstanding during the period. Dilutive potential shares of common stock consist of common shares issuable upon exercise of stock options, issuances of shares pursuant to the Employee Stock Purchase Plan, or ESPP, vesting of restricted stock units, or RSUs, and contingently issuable performance stock units, or PSUs, to the extent dilutive. We include the common shares underlying PSUs in the calculation of diluted net income (loss) per share when they become contingently issuable and exclude such shares when they are not contingently issuable. Certain potential shares of common stock were excluded from the computation of diluted net income (loss) per share because their effect would be anti-dilutive.

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share data):

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
Net income (loss)	$	26,121	$	(16,175	)	$	7,607	$	18,730
Net income (loss) per share
Basic	$	0.51	$	(0.32	)	$	0.15	$	0.38
Diluted	$	0.50	$	(0.32	)	$	0.14	$	0.37
Weighted average shares used to compute net income (loss)    per share
Basic		51,224		49,862			50,992		49,586
Diluted		52,766		49,862			52,492		51,095

The following potential common shares outstanding were excluded from the computation of diluted net income (loss) per share because including them would have been anti-dilutive (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Employee equity awards		5,407		7,709		5,263		4,260

9

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Cash, Cash Equivalents and Short-Term Investments

Cash, cash equivalents, and short-term investments consisted of the following as of June 30, 2016 (in thousands):

	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
Current assets:
Cash	$	57,979	$	—	$	—		$	57,979
Cash equivalents:
Money market mutual funds		10,000		—		—			10,000
Total cash and cash equivalents		67,979		—		—			67,979
Short-term fixed income securities:
U.S. government and agency obligations		24,106		49		—			24,155
U.S. and foreign corporate debt securities		16,697		36		(1	)		16,732
Foreign governments and multi-national agency    obligations		2,000		—		—			2,000
Commercial Paper		2,198		—		—			2,198
Total short-term investments		45,001		85		(1	)		45,085
Total cash, cash equivalents and short-term investments	$	112,980	$	85	$	(1	)	$	113,064

Cash, cash equivalents, and short-term investments consisted of the following as of December 31, 2015 (in thousands):

	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
Current assets:
Cash	$	59,263	$	—	$	—		$	59,263
Cash equivalents:
Money market mutual funds		6,001		—		—			6,001
Total cash and cash equivalents		65,264		—		—			65,264
Short-term fixed income securities:
U.S. government and agency obligations		38,396		4		(110	)		38,290
U.S. and foreign corporate debt securities		18,945		2		(52	)		18,895
Foreign governments and multi-national agency    obligations		2,000		—		(4	)		1,996
Total short-term investments		59,341		6		(166	)		59,181
Total cash, cash equivalents and short-term investments	$	124,605	$	6	$	(166	)	$	124,445

As of June 30, 2016, approximately 84% and 9% of our cash, cash equivalents, and short-term investments were held with two financial institutions, respectively. As of December 31, 2015, approximately 84% and 11% of our cash, cash equivalents, and short-term investments were held with two financial institutions, respectively.

Contractual Maturities

The contractual maturities of cash equivalents and short-term investments consisted of the following (in thousands):  

	As of June 30, 2016				As of December 31, 2015
	Amortized		Aggregate		Amortized		Aggregate
	Cost Basis		Fair Value		Cost Basis		Fair Value
Due within one year	$	39,189	$	39,217	$	25,183	$	25,163
Due from 1 year through 3 years		15,812		15,868		40,159		40,019
Total cash equivalents and short-term investments	$	55,001	$	55,085	$	65,342	$	65,182

10

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as ofJune 30, 2016 and December 31, 2015, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):  

	As of June 30, 2016					As of December 31, 2015
	Total (Less Than 12 Months)					Total (Less Than 12 Months)
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. and foreign corporate debt securities	$	1,773	$	(1	)	$	15,894	$	(52	)
Foreign governments and multi-national agency obligations		—		—			1,996		(4	)
U.S. government and agency obligations		—		—			31,792		(110	)
Total	$	1,773	$	(1	)	$	49,682	$	(166	)

As of June 30, 2016 and December 31, 2015, there were no investments with unrealized losses for a period in excess of 12 months.

We periodically review our marketable debt securities for other-than-temporary impairment. We consider factors such as the duration, severity and the reason for the decline in value, the potential recovery period and our intent to sell. We also consider whether it is more likely than not that we will be required to (i) sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses. As of June 30, 2016, we anticipate that we will recover the entire amortized cost basis of such available-for-sale debt securities and have determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the three and six months ended June 30, 2016 and 2015. There were insignificant gross realized gains or losses from available-for-sale securities during the three and six months ended June 30, 2016 and 2015.  

5. Fair Value Measurements

We determine the fair values of our financial instruments based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. Under ASC Topic 820, Fair Value Measurement and Disclosures, the fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3—Unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions.

Level 1 measurements are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 measurements are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. We did not have any transfers of financial instruments between valuation levels during the six months ended June 30, 2016 and year ended December 31, 2015.

11

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Assets Measured at Fair Value on a Recurring Basis

As of June 30, 2016, financial assets recorded at fair value on a recurring basis were determined using the following inputs (in thousands):

	Fair Value Measurement Using
	Quoted Prices in		Significant
	Active Markets for		Other		Significant
	Identical		Observable		Unobservable
	Instruments		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Cash equivalents:
Money-market funds	$	10,000	$	—	$	—	$	10,000
Total cash equivalents		10,000		—		—		10,000
Short-term investments:
U.S. Government and agency obligations		—		24,155		—		24,155
U.S. and foreign corporate debt securities		—		16,732		—		16,732
Foreign governments and multi-national agency    obligations		—		2,000		—		2,000
Commercial paper		—		2,198		—		2,198
Total short-term investments		—		45,085		—		45,085
Total assets measured at fair value	$	10,000	$	45,085	$	—	$	55,085

As of December 31, 2015, financial assets recorded at fair value on a recurring basis were determined using the following inputs (in thousands):

	Fair Value Measurement Using
	Quoted Prices in		Significant
	Active Markets for		Other		Significant
	Identical		Observable		Unobservable
	Instruments		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Cash equivalents:
Money-market funds	$	6,001	$	—	$	—	$	6,001
Total cash equivalents		6,001		—		—		6,001
Short-term investments:
U.S. Government and agency obligations		—		38,290		—		38,290
U.S. and foreign corporate debt securities		—		18,895		—		18,895
Foreign governments and multi-national agency    obligations		—		1,996		—		1,996
Total short-term investments		—		59,181		—		59,181
Total assets measured at fair value	$	6,001	$	59,181	$	—	$	65,182

As of June 30, 2016 and December 31, 2015, there were no liabilities that are measured and recorded at fair value on a recurring basis.

As of June 30, 2016 and December 31, 2015, there were no assets and liabilities that are measured and recorded at fair value on a nonrecurring basis except for assets and liabilities valued on the date of acquisition for business acquired during 2015.

Assets and Liabilities Not Measured at Fair Value

The carrying amounts of our accounts receivable, accounts payable, and other accrued liabilities approximate fair value due to their short maturities.

12

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6. Business Acquisition

On January 16, 2015, we completed the acquisition of Detectent, Inc., or Detectent, a privately held corporation that provides customer intelligence solutions for utilities leveraging its data analytics platform, and paid $7.6 million in cash consideration. The acquisition of Detectent was accounted for under the acquisition method of accounting. Detectent’s SaaS, subscription, and software solutions help improve advanced metering infrastructure and utility grid operations, ensure revenue protection, and deliver enhanced customer engagement programs. We recorded goodwill of $4.5 million and intangible assets of $3.8 million, consisted primarily of developed technology, customer relationships, non-compete agreements and order backlog, at the time of acquisition. The goodwill arising from the Detectent acquisition was largely attributable to the synergies expected to be realized and was not deductible for U.S. federal income tax purposes.

In addition, we paid and held $4.0 million of deferred cash consideration, or contingent payments, in an escrow account, to be released over a two-year period subject to the retention of key employees of Detectent, or retention period. Contingent payments associated with future employment conditions are being recorded as compensation expense over the retention period. During the six months ended June 30, 2016, we released $1.0 million from the escrow account in connection with the satisfaction of the retention terms of the acquisition agreement.

7. Goodwill and Intangible Assets

Goodwill:

As of June 30, 2016 and December 31, 2015, the gross amount of goodwill was $8.8 million.

Intangible Assets:

The following table summarizes the gross carrying amount and accumulated amortization for the intangible assets resulting from acquisitions (in thousands):

		As of June 30, 2016						As of December 31, 2015
	Useful Lives (in years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Purchased technology	4-6 years	$	4,865	$	2,544	$	2,321	$	4,865	$	2,180	$	2,685
Customer relationships	4-7 years		3,640		1,367		2,273		3,640		973		2,667
Trade name	6 years		369		142		227		369		103		266
Total		$	8,874	$	4,053	$	4,821	$	8,874	$	3,256	$	5,618

Intangible assets subject to amortization are amortized over their useful lives as shown in the table above.

The following table illustrates the amortization expense included in the consolidated statements of operations for the three and six months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Amortization of purchased intangible assets:	2016		2015		2016		2015
Cost of revenue	$	195	$	260	$	364	$	522
Sales and marketing		172		154		415		294
General and administrative		8		8		17		15
Total	$	375	$	422	$	796	$	831

13

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The estimated future amortization expense of purchased intangible assets with definite lives for the next five years is as follows (in thousands):

Year Ending December 31,	Amount
Remainder of 2016	$	750
2017		1,501
2018		1,195
2019		1,005
2020		259
2021 and thereafter		111
	$	4,821

8. Stock-Based Compensation

Equity Incentive Plan and Employee Stock Purchase Plan

Our Board of Directors adopted the 2012 Equity Incentive Plan, or 2012 Plan, which became effective on March 12, 2013 and serves as the successor to our 2003 Stock Option Plan, or 2003 Plan. Pursuant to the 2012 Plan, 3,400,000 shares of our common stock were initially reserved for grant, plus (1) any shares that were reserved and available for issuance under the 2003 Plan at the time the 2012 Plan became effective, and (2) any shares that become available upon forfeiture or repurchase by us under the 2003 Plan and a stock option plan assumed in connection with a previous acquisition, will be reserved for issuance. In addition, the number of shares of our common stock available for grant and issuance shall be increased on January 1 of each calendar year during the term of the Plan by the lesser of (i) four percent (4%) of the number of shares of our common stock issued and outstanding on each December 31 immediately prior to the date of increase, or (ii) such number of shares determined by the Board of Directors. Under the 2012 Plan, we may grant both incentive and non-statutory stock options, restricted stock, restricted stock units, and performance stock units to employees, directors and service providers. We may grant options to purchase shares of common stock to employees, directors and service providers at prices not less than the fair market value on the date of grant for both Incentive Stock Options, or ISOs, and Nonqualified Stock Options. ISOs granted to a person who, at the time of the grant, owns more than 10% of the voting power of all classes of stock must be at no less than 110% of the fair market value and expire five years from the date of grant. All other options generally have a contractual term of 10 years. Options generally vest over four years. RSUs generally vest between two to four years. PSUs generally vest over three years.

Our Board of Directors adopted the 2012 Employee Stock Purchase Plan, or ESPP, which became effective on March 12, 2013, pursuant to which 400,000 shares of our common stock have been reserved for future issuance. In addition, on each January 1 for the first ten calendar years after the first Offering Date, the aggregate number of shares of our common stock reserved for issuance under the ESPP shall be increased automatically by the number of shares equal to 1% of the total number of outstanding shares of our common stock on the immediately preceding December 31 subject to restrictions defined in the ESPP. Eligible employees can enroll and elect to contribute up to 15% of their compensation through payroll withholdings in each offering period, subject to certain limitations. Each offering period is six months in duration. The purchase price of the stock is the lower of 85% of the fair market value on (a) the first day of the offering period or (b) the purchase date.

As of June 30, 2016 and December 31, 2015, there were 6.3 million and 4.9 million shares, respectively, of common stock reserved for future grants under our ESPP and 2012 Plan.

14

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Stock Option Activities

The following table summarizes our stock option activity and related information for the six months ended June 30, 2016 as follows (in thousands, except per share data):

	Options Outstanding
				Weighted		Weighted
				Average		Average
				Exercise		Remaining		Aggregate
	Number of			Price per		Contractual		Intrinsic
	Shares			Share		Term (years)		Value
Balance at December 31, 2015		4,432		$	11.99		5.36	$	17,290
Options granted		420			13.33
Options exercised		(211	)		2.39
Options cancelled or expired		(527	)		15.71
Balance at June 30, 2016		4,114		$	12.14		5.58	$	11,325
As of June 30, 2016:
Options vested and expected to vest		4,062		$	12.12		5.54	$	11,306
Options exercisable		2,961		$	11.67		4.32	$	10,420

The aggregate intrinsic value disclosed above represents the total intrinsic value (the difference between the fair value of our common stock as of June 30, 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2016. This amount is subject to change based on changes to the fair value of our common stock.

Restricted Stock Units Activities

The following table summarizes our restricted stock units activity and related information for the six months ended June 30, 2016 as follows (in thousands, except per share data):  

	Restricted Stock Units Outstanding
						Weighted
				Weighted		Average
				Average Grant		Remaining		Aggregate
	Number of			Date Fair Value		Contractual		Intrinsic
	Shares			per Share		Term(years)		Value
Balance at December 31, 2015		3,086		$	11.11		1.73	$	44,473
Restricted stock units granted		1,614			12.99
Restricted stock units vested		(850	)		13.31
Restricted stock units cancelled		(158	)		14.11
Performance stock units cancelled		(100	)		7.42
Balance at June 30, 2016		3,592		$	10.90		1.63	$	43,649

Stock-based Compensation

We recorded stock-based compensation expense as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Cost of revenue	$	1,389	$	2,209	$	2,717	$	3,932
Research and development		2,241		2,832		4,266		5,013
Sales and marketing		726		1,287		1,557		2,525
General and administrative		2,685		2,333		5,401		4,214
Stock-based compensation expense	$	7,041	$	8,661	$	13,941	$	15,684

15

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Stock-based compensation related to our corporate bonus incentive plan was $1.9 million and $3.7 million for the three months ended June 30, 2016 and 2015, respectively. Stock-based compensation related to our corporate bonus incentive plan was $4.0 million and $5.2 million for the six months ended June 30, 2016 and 2015, respectively. We recorded these amounts under accrued liabilities in our consolidated balance sheets.

The following table presents unrecognized compensation cost, adjusted for estimated forfeitures, recognized over a weighted-average period related to unvested stock options, ESPP, RSUs, and PSUs as of June 30, 2016:

			Weighted
	Unrecognized		Average
	Compensation		Period
	Cost		(Years)
Stock options	$	7,044	2.7
ESPP		179	0.1
RSUs and PSUs	$	28,653	2.6

9. Income Taxes

Our income tax provision and benefit for income taxes for the three months ended June 30, 2016 and 2015 reflects an effective tax rate of 3.5% and 1.8%, respectively. Our income tax provision and benefit for income taxes for the six months ended June 30, 2016 and 2015 reflects an effective tax rate of 11.5% and (4.3%), respectively. Our income tax expense for the three and six months ended June 30, 2016 consists primarily of an income tax from foreign jurisdictions and state, respectively. Our benefit for income taxes for the three and six months ended June 30, 2015 consists primarily of a net benefit of $0.9 million, which was due to the deferred income tax benefits related to the Detectent acquisition.

10. Segment Information

We operate in one reportable segment. Our chief operating decision makers are our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, who review consolidated operating results to make decisions about allocating resources and assessing performance for the entire company. Revenue by geography is based on the billing address of the customer. The following table presents revenue by geographic region (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Revenue:
United States	$	118,539	$	72,367	$	163,761	$	194,950
Australia		1,834		3,526		3,969		22,702
All Other		1,579		1,274		2,842		3,155
Total	$	121,952	$	77,167	$	170,572	$	220,807

Substantially all of our long-lived assets are located in the United States.

11.Balance Sheet Details

Inventory

Inventory consisted of the following (in thousands):

	June 30,		December 31,
	2016		2015
Component parts	$	411		1,201
Finished goods		2,075		3,344
Inventory	$	2,486		4,545

16

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accrued and Other Liabilities

Accrued and other liabilities consisted of the following (in thousands):  

	June 30,		December 31,
	2016		2015
Accrued payroll and related expenses	$	14,098	$	14,249
Accrued operating expenses		2,943		5,937
Warranty obligations, current		5,984		8,601
Sales, property and income taxes		1,358		4,850
Current portion of capital lease obligation		—		285
Other deferred revenue		11,541		8,326
Other		395		503
Accrued and other liabilities	$	36,319	$	42,751

Other Liabilities, non-current

Other liabilities, non-current consisted of the following (in thousands):  

	June 30,		December 31,
	2016		2015
Warranty obligations, non-current	$	2,062	$	2,898
Other deferred revenue		10,801		11,099
Deferred rent, non-current		8,079		944
Other		502		1,462
Other liabilities, non-current	$	21,444	$	16,403

          Product Warranty

Product warranty activity is as follows (in thousands):

	SixMonths Ended
	June 30,
	2016
Warranty obligation—beginning of period	$	11,499
Warranty expense for new warranties issued		159
Utilization of warranty obligation		(2,798	)
Changes in estimates for pre-existing warranties		(814	)
Warranty obligation—end of period	$	8,046

Accumulated Other Comprehensive (Loss) Income (AOCI), Net of Tax

The components of accumulated other comprehensive (loss) income, net of tax, for the six months ended June 30, 2016 are as follows (in thousands):

				Unrealized Gains
	Foreign Currency			(Losses) on Available
	Adjustment			for Sale Securities			Total
Balance as of December 31, 2015	$	(1,561	)	$	(211	)	$	(1,772	)
Other comprehensive (loss) income before    reclassification		(199	)		272			73
Amounts reclassified from AOCI		—			(27	)		(27	)
Other comprehensive (loss) income		(199	)		245			46
Balance as of June 30, 2016	$	(1,760	)	$	34		$	(1,726	)

17

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

12. Commitments and contingencies

Operating and Capital Leases

Our primary operating lease commitment as of June 30, 2016, related to our headquarters in San Jose, California, requires monthly lease payments through September 2026.

We recognize rent expense on a straight-line basis over the lease period. Where leases contain escalation clauses, rent abatements, or concessions, such as rent holidays and landlord or tenant incentives or allowances, we apply them in the determination of straight-line rent expense over the lease term. Rent expense for all facility leases was $2.0 million and $1.3 million for the three months ended June 30, 2016 and 2015, respectively, $4.3 million and $2.5 million for the six months ended June 30, 2016 and 2015, respectively.

As of June 30, 2016, the future minimum commitments under our operating leases were as follows (in thousands):  

	Operating
	Leases
Remainder of 2016	$	2,325
2017		5,976
2018		7,047
2019		7,211
2020		6,949
2021 and thereafter		40,454
Net minimum lease payments	$	69,962

Legal Contingencies

EON Patent Litigation.  In June 2011, EON Corp. IP Holdings, LLC, a non-producing entity, or EON, filed suit in United States District Court for the Eastern District of Texas, Tyler Division against us and a number of smart grid providers.  The lawsuit alleges infringement of United States Patent Nos. 5,388,101, 5,481,546, and 5,592,491, or the EON Patents, by certain networking technology and services that we and the other defendants provide.  Other defendants included Landis+Gyr AG (which was acquired by Toshiba Corporation), Aclara Power-Line Systems Inc., Elster Solutions, LLC, Itron, Inc. and Trilliant Networks Inc., all of which settled with EON prior to trial. We filed answers, affirmative defenses and counterclaims denying the plaintiff’s allegations and asserting that the plaintiff’s patents are invalid. A trial was held in June 2014. After the trial, the jury determined that we had infringed certain, but not all, of the claims under the EON Patents, and returned a verdict against us in the amount of $18.8 million.  Following post-trial motions by both parties, the court reduced the damage award to approximately $13.0 million, and in December 2014, entered a final judgment in that amount plus approximately $1.5 million in pre-judgment interest.  The court subsequently revised the final judgment to include additional costs of about $0.2 million and entered an amended final judgment in December 2014.  All of the EON Patents have expired and therefore EON is not seeking, and EON may not recover, any additional sums as royalties for our sales of products going forward.

In December 2014, we filed a notice of appeal with the U.S. Court of Appeals for the Federal Circuit in Washington, D.C.  In order to stay the execution of the final judgment pending the appeal, in December 2014 we filed a surety bond in the amount of $17.6 million, which includes an additional 20% of the final judgment for post-judgment interest and expenses expected to be incurred during the appeal process, in accordance with court rules.  The bond was issued by Zurich Insurance and is collateralized with a standby letter of credit in the amount of $13.0 million, the amount of the damage award, as described below in “Customer Performance and Other Commitments.” Upon completion of the appeal process, both the surety bond and standby letter of credit will be released.  In January 2015, the District Court accepted the bond and entered the stay of execution of the judgment.  The appellate hearing took place in November 2015, and in February 2016 the appellate court issued a ruling reversing the District Court’s prior decision and judgment against us, and holding that no reasonable jury could find we infringed the EON patents. In April 2016, EON filed a petition for a rehearing en banc, which the appellate court denied in May 2016.  In June 2016, the appellate court notified the District Court that the prior judgment in favor of EON was vacated and that judgment was in our favor, and the District Court released our appellate bond obligation.  We filed a renewed motion to recover certain costs of the trial and appeal from EON in June 2016, and in July 2016 the District Court awarded us $0.6 million. We intend to continue vigorously pursuing this motion and collection of the award, and defending the action as necessary.

18

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Linex Patent Litigation.  In March 2013, Linex Technologies, Inc., a non-producing entity, or Linex, filed suit against us in United States District Court for the Southern District of Florida. Linex alleged that certain of our networking technology infringes United States Patent Nos. 6,493,377 and 7,167,503. We filed an answer in May 2013. In January 2014, the court granted the plaintiff’s request for a stay of the matter, pending reexamination of the patents at issue by the USPTO. In September 2014, Linex amended certain patent claims and canceled certain other patent claims based upon the USPTO’s completed reexaminations, and in October 2014, the court lifted the stay of the matter.  In January 2015, Linex filed an amended complaint to incorporate facts related to the completed reexaminations, and we filed an answer responding to the complaint and raising additional defenses.  In June 2015, the court stayed the action pending the USPTO’s completion of further ex parte reexaminations of the patents at issue.  We believe that we have meritorious defenses to Linex’s allegations and intend to continue vigorously defending against the action.

Atlas/ComEd, Atlas/PG&E, and Atlas/FP&L Patent Litigation. In November 2015, Atlas IP, LLC filed separate suits against our customers Commonwealth Edison Company, or ComEd, and Pacific Gas and Electric Co., or PG&E, alleging infringement of United States Patent No. 5,371,734 by communications between smart meters and access points over a neighborhood area network using wireless communication modules and networking equipment supplied by us. In May 2016, Atlas filed a similar suit against our customer Florida Power & Light Company, or FP&L. We have agreed to assume the defense in each of these suits.

ComEd.  The suit against ComEd was filed in the Northern District of Illinois in November 2015, and also named Exelon Corp., or Exelon, as a defendant. In January 2016, we filed a motion to dismiss the ComEd complaint and to remove Exelon as a defendant. In February 2016, the court granted our motion to dismiss the complaint, and dismissed Exelon from the case with prejudice. In March 2016, Atlas IP filed an amended complaint against ComEd, which the court dismissed in May 2016, finding the complaint to be legally insufficient. The court awarded us reasonable attorneys’ fees and costs in July 2016. Atlas IP filed a notice of appeal in June 2016, seeking to appeal the dismissal to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C.

PG&E.  The suit against PG&E was filed in the Northern District of California. We filed a motion to dismiss the PG&E complaint in January 2016, which the court granted in March 2016.  Atlas IP filed an amended complaint against PG&E, which the court dismissed in June 2016, determining that Atlas IP is collaterally estopped from re-litigating the sufficiency of its complaint as the sufficiency of Atlas IP’s complaint was already decided against Atlas IP by the court in the ComEd suit.

FP&L.  The suit against FP&L was filed in the Southern District of Florida in May 2016.  In June 2016, the court stayed the action until the conclusion of Atlas IP’s appeal in the ComEd case, pursuant to an agreement between the parties that if the appellate court affirms the dismissal of the ComEd case, it will be dispositive of the FP&L action.

We believe that we have meritorious defenses to Atlas IP’s allegations in each of these matters, and intend to continue vigorously defending the actions.

Acoustic Technology Patent Litigation.  On July 29, 2016, Acoustic Technology, Inc., a non-producing entity, filed suit in United States District Court for the Eastern District of Texas, Marshall Division against us. The lawsuit alleges infringement of United States Patent Nos. 5,986,574, and 6,509,841 by certain meters and networking technology and services that we provide. The patents will expire in late 2017 and early 2018. We have not yet received service of process in this matter. We believe that we have meritorious defenses to Acoustic’s allegations and intend to vigorously defend ourselves.

In addition to the matters described above, from time to time we may be subject to other legal proceedings and claims in the ordinary course of business. We have received, and may in the future continue to receive, claims from third parties asserting infringement of their intellectual property rights. We may, from time to time, also be subject to various legal or government claims, disputes, or investigations. Such matters may include, but not be limited to, claims, disputes, or investigations related to warranty, refund, breach of contract, employment, intellectual property, government regulation, compliance or other matters. Future litigation may be necessary to defend ourselves and our customers by determining the scope, enforceability and validity of third-party rights or to establish our rights. There can be no assurance with respect to the outcome of any current or future litigation brought against us or pursuant to which we have indemnification obligations and the outcome could have a material adverse impact on our business, operating results and financial condition.

We have not recorded any amounts for contingent losses associated with the matters described above based on our belief that losses, while reasonably possible, are not probable. Unless otherwise stated, we are currently unable to predict the final outcome of these lawsuits and therefore cannot determine the likelihood of loss nor estimate a range of possible loss.

19

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

We are directly involved with various unresolved legal actions and claims, and are indirectly involved with proceedings by administrative bodies such as public utility commissions, arising in the ordinary course of business. We do not believe that any liability from any reasonably foreseeable disposition of such legal actions and claims, individually or in the aggregate, would have a material effect on our consolidated financial statements. There are many uncertainties associated with any litigation or claim, and we cannot be certain that these actions or other third-party claims will be resolved without costly litigation, fines and/or substantial settlement payments. If that occurs, our business, financial condition and results of operations could be materially and adversely affected. If information becomes available that causes us to determine that a loss in any of our pending litigation matters, claims or settlements is probable, and a reasonable estimate of the loss associated with such events can be made, we will record the estimated loss at that time.

Customer Performance and Other Commitments

Certain customer agreements require us to obtain letters of credit or surety bonds in support of our obligations under such arrangements. These letters of credit or surety bonds typically provide a guarantee to the customer for future performance, which usually covers the deployment phase of a contract and may on occasion cover the operations and maintenance phase of service contracts.

As of June 30, 2016 and December 31, 2015, we had a total of $27.8 million and $22.7 million, respectively, including $13.0 million related to the EON Patent Litigation mentioned above, of standby letters of credit issued under the Credit Facility with a financial institution. As of June 30, 2016 and December 31, 2015, $4.5 million (AUD$6.2 million) and $4.4 million (AUD$6.2 million) of these standby letters of credit were denominated in Australian dollars, respectively. In accordance with the terms of our Credit Facility, increases or decreases in the exchange rate between the Australian dollar and the U.S. dollar will increase or decrease the amount available to us under the Credit Facility. See Liquidity and Capital Resources under Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operationsfor more information on the Credit Facility.

As of June 30, 2016, we had a $20.3 million unsecured surety bond. The surety bond provides a financial guarantee to support performance obligations under certain customer agreements. In the event any such letters of credit or surety bonds are called, we would be obligated to reimburse the issuer of the letters of credit or surety bond. We do not believe there will be any claims against currently outstanding letters of credit or surety bonds.

Indemnification Commitments

Directors, Officers and Employees. In accordance with our bylaws and/or pursuant to indemnification agreements we have entered into with directors, officers and certain employees, we have indemnification obligations to our directors, officers and employees for claims brought against these persons arising out of certain events or occurrences while they are serving at our request in such a capacity. We maintain a director and officer liability insurance coverage to reduce our exposure to such obligations, and payments made under these agreements. To date, there have been no indemnification claims by these directors, officers and employees.

Customers and Third Party Device Manufacturers. Refer to the discussion above under the heading Legal Contingencies for a description of our indemnification obligations.

Our contracts with customers and third party device manufacturers typically provide indemnification for claims filed by third parties alleging that our products and services sold to the customer or manufacturer infringe or misappropriate any patent, copyright, trademark or other intellectual property right.

In our customer contracts, we also typically provide an indemnification for third-party claims resulting from death, personal injury or property damage caused by the negligence or willful misconduct of our employees and agents in connection with the performance of certain contracts.

Under our customer and third party device manufacturer indemnities, we typically agree to defend the utility customer or third party device manufacturer, as the case may be, from such claims, and pay any resulting costs, damages and attorneys’ fees awarded against the indemnified party with respect to such claims, provided that (a) the indemnified party promptly notifies us in writing of the claim, (b) the indemnified party provides reasonable assistance to us at our expense, and (c) we have sole control of the defense and all related settlement negotiations.

20

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. In addition, the following discussion contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly the section entitled “Risk Factors.”

Overview

We have over ten years of experience creating, building and successfully deploying large scale networks and solutions enabling the internet of things, or IoT, for critical infrastructure. The IoT refers to a system where a diversity of physical devices has the capacity to communicate using internet technologies. Our first area of focus was in energy, creating a leading smart grid network platform by applying advanced networking technology and solutions to the power grid. We have broadened our focus beyond the smart grid to other utility networks including gas and water, and other critical infrastructure such as street lights, which enable smarter and more efficient cities.

For the smart grid, we provide a leading networking platform and solutions that enable utilities to transform the power grid infrastructure into the smart grid. The smart grid intelligently connects millions of devices that generate, control, monitor and consume power, providing timely information and control to both utilities and consumers. We believe that the application of networking technology to the power grid has started to transform the energy industry through better communication just as the application of networking technology to the computing industry enabled the internet.

We believe the power grid is one of the most significant elements of contemporary industrial infrastructure that has yet to be extensively networked with modern technology. To address this challenge, we pioneered a fundamentally new approach to connect utilities with millions of devices on the power grid. We believe our technology has started to yield significant benefits to utilities, consumers and the environment, as the industry begins to realize the potential benefits of increased communication capabilities being deployed in the smart grid. These benefits include more efficient management of energy, improved grid reliability, capital and operational savings, integration with renewable-generation sources, consumer empowerment and assistance in complying with evolving regulatory mandates through reduced carbon emissions.  

We intend to continue to innovate in order to advance our networking platform to support increased performance and a broader range of communications modules, including compact battery-operated solutions and advanced analytics capabilities. We believe this will enable a more powerful smart grid with support for more devices, applications and solutions. We believe these technological advances are also well-suited to provide intelligence to other devices within our core smart grid market, as well as adjacent markets for distribution systems to gas and water utilities.

We believe our technology is also well suited for a range of other solutions across the broader category of the IoT. We are focused on critical infrastructure within the IoT that requires similar networking performance as our smart grid solution. Our first expansion beyond the power grid has been on city infrastructure, specifically networking street lights. We believe that by applying advanced networking technology, we can enable cities to achieve their goals for increasing energy and operating efficiency while improving quality of life. In the long term, we look to expand our reach into an even broader range of IoT markets by working with new and existing customers to open their smart grid networks to third parties and support a wide range of devices, applications and solutions.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. Under Section 107(b) of the JOBS act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail our company of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

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Key Non-GAAP and Other Financial Metrics

We supplement our results of operations presented in accordance with GAAP with certain non-GAAP metrics. We manage our business, make planning decisions, evaluate our performance and allocate resources by assessing non-GAAP metrics such as billings (including product billings, services billings, professional services billings, managed services and SaaS billings, advanced metering infrastructure billings, new solutions billings, and international billings), recurring billings, recurring billings per endpoint, cost of billings (including product cost of billings and services cost of billings), 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), adjusted EBITDA, and total backlog in addition to other financial metrics presented in accordance with GAAP. We believe that these non-GAAP and other financial metrics offer valuable supplemental information regarding the performance of our business, and will help investors better understand the sales volumes, and gross margin and profitability trends, as well as the cash flow characteristics, of our business. These non-GAAP and other financial metrics are not intended to be considered in isolation from, as a substitute for, and do not purport to be an alternative to revenue, cost of revenue, gross profit, gross margin, net income (loss), or any other performance measure derived in accordance with GAAP.

Billings

Billings represent 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 exclude 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 have been met under our accounting policies. We reconcile revenue to billings by adding revenue to the change in deferred revenue in a given period. We use the following categories to further analyze and evaluate billings calculating and reconciling each metric as described above:

Product Billings

Product billings represent billings associated with hardware, such as communications modules, access points, relays, and bridges, and various types of software products used in our networking and data platforms, which have been delivered to the customer.

Services Billings

Services billings represent billings associated with services related to the initial deployment and ongoing operation of our networking platform and solutions that have been provided to the customer. This includes professional services billings and managed services & SaaS billings.

Professional Services Billings

Professional services billings represent billings associated with professional services related to the deployment of our networking platform and solutions that have been provided to the customer.  

Managed Services & SaaS Billings

Managed services & SaaS billings represent billings associated with managed services and SaaS offerings that have been provided to the customer.  

Advanced Metering Infrastructure Billings

Advanced metering infrastructure billings represent billings associated with products and services for our advanced metering solution.  

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New Solutions Billings

New solutions billings represent billings derived from our products and services beyond our advanced metering solution, such as distribution automation, demand side management, demand response, smart cities, street lights, and SilverLink Data Platform. New solutions billings represent incremental opportunities to deliver benefits into our customers’ deployed network or in some cases new stand-alone opportunities to deliver our new solutions.

International Billings

International billings represent billings for products and services that have been provided to customers outside of the United States.

Recurring Billings and Recurring Billings per Endpoint

Recurring billings are our billings from our managed services and SaaS offering, as well as customer support and other services offerings. Recurring billings are primarily recurring in nature and includes managed services, hosting and software maintenance, and support fees, as well as one-time managed services and SaaS setup fees. We do have other sources of revenue that are recurring in nature in both our product and services solutions but we believe revenue from our managed services and SaaS offerings, as well as customer support and other services revenue, best represents our overall recurring billings. We reconcile recurring revenue to recurring billings by adding revenue due to the change in deferred revenue in a given period.

Recurring billings per endpoint represents a trailing twelve months, or TTM, recurring billings from our managed services and SaaS offering divided by cumulative home and business endpoints shipped from inception to date.

Cost of Billings

Cost of billings represents the cost associated with products and services that have been delivered to the customer, excluding stock-based compensation and 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. We reconcile cost of revenue to cost of billings by adding cost of revenue to 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. We use the following categories to further analyze and evaluate cost of billings, calculating and reconciling each metric as described above:

Product Cost of Billings

Product cost of billings represents the cost associated with products that have been delivered to the customer.

Services Cost of Billings

Services cost of billings represents the cost associated with services that have been delivered to the customer. This includes professional services cost of billings and managed services & SaaS cost of billings.

Gross Profit and Gross Margin on Billings

Gross profit on billings is the difference between billings and cost of billings. Gross margin on billings is gross profit on billings as a percentage of billings.

Gross Profit and Gross Margin on Product Billings

Gross profit on product billings is the difference between product billings and product cost of billings. Product gross margin on billings is product gross profit on billings as a percentage of billings.

Gross Profit and Gross Margin on Services Billings

Gross profit on services billings is the difference between services billings and services cost of billings. Services gross margin on billings is services gross profit on billings as a percentage of billings.

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Adjusted EBITDA

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

Total Backlog

Total backlog represents future product and services billings that we expect to generate pursuant to contracts that we have entered into with our utility customers and meter manufacturers. Total backlog includes order backlog, which represents future billings for open purchase orders and other firm commitments.

The non-GAAP financial metrics set forth below for the three and six months ended June 30, 2016 and 2015 have been derived from our unaudited financial statements. Reconciliations to the comparable GAAP metrics are contained in the notes below.

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	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(unaudited, in thousands, except per endpoint and percentages)						(unaudited, in thousands, except per endpoint and percentages)
Product revenue, net	$	69,917		$	54,711		$	102,769		$	159,746
Services revenue, net
Managed services and SaaS		24,570			10,608			35,638			23,582
Professional services		27,465			11,848			32,165			37,479
Total services revenue, net		52,035			22,456			67,803			61,061
Revenue, net	$	121,952		$	77,167		$	170,572		$	220,807
Product billings(1)	$	46,113		$	44,696		$	91,848		$	85,697
Services billings(1)
Managed services and SaaS(1)		14,920			12,995			27,808			25,550
Professional services(1)		10,813			11,449			21,104			20,992
Total services billings(1)		25,733			24,444			48,912			46,542
Total billings(1)	$	71,846		$	69,140		$	140,760		$	132,239
Recurring revenue (TTM)							$	84,003		$	41,697
Recurring billings (TTM)(2)							$	54,674		$	48,609
Recurring revenue per endpoint							$	3.44		$	1.94
Recurring billings per endpoint(2)							$	2.24		$	2.26
Advanced metering infrastructure revenue, net	$	105,181		$	66,907		$	145,695		$	179,772
New solutions revenue, net		16,771			10,260			24,877			41,035
Revenue, net	$	121,952		$	77,167		$	170,572		$	220,807
Advanced metering infrastructure billings (3)	$	59,997		$	55,931		$	117,468		$	103,968
New solutions billings(3)		11,849			13,209			23,292			28,271
Total billings(3)	$	71,846		$	69,140		$	140,760		$	132,239
International revenue, net	$	3,413		$	4,807		$	6,811		$	25,865
International billings(3)	$	10,973		$	14,735		$	26,197		$	21,785
Cost of product revenue	$	41,439		$	40,533		$	57,419		$	97,150
Cost of services revenue
Managed services and SaaS		8,900			8,093			17,532			15,986
Professional services		7,070			8,585			14,081			16,260
Total cost of services revenue		15,970			16,678			31,613			32,246
Cost of revenue	$	57,409		$	57,211		$	89,032		$	129,396
Cost of product billings(4)	$	23,837		$	25,225		$	47,964		$	48,836
Cost of services billings(4)
Managed services and SaaS(4)		8,294			7,381			16,531			14,673
Professional services(4)		6,686			7,588			13,101			14,358
Total cost of services billings(4)		14,980			14,969			29,632			29,031
Cost of billings(4)	$	38,817		$	40,194		$	77,596		$	77,867
Product gross profit	$	28,478		$	14,178		$	45,350		$	62,596
Services gross profit
Managed services and SaaS		15,670			2,515			18,106			7,596
Professional services		20,395			3,263			18,084			21,219
Total services gross profit		36,065			5,778			36,190			28,815
Gross profit	$	64,543		$	19,956		$	81,540		$	91,411
Total gross margin		52.9	%		25.9	%		47.8	%		41.4	%

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Gross profit on product billings(5)	$	22,276		$	19,471		$	43,884		$	36,861
Gross profit on services billings(5)
Managed services and SaaS(5)		6,626			5,614			11,277			10,877
Professional services(5)		4,127			3,861			8,003			6,634
Total gross profit on services billings(5)		10,753			9,475			19,280			17,511
Gross profit on billings(5)	$	33,029		$	28,946		$	63,164		$	54,372
Total gross margin on billings(5)		46.0	%		41.9	%		44.9	%		41.1	%
Adjusted EBITDA(6)	$	3,290		$	2,365		$	5,580		$	(1,618	)

(1) The following tables reconcile revenue to billings:

		Three Months Ended June 30, 2016							Six Months Ended June 30, 2016
		Revenue		Change in Deferred Revenue and Deferred Cost of Revenue (a)			Billings		Revenue		Change in Deferred Revenue and Deferred Cost of Revenue (a)			Billings
		(unaudited, in thousands)							(unaudited, in thousands)
Product		$	69,917	$	(23,804	)	$	46,113	$	102,769	$	(10,921	)	$	91,848
Services
Managed services and SaaS			24,570		(9,650	)		14,920		35,638		(7,830	)		27,808
Professional services			27,465		(16,652	)		10,813		32,165		(11,061	)		21,104
Total services, net			52,035		(26,302	)		25,733		67,803		(18,891	)		48,912
Net		$	121,952	$	(50,106	)	$	71,846	$	170,572	$	(29,812	)	$	140,760
		Three Months Ended June 30, 2015							Six Months Ended June 30, 2015
		Revenue		Change in Deferred Revenue and Deferred Cost of Revenue (a)			Billings		Revenue		Change in Deferred Revenue and Deferred Cost of Revenue (a)			Billings
		(unaudited, in thousands)							(unaudited, in thousands)
Product		$	54,711	$	(10,015	)	$	44,696	$	159,746	$	(74,049	)	$	85,697
Services
Managed services and SaaS			10,608		2,387			12,995		23,582		1,968			25,550
Professional services			11,848		(399	)		11,449		37,479		(16,487	)		20,992
Total services, net			22,456		1,988			24,444		61,061		(14,519	)		46,542
Net		$	77,167	$	(8,027	)	$	69,140	$	220,807	$	(88,568	)	$	132,239
	(a) Amounts presented net of foreign currency translation.

(2) The following table reconciles recurring revenue to recurring billings and recurring revenue per endpoint to recurring billings per endpoint:

	Six Months Ended June 30,					Change in
	2016			2015		2016
	(unaudited, in thousands, except per endpoint)
Recurring revenue (TTM)	$	84,003		$	41,697	$	42,306
Changes in deferred revenue, net of foreign currency    translation		(29,329	)		6,912		(36,241	)
Recurring billings (TTM)	$	54,674		$	48,609	$	6,065
Cumulative network endpoints delivered		24,399			21,506		2,893
Recurring revenue per endpoint	$	3.44		$	1.94	$	1.50
Recurring billings per endpoint	$	2.24		$	2.26	$	(0.02	)

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(3) The following tables reconcile advanced metering infrastructure revenue to advanced metering infrastructure billings, new solutions revenue to new solutions billings, and international revenue to international billings: 

		Three Months Ended June 30, 2016							Six Months Ended June 30, 2016
		Revenue		Change in Deferred Revenue and Deferred Cost of Revenue (a)			Billings		Revenue		Change in Deferred Revenue and Deferred Cost of Revenue (a)			Billings
		(unaudited, in thousands)							(unaudited, in thousands)
Advanced metering infrastructure		$	105,181	$	(45,184	)	$	59,997	$	145,695	$	(28,227	)	$	117,468
New solutions			16,771		(4,922	)		11,849		24,877		(1,585	)		23,292
Net		$	121,952	$	(50,106	)	$	71,846	$	170,572	$	(29,812	)	$	140,760
International		$	3,413	$	7,560		$	10,973	$	6,811	$	19,386		$	26,197
		Three Months Ended June 30, 2015							Six Months Ended June 30, 2015
		Revenue		Change in Deferred Revenue and Deferred Cost of Revenue (a)			Billings		Revenue		Change in Deferred Revenue and Deferred Cost of Revenue (a)			Billings
		(unaudited, in thousands)							(unaudited, in thousands)
Advanced metering infrastructure		$	66,907	$	(10,976	)	$	55,931	$	179,772	$	(75,804	)	$	103,968
New solutions			10,260		2,949			13,209		41,035		(12,764	)		28,271
Net		$	77,167	$	(8,027	)	$	69,140	$	220,807	$	(88,568	)	$	132,239
International		$	4,807	$	9,928		$	14,735	$	25,865	$	(4,080	)	$	21,785
	(a) Amounts presented net of foreign currency translation.

(4) The following tables reconcile cost of revenue to cost of billings:

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		Three Months Ended June 30, 2016
		Revenue		Change in deferred revenue and deferred cost of revenue (a)			Stock-based compensation			Amortization of intangible assets			Acquisition-related charges			Billings
		(unaudited, in thousands)
Cost of product		$	41,439	$	(16,992	)	$	(415	)	$	(195	)	$	—		$	23,837
Cost of services
Managed services and SaaS			8,900		—			(590	)		—			(16	)		8,294
Professional services			7,070		—			(384	)		—			—			6,686
Total cost of services			15,970		—			(974	)		—			(16	)		14,980
Total cost		$	57,409	$	(16,992	)	$	(1,389	)	$	(195	)	$	(16	)	$	38,817
		Six Months Ended June 30, 2016
		Revenue		Change in deferred revenue and deferred cost of revenue (a)			Stock-based compensation			Amortization of intangible assets			Acquisition-related charges			Billings
		(unaudited, in thousands)
Cost of product		$	57,419	$	(8,324	)	$	(767	)	$	(364	)	$	—		$	47,964
Cost of services
Managed services and SaaS			17,532		—			(970	)		—			(31	)		16,531
Professional services			14,081		—			(980	)		—			—			13,101
Total cost of services			31,613		—			(1,950	)		—			(31	)		29,632
Total cost		$	89,032	$	(8,324	)	$	(2,717	)	$	(364	)	$	(31	)	$	77,596
		Three Months Ended June 30, 2015
		Revenue		Change in deferred revenue and deferred cost of revenue (a)			Stock-based compensation			Amortization of intangible assets			Acquisition-related charges			Billings
		(unaudited, in thousands)
Cost of product		$	40,533	$	(14,488	)	$	(560	)	$	(260	)	$	—		$	25,225
Cost of services
Managed services and SaaS			8,093		—			(712	)		—			—			7,381
Professional services			8,585		—			(937	)		—			(60	)		7,588
Total cost of services			16,678		—			(1,649	)		—			(60	)		14,969
Total cost		$	57,211	$	(14,488	)	$	(2,209	)	$	(260	)	$	(60	)	$	40,194
		Six Months Ended June 30, 2015
		Revenue		Change in deferred revenue and deferred cost of revenue (a)			Stock-based compensation			Amortization of intangible assets			Acquisition-related charges			Billings
		(unaudited, in thousands)
Cost of product		$	97,150	$	(47,004	)	$	(788	)	$	(522	)	$	—		$	48,836
Cost of services
Managed services and SaaS			15,986		—			(1,313	)		—			—			14,673
Professional services			16,260		—			(1,831	)		—			(71	)		14,358
Total cost of services			32,246		—			(3,144	)		—			(71	)		29,031
Total cost		$	129,396	$	(47,004	)	$	(3,932	)	$	(522	)	$	(71	)	$	77,867
	(a) Amounts presented net of foreign currency translation.

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(5) The following tables reconcile gross profit to gross profit on billings, and gross margin to gross margin on billings:

		Three Months Ended June 30, 2016
		Gross Profit			Change in deferred revenue and deferred cost of revenue (a)			Stock-based compensation			Amortization of intangible assets			Acquisition-related charges			Gross Profit on Billings
		(unaudited, in thousands)
Product		$	28,478		$	(6,812	)	$	415		$	195		$	—		$	22,276
Services
Managed services and SaaS			15,670			(9,650	)		590			—			16			6,626
Professional services			20,395			(16,652	)		384			—			—			4,127
Total services			36,065			(26,302	)		974			—			16			10,753
Total gross profit		$	64,543		$	(33,114	)	$	1,389		$	195		$	16		$	33,029
Gross margin			52.9	%		-9.2	%		1.9	%		0.3	%		0.1	%		46.0	%
		Six Months Ended June 30, 2016
		Gross Profit			Change in deferred revenue and deferred cost of revenue (a)			Stock-based compensation			Amortization of intangible assets			Acquisition-related charges			Gross Profit on Billings
		(unaudited, in thousands)
Product		$	45,350		$	(2,597	)	$	767		$	364		$	—		$	43,884
Services
Managed services and SaaS			18,106			(7,830	)		970			—			31			11,277
Professional services			18,084			(11,061	)		980			—			—			8,003
Total services			36,190			(18,891	)		1,950			—			31			19,280
Total gross profit		$	81,540		$	(21,488	)	$	2,717		$	364		$	31		$	63,164
Gross margin			47.8	%		-5.1	%		1.9	%		0.3	%		0.0	%		44.9	%
		Three Months Ended June 30, 2015
		Gross Profit			Change in deferred revenue and deferred cost of revenue (a)			Stock-based compensation			Amortization of intangible assets			Acquisition-related charges			Gross Profit on Billings
		(unaudited, in thousands)
Product		$	14,178		$	4,473		$	560		$	260		$	—		$	19,471
Services
Managed services and SaaS			2,515			2,387			712			—			—			5,614
Professional services			3,263			(399	)		937			—			60			3,861
Total services			5,778			1,988			1,649			—			60			9,475
Total gross profit		$	19,956		$	6,461		$	2,209		$	260		$	60		$	28,946
Gross margin			25.9	%		12.3	%		3.2	%		0.4	%		0.1	%		41.9	%
		Six Months Ended June 30, 2015
		Gross Profit			Change in deferred revenue and deferred cost of revenue (a)			Stock-based compensation			Amortization of intangible assets			Acquisition-related charges			Gross Profit on Billings
		(unaudited, in thousands)
Product		$	62,596		$	(27,045	)	$	788		$	522		$	—		$	36,861
Services
Managed services and SaaS			7,596			1,968			1,313			—			—			10,877
Professional services			21,219			(16,487	)		1,831			—			71			6,634
Total services			28,815			(14,519	)		3,144			—			71			17,511
Total gross profit		$	91,411		$	(41,564	)	$	3,932		$	522		$	71		$	54,372
Gross margin			41.4	%		-3.7	%		3.0	%		0.3	%		0.1	%		41.1	%
	(a) Amounts presented net of foreign currency translation.

29

(6) The following table reconciles net (loss) income to adjusted EBITDA:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(unaudited, in thousands)						(unaudited, in thousands)
Net income (loss)	$	26,121		$	(16,175	)	$	7,607		$	18,730
Change in deferred revenue, net of foreign currency translation		(50,106	)		(8,027	)		(29,812	)		(88,568	)
Change in deferred cost of revenue, net of foreign currency translation		16,992			14,488			8,324			47,004
Other income, net		(333	)		(74	)		(774	)		(362	)
Provision (benefit) for income taxes		961			(290	)		993			(766	)
Depreciation and amortization		2,104			1,953			4,236			3,902
Stock-based compensation		7,041			8,661			13,941			15,684
Acquisition-related charges		510			751			1,026			1,486
Restructuring		—			1,078			39			1,272
Adjusted EBITDA	$	3,290		$	2,365		$	5,580		$	(1,618	)

Non-GAAP metrics have limitations and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. The most significant of these limitations include:

· our non-GAAP metrics do not reflect the effect of customer acceptance provisions as required under GAAP;

· our non-GAAP metrics do not reflect the restructuring expenses as required under GAAP;

· our non-GAAP metrics do not reflect the effect of contingent revenue recognition limits due to potential refunds and penalty provisions related to future delivery or performance as required under GAAP;

· our non-GAAP metrics do not reflect the impact of issuing stock-based compensation to our management team and employees;

· our non-GAAP metrics do not reflect the impact of the amortization of intangibles assets acquired in connection with acquisitions and acquisitions-related charges;

· our non-GAAP metrics do not reflect income tax (benefit) expense in connection with acquisitions or legal settlement costs;

· although depreciation and amortization are non-cash expenses, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditures;

· our non-GAAP metrics do not reflect changes in, or cash requirements for, our working capital needs; and

· other companies, including companies in our industry, may not use such metrics, may calculate non-GAAP metrics differently or may use other financial metrics to evaluate their performance, all of which reduce the usefulness of our non-GAAP metrics as comparative metrics.

Key Elements of Operating and Financial Performance

We monitor the key elements of our operating and financial performance set forth below to help us evaluate growth trends, determine investment priorities, establish budgets, measure the effectiveness of our sales efforts and assess operational efficiencies. These key elements of operating and financial performance include financial metrics presented in accordance with GAAP as well as non-GAAP metrics which consist of billings (including product billings, services billings, professional services billings, managed services and SaaS billings, advanced metering infrastructure billings, new solutions billings, and international billings), recurring billings, recurring billings per endpoint, cost of billings (including product cost of billings and services cost of billings), 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), adjusted EBITDA, and total backlog. For more information regarding our use of non-GAAP metrics, see Key Non-GAAP and Other Financial Metrics above.

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Revenue

We derive revenue from sales of products and services that enable customers to deploy our networking platform. For the three and six months ended June 30, 2016, product revenue represented 57% and 60% of our total revenue, respectively, and services revenue represented 43% and 40% of our total revenue. For the three and six months ended June 30, 2016, we shipped approximately 747,000 and 1,445,000 endpoints, respectively. We have shipped over 24.3 million cumulative endpoints from inception to June 30, 2016.

Our product revenue is derived from sales of hardware such as communications modules, access points, relays and bridges, and various types of software related to our solutions. To date, in our typical customer deployments, we have sold our communications modules to third-party device manufacturers and our other hardware and software products directly to our customers. In such sales of communications modules to third-party device manufacturers, we only record revenue related to the communications modules pursuant to a contractual relationship between us and the third-party device manufacturer. However, in some cases, we have sold third-party devices such as meters integrated with our communications modules directly to our customers. In those circumstances where we sell third-party devices directly to our customers, we recognize the sale on a gross basis as we are acting as principal. Whether our customer purchases the third-party device from us or the third party device manufacturer is dependent on the nature and extent of the business relationship our customer has with the third-party device manufacturer and how our customer prefers to manage their deployment.          

Our services revenue includes fees for managed services and SaaS, and professional services. For the three and six months ended June 30, 2016, revenue from managed services and SaaS represented 20% and 21% of our total revenue, respectively, and revenue from professional services represented 23% and 19% of our total revenue, respectively.

For the three and six months ended June 30, 2016, our advanced metering solutions represented 86% and 85% of our total revenue, respectively, and our new solutions represented 14% and 15% of our total revenue, respectively. Advanced metering solutions revenue includes hardware and software products along with services primarily related to deployment of the network canopy through our access points and the shipment of our communications modules which are integrated into third-party meters for deployment to homes and businesses supported by our customer base. New solutions revenue includes revenues derived from our products and services beyond our advanced metering solutions, such as distribution automation, demand side management, demand response, smart cities, street lights, and SilverLink Data Platform.

To date, a substantial majority of our revenue is attributable to a limited number of customer deployments. In the three months ended June 30, 2016, the deployments for CPS Energy, or CPS, and Commonwealth Edison Company, or ComEd, represented 63% and 18% of our total revenue, respectively. In the six months ended June 30, 2016, the deployments for CPS and ComEd represented 45% and 27% of our revenue, respectively.

Each of these total revenue percentages includes amounts related to the customers’ deployments that were invoiced directly to our third-party device manufacturers, as well as direct revenue from our customers. We expect that a limited number of customers will continue to account for a substantial portion of our revenue in future periods although these customers have varied and are likely to vary from period to period.

Billings

For the three and six months ended June 30, 2016, product billings represented 64% and 65% of our total billings, respectively, and services billings represented 36% and 35% of our total billings, respectively. Our services billings include revenue from managed services and SaaS, and professional services. For the three and six months ended June 30, 2016, billings from managed services and SaaS represented 21% and 20% of our total billings, respectively, and professional services represented 15% and 15% of our total billings, respectively.

For the three and six months ended June 30, 2016, billings from our advanced metering solutions represented 84% and 83% of our total billings, respectively, and new solutions represented 16% and 17% of our total billings, respectively. For a description of billings, see Key Non-GAAP and Other Financial Metrics above.

To date, a substantial portion of our billings are attributable to a limited number of customer deployments. In the three months ended June 30, 2016, the billings from ComEd, CPS, and Florida Power & Light, or FPL, represented 32%, 14%, and 12% of total billings, respectively. In the six months ended June 30, 2016, the billings from ComEd, FPL, and CPS represented 34%, 11%, and 10% of total billings, respectively.

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Recurring Revenue per Endpoint

Recurring revenue is our revenue from our managed services and SaaS offering, as well as customer support and other services offerings. Recurring 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 setup fees. We do have other sources of revenue that are recurring in nature in both our product and services solutions but we believe revenue from our managed services and SaaS offerings, as well as customer support and other services revenue, best represents our overall recurring revenue. Recurring revenue per endpoint represents a trailing twelve months, or TTM, recurring revenue from our managed services and SaaS offering divided by cumulative home and business endpoints shipped from inception to date. Recurring revenue per endpoint as of June 30, 2016 was $3.44. Changes in recurring revenue are primarily driven by the timing of customer acceptances and recognition of revenue subject to contingency provisions.

Recurring Billings and Recurring Billings per Endpoint

Recurring billings are our billings from our managed services and SaaS offering, as well as customer support and other services offerings. Managed services and SaaS billings are primarily recurring in nature and includes some one-time set-up fees related to the business. These one-time set-up fees could cause fluctuations in our recurring billings from period to period. In addition, our managed services and SaaS offerings are subject to regular renewals and renegotiations with our customers, which could contribute to fluctuations or cancellations in the amount of revenue which is deemed to be recurring from period to period, which in turn, could cause fluctuations in the amount of recurring billings and recurring billings per endpoint from period to period.  

Recurring billings per endpoint enables us to measure the amount of incremental revenue we derive from our growing footprint of networked homes and business as a result of sales of our additional solutions and services. Recurring billings per endpoint as of June 30, 2016 was $2.24. For a description of recurring billings and recurring billings per endpoint, see Key Non-GAAP and Other Financial Metrics above. We intend to continue to broaden the scope of our available solutions and services, which should have the effect of increasing the amount of recurring billings per endpoint over time.

Cost of Revenue, Gross Profit, and Gross Margin

Product cost of revenue consists of contract manufacturing costs, including raw materials, component parts and associated freight, and normal yield loss in the period in which we recognize the related revenue. In addition, product cost of revenue includes compensation, benefits and stock-based compensation provided to our supply chain management personnel, and overhead and other direct costs, which are recognized in the period in which we recognize the related revenue. Further, we recognize certain costs, including logistics costs, manufacturing ramp-up costs, expenses for inventory obsolescence, warranty obligations, lower of cost or market adjustments to inventory, and amortization of intangibles, in the period in which they are incurred or can be reasonably estimated. We record a lower of cost or market adjustment in instances where the selling price of the products delivered or expected to be delivered is less than cost. We also include the cost of third-party devices in cost of revenue in instances when our customers contract with us directly for such devices. In accordance with our accounting policies, we recognize product cost of revenue in the periods we recognize the related revenue.

Services cost of revenue includes compensation and related costs for our services delivery, customer operations and customer support personnel, facilities and infrastructure cost and depreciation, and data center costs. In accordance with our accounting policies, we recognize services cost of revenue in the period in which it is incurred even though the associated services revenue may be required to be deferred.

Our gross profit varies from period to period based on the volume, average selling prices, and mix of products and services recognized as revenue, as well as product and services costs, expense for warranty obligations, and inventory write-downs. The timing of revenue recognition and related costs, which depends primarily on customer acceptance, can fluctuate significantly from period to period and have a material impact on our gross profit and gross margin results. In addition, our gross profit will also increase based on revenue generated from sales of third-party devices. If in a given period our mix of revenue generated from third-party devices is higher, our gross profit will be lower as margin on third-party devices is lower as compare to our own products.

Cost of Billings, Gross Profit on Billings, and Gross Margin on Billings

Cost of billings represents the cost associated with products and services that have been delivered to the customer, excluding stock-based compensation and amortization of acquired intangibles and acquisition-related charges as described Key Non-GAAP and Other Financial Metrics above.

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Operating Expenses

Operating expenses consist of research and development, sales and marketing, and general and administrative expenses, as well as legal settlement expenses, amortization of acquired intangibles, and restructuring charges. Personnel-related expense represents a significant component of our operating expenses. Our regular full-time employee headcount increased from 652 as of December 31, 2015 to 708 as of June 30, 2016.

Research and Development

We expense our research and development costs as they are incurred. Research and development expense represents the largest component of our operating expenses and consists primarily of:

· compensation, including salaries, bonuses, and benefits and stock-based compensation provided to our hardware and software engineering personnel, as well as facility costs and other related overhead;

· cost of prototypes and test equipment relating to the development of new products and the enhancement of existing products; and

· fees for design, testing, consulting, legal, and other related services.

Sales and Marketing

Sales and marketing expense consists primarily of:

· compensation, including salaries, bonuses, and benefits, sales commissions and stock-based compensation provided to our sales, marketing and business development personnel, as well as facility costs and other related overhead;

· marketing programs, including expenses associated with industry events and trade shows;

· amortization of acquired intangibles; and

· travel costs.

General and Administrative

General and administrative expense consists primarily of:

· compensation, including salaries, bonuses, and benefits and stock-based compensation provided to our executives, finance, legal, human resource and administrative personnel, as well as facility costs and other related overhead;

· fees paid for professional services, including legal, tax and accounting services; and

· legal settlement expenses.

Restructuring

During September 2014, we initiated a restructuring plan to refocus our strategy, optimize our structure, and improve operational efficiencies. This restructuring plan included a worldwide workforce reduction.

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Results of Operations and Key Non-GAAP Financial Metrics

The following table sets forth our consolidated results of operations for the periods shown:

	Three Months Ended June 30,											Six Months Ended June 30,
	2016		2015			2016 vs. 2015						2016		2015			2016 vs. 2015
	(unaudited, in thousands)					$ Change			% Change			(unaudited, in thousands)					$ Change			% Change
Consolidated Statements of Operations Data:
Revenue, net	$	121,952	$	77,167		$	44,785			58	%	$	170,572	$	220,807		$	(50,235	)		(23	)%
Cost of revenue		57,409		57,211			198			0	%		89,032		129,396			(40,364	)		(31	)%
Gross profit		64,543		19,956			44,587			223	%		81,540		91,411			(9,871	)		(11	)%
Operating expenses:
Research and development		17,933		16,050			1,883			12	%		33,418		31,744			1,674			5	%
Sales and marketing		8,622		8,912			(290	)		(3	)%		18,172		18,209			(37	)		(0	)%
General and administrative		11,239		10,455			784			7	%		22,085		22,584			(499	)		(2	)%
Restructuring		—		1,078			(1,078	)		(100	)%		39		1,272			(1,233	)		(97	)%
Total operating expenses		37,794		36,495			1,299			4	%		73,714		73,809			(95	)		(0	)%
Operating income (loss)		26,749		(16,539	)		43,288			(262	)%		7,826		17,602			(9,776	)		(56	)%
Other income, net		333		74			259			350	%		774		362			412			114	%
Income (loss) before income taxes		27,082		(16,465	)		43,547			(264	)%		8,600		17,964			(9,364	)		(52	)%
Provision (benefit) for income taxes		961		(290	)		1,251			(431	)%		993		(766	)		1,759			(230	)%
Net income (loss)	$	26,121	$	(16,175	)	$	42,296			(261	)%	$	7,607	$	18,730		$	(11,123	)		(59	)%

Revenue

The following table sets forth our revenue for the periods shown:

	Three Months Ended June 30,											Six Months Ended June 30,
	2016			2015			2016 vs. 2015					2016			2015			2016 vs. 2015
	(unaudited, in thousands)						$ Change		% Change			(unaudited, in thousands)						$ Change			% Change
Product revenue	$	69,917		$	54,711		$	15,206		28	%	$	102,769		$	159,746		$	(56,977	)		(36	)%
Percent of net revenue		57.3	%		70.9	%							60.2	%		72.3	%
Services revenue
Managed services and SaaS		24,570			10,608			13,962		132	%		35,638			23,582			12,056			51	%
Professional services		27,465			11,848			15,617		132	%		32,165			37,479			(5,314	)		(14	)%
Total services revenue		52,035			22,456			29,579		132	%		67,803			61,061			6,742			11	%
Percent of net revenue		42.7	%		29.1	%							39.8	%		27.7	%
Revenue, net	$	121,952		$	77,167		$	44,785		58	%	$	170,572		$	220,807		$	(50,235	)		(23	)%

From incorporation through December 31, 2014, we deferred revenue for arrangements that contained customer-specific acceptance criteria until we determined whether acceptance was achieved due to our limited experience with customer deployments during that period. We perform an ongoing evaluation of the sufficiency of historical experience in determining the effect of customer-specific acceptance terms on timing of revenue recognition. During the quarter ended March 31, 2015, following the completion of analyses of historical experience, we determined that we have sufficient objective evidence to conclude that (i) network solution testing conducted in prior deployments can be relied upon to demonstrate that products and services delivered for deployments of other customers will meet acceptance testing criteria, provided that such prior deployments have similar characteristics and substantially similar testing criteria, or (ii) in absence of such evidence from prior deployments, network solution testing in the initial service area for a specific customer deployment can be relied upon to demonstrate that products and services delivered for subsequent service areas within that same deployment will meet subsequent acceptance testing criteria, provided that such initial network solution testing is successfully completed, and the testing criteria in the initial service area are substantially similar to the agreed-upon testing criteria for the remaining service areas. Receipt of acceptance from these customers is no longer considered necessary as (i) substantially similar acceptance testing criteria have been met in similar deployments of other customers, or (ii) substantially similar acceptance testing criteria have been met in the initial service area within the customer’s deployment, and all other revenue recognition criteria were met.

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Total revenue recognized was due to the receipt of customer acceptances and the performance of related services for follow-on phases of deployment of our networking platform and solutions., Of our total revenue, revenue from our advanced metering solutions and new solutions represented 86% and 14%, respectively, for the three months ended June 30, 2016, and 87% and 13%, respectively, for the three months ended June 30, 2015. The increase in total revenue for the three months ended June 30, 2016 as compared to the same period in 2015 was primarily due to the receipt of customer initial acceptances.

Of our total revenue, revenue from our advanced metering solutions and new solutions represented 85% and 15%, respectively, for the six months ended June 30, 2016 and 81% and 19%, respectively, for the six months ended June 30, 2015. The decrease in total revenue for the six months ended June 30, 2016 as compared to the same period in 2015 was due primarily to a one-time cumulative catch up adjustment recorded during the three months ended March 31, 2015 as a result of a change in assessment of the impact of customer-specific acceptance criteria as mentioned above.

For the three months ended June 30, 2016, the deployments for CPS and ComEd represented 63% and 18% of our total revenue, respectively. For the three months ended June 30, 2015, the deployments for Virginia Electric and Power Company, or Dominion, and ComEd represented 37% and 26% of our total revenue, respectively. For the six months ended June 30, 2016, the deployments for CPS and ComEd represented 45% and 27% of our total revenue, respectively. For the six months ended June 30, 2015, the deployments for ComEd, Dominion, and FPL represented 44%, 13% and 12% of our total revenue, respectively.

Product Revenue

The increase in product revenue for the three months ended June 30, 2016 as compared to the same period in 2015 was primarily due to the receipt of customer initial acceptances.

The decrease in product revenue for the six months ended June 30, 2016 as compared to the same period in 2015, was primarily due to a one-time cumulative catch up adjustment recorded during the three months ended March 31, 2015 as a result of a change in assessment of the impact of customer-specific acceptance criteria, partially offset by receipt of customer initial acceptances.

Services Revenue

The increase in services revenue for the three months ended June 30, 2016 as compared to the same period in 2015 was primarily due to the receipt of customer initial acceptances.

The increase in services revenue for the six months ended June 30, 2016 as compared to the same period in 2015 was primarily due to receipt of customer initial acceptances, partially offset by, to a lesser extent, due to a one-time cumulative catch up adjustment recorded during the three months ended March 31, 2015 as a result of a change in assessment of the impact of customer-specific acceptance criteria.

Our revenue from product, managed services and SaaS, and professional services represented 57%, 20%, and 23%, respectively, of our total revenue for the three months ended June 30, 2016, and 71%, 14% and 15%, respectively, of our total revenue for the three months ended June 30, 2015.

Our revenue from product, managed services and SaaS, and professional services represented 60%, 21%, and 19%, respectively, of our total revenue for the six months ended June 30, 2016, and 72%, 11% and 17%, respectively, of our total revenue for the six months ended June 30, 2015.

We anticipate that revenue in 2016 may fluctuate from period to period throughout 2016 primarily due to the timing of when we expect to meet the completion and acceptance criteria in our customer arrangements.

Recurring Revenue per Endpoint

Recurring revenue per endpoint as of June 30, 2016 and 2015 was $3.44 and $1.94, respectively. The increase is due to higher recurring revenue as a result of receipt of customer initial acceptances in the last twelve months.

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Billings

The following table sets forth our billings for the periods shown:

	Three Months Ended June 30,										Six Months Ended June 30,
	2016		2015		2016 vs. 2015						2016		2015		2016 vs. 2015
	(unaudited, in thousands)				$ Change			% Change			(unaudited, in thousands)				$ Change			% Change
Product billings	$	46,113	$	44,696	$	1,417			3	%	$	91,848	$	85,697	$	6,151			7	%
Services billings
Managed services and SaaS		14,920		12,995		1,925			15	%		27,808		25,550		2,258			9	%
Professional services		10,813		11,449		(636	)		(6	)%		21,104		20,992		112			1	%
Total services billings		25,733		24,444		1,289			5	%		48,912		46,542		2,370			5	%
Total billings	$	71,846	$	69,140	$	2,706			4	%	$	140,760	$	132,239	$	8,521			6	%
Advanced metering infrastructure billings	$	59,997	$	55,931	$	4,066			7	%	$	117,468	$	103,968	$	13,500			13	%
New solutions billings		11,849		13,209		(1,360	)		(10	)%		23,292		28,271		(4,979	)		(18	)%
Total billings	$	71,846	$	69,140	$	2,706			4	%	$	140,760	$	132,239	$	8,521			6	%
International billings	$	10,973	$	14,735	$	(3,762	)		(26	)%	$	26,197	$	21,785	$	4,412			20	%

For the three months ended June 30, 2016, billings from product and services represented 64% and 36% of our total billings, respectively, and for the three months ended June 30, 2015, billings from product and services represented 65% and 35% of our total billings, respectively. The increase in product billings was driven by higher endpoint shipments. We delivered approximately 747,000 endpoints during the three months ended June 30, 2016 as compared to approximately 692,000 endpoints during the same period in 2015. The increase in services billings was primarily due to an increase in managed services and SaaS billings, driven by ramping up of full deployment from customers. Billings from international customers represented 15% and 21% of total billings in the three months ended June 30, 2016 and 2015, respectively.

Of our total billings, billings from our advanced metering solutions and new solutions represented 84% and 16%, respectively, for the three months ended June 30, 2016, and 81% and 19%, respectively, for the three months ended June 30, 2015.

Of our total billings, billings from product, managed services and SaaS, and professional services represented 64%, 21%, and 15%, respectively, for the three months ended June 30, 2016, and 65%, 19% and 16%, respectively, for the three months ended June 30, 2015.

For the six months ended June 30, 2016, billings from product and services represented 65% and 35%, of our total billings, respectively, and for the six months ended June 30, 2015, billings from product and services represented 65% and 35%, of our total billings, respectively. The increase in product billings was driven by higher endpoint shipments. We delivered approximately 1,445,000 endpoints during the six months ended June 30, 2016 as compared to approximately 1,240,000 endpoints during the same period in 2015. The increase in services billings was primarily due to an increase in managed services and SaaS billings, driven by ramping up of full deployment from customers. Billings from international customers represented 19% and 16% of total billings in the six months ended June 30, 2016 and 2015, respectively.

Of our total billings, billings from our advanced metering solutions and new solutions represented 83% and 17%, respectively, for the six months ended June 30, 2016, and 79% and 21%, respectively, for the six months ended June 30, 2015.

Of our total billings, billings from product, managed services and SaaS, and professional services represented 65%, 20%, and 15%, respectively, for the six months ended June 30, 2016, and 65%, 19% and 16%, respectively, for the six months ended June 30, 2015.

To date, a substantial portion of our billings are attributable to a limited number of customer deployments. In the three months ended June 30, 2016, the billings for ComEd, CPS, and FPL represented 32%, 14%, and 12% of our total billings, respectively. In the three months ended June 30, 2015, the billings for ComEd and CPS represented 29% and 11% of total billings, respectively. In the six months ended June 30, 2016, the billings for ComEd, FPL, CPS, and AusNet Electricity Services represented 34%, 11%, 10%, and 10% of our total billings, respectively. In the six months ended June 30, 2015, the billings for ComEd, FPL, and CPS represented 31%, 12%, and 11% of our total billings, respectively.

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Recurring Billings per Endpoint

Recurring billings per endpoint as of June 30, 2016 and 2015 was $2.24 and $2.26, respectively.

We anticipate that billings will fluctuate from period to period throughout 2016, and may be at similar levels year-over-year.

Cost of Revenue, Gross Profit, and Gross Margin

The following table sets forth our cost of revenue, gross profit and gross margin for the periods shown:

	Three Months Ended June 30,												Six Months Ended June 30,
	2016			2015			2016 vs. 2015						2016			2015			2016 vs. 2015
	(unaudited, in thousands)						$ Change			% Change			(unaudited, in thousands)						$ Change			% Change
Cost of product revenue	$	41,439		$	40,533		$	906			2	%	$	57,419		$	97,150		$	(39,731	)		(41	)%
Cost of services revenue
Managed services and SaaS		8,900			8,093			807			10	%		17,532			15,986			1,546			10	%
Professional services		7,070			8,585			(1,515	)		(18	)%		14,081			16,260			(2,179	)		(13	)%
Total cost of services revenue		15,970			16,678			(708	)		(4	)%		31,613			32,246			(633	)		(2	)%
Total cost of revenue	$	57,409		$	57,211		$	198			0	%	$	89,032		$	129,396		$	(40,364	)		(31	)%
Product gross profit	$	28,478		$	14,178		$	14,300			101	%	$	45,350		$	62,596		$	(17,246	)		(28	)%
Product gross margin		40.7	%		25.9	%								44.1	%		39.2	%
Services gross profit
Managed services and SaaS		15,670			2,515			13,155			523	%		18,106			7,596			10,510			138	%
Professional services		20,395			3,263			17,132			525	%		18,084			21,219			(3,135	)		(15	)%
Total services gross profit		36,065			5,778			30,287			524	%		36,190			28,815			7,375			26	%
Services gross margin		69.3	%		25.7	%								53.4	%		47.2	%
Total gross profit	$	64,543		$	19,956		$	44,587			223	%	$	81,540		$	91,411		$	(9,871	)		(11	)%
Total gross margin		52.9	%		25.9	%								47.8	%		41.4	%

Product Cost of Revenue. The increase in product cost of revenue for the three months ended June 30, 2016 as compared to the same period in 2015 was primarily due to the receipt of customer initial acceptances.

The decrease in product cost of revenue for the six months ended June 30, 2016 as compared to the same period in 2015 was primarily due to a one-time cumulative catch up adjustment recorded during the three months ended March 31, 2015 as a result of a change in assessment of the impact of customer-specific acceptance criteria.

Services Cost of Revenue. The services cost of revenue was relatively flat for the three and six months ended June 30, 2016 as compared to the same periods in 2015.

Product Gross Profit and Product Gross Margin.  Product gross profit increased during the three months ended June 30, 2016 as compared to the same period in 2015, primarily due to the receipt of customer initial acceptances as well as cost savings from manufacturing efficiencies. Product gross profit decreased during the six months ended June 30, 2016 as compared to the same period in 2015, primarily due to a one-time cumulative catch up adjustment recorded during the three months ended March 31, 2015 as a result of a change in assessment of the impact of customer-specific acceptance criteria.

Product gross margin increased during the three and six months ended June 30, 2016 as compared to the same periods in 2015, primarily due to the receipt of customer initial acceptances as well as cost savings from manufacturing efficiencies. The product gross margin for the six months ended June 30, 2015 includes a one-time cumulative catch up adjustment which was recorded during the three months ended March 31, 2015 as a result of a change in assessment of the impact of customer-specific acceptance criteria. The overall increase in product gross margin during the six months ended June 30, 2016 as compared to the same period in 2015 is partially offset by this one-time cumulative catch up adjustment recorded in during the three months ended March 31, 2015.

Services Gross Profit and Services Gross Margin. Services gross profit increased during the three and six months ended June 30, 2016 as compared to the same periods in 2015, primarily due to the receipt of customer initial acceptances.

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Servicesgross margin increased during the three and six months ended June 30, 2016 as compared to the same periods in 2015, primarily due to the receipt of customer initial acceptances. The service gross margin for the six months ended June 30, 2015 includes a one-time cumulative catch up adjustment which was recorded during the three months ended March 31, 2015 as a result of a change in assessment of the impact of customer-specific acceptance criteria. The overall increase in services gross margin during the six months ended June 30, 2016 as compared to the same period in 2015 is partially offset by this one-time cumulative catch up adjustment recorded during the three months ended March 31, 2015.

Changes in our services cost of revenue are disproportionate to changes in our services revenue because we recognize services cost of revenue in the period in which it is incurred even though the associated services revenue may be required to be deferred, as described under “Key Elements of Operating and Financial Performance” above. In addition, we may incur gross losses primarily due to the timing of when we expect to meet the completion and acceptance criteria in our customer arrangements.

Cost of Billings, Gross Profit on Billings, and Gross Margin on Billings

The following table sets forth our cost of billings, gross profit on billings and gross margin on billings for the periods shown:

	Three Months Ended June 30,												Six Months Ended June 30,
	2016			2015			2016 vs. 2015						2016			2015			2016 vs. 2015
	(unaudited, in thousands)						$ Change			% Change			(unaudited, in thousands)						$ Change			% Change
Cost of product billings	$	23,837		$	25,225		$	(1,388	)		(6	)%	$	47,964		$	48,836		$	(872	)		(2	)%
Cost of services billings
Managed services and SaaS		8,294			7,381			913			12	%		16,531			14,673			1,858			13	%
Professional services		6,686			7,588			(902	)		(12	)%		13,101			14,358			(1,257	)		(9	)%
Total cost of services billings		14,980			14,969			11			0	%		29,632			29,031			601			2	%
Total cost of billings	$	38,817		$	40,194		$	(1,377	)		(3	)%	$	77,596		$	77,867		$	(271	)		(0	)%
Gross profit on product billings	$	22,276		$	19,471		$	2,805			14	%	$	43,884		$	36,861		$	7,023			19	%
Product gross margin on billings		48.3	%		43.6	%								47.8	%		43.0	%
Gross profit on services billings
Managed services and SaaS		6,626			5,614			1,012			18	%		11,277			10,877			400			4	%
Professional services		4,127			3,861			266			7	%		8,003			6,634			1,369			21	%
Total gross profit on services billings		10,753			9,475			1,278			13	%		19,280			17,511			1,769			10	%
Service gross margin on billings		41.8	%		38.8	%								39.4	%		37.7	%
Total gross profit on billings	$	33,029		$	28,946		$	4,083			14	%	$	63,164		$	54,372		$	8,792			16	%
Total gross margin on billings		46.0	%		41.9	%								44.9	%		41.1	%

Total cost of billings decreased during the three and six months ended June 30, 2016 as compared to the same periods in 2015 primarily due to a decrease in cost of product billings. Cost of product billings decreased due to cost savings from manufacturing efficiencies and improved product mix.    

Total gross profit on billings increased during the three and six months ended June 30, 2016 as compared to the same periods in 2015 due to an increase in both product and services gross profit on billings. Gross profit on product billings increased due to cost savings from manufacturing efficiencies, higher volume, and favorable product mix. Gross profit on services billings increased due to increase in services billings and lower third party costs.

For the three and six months ended June 30, 2016, gross margin on billings increased as compared to the same periods in 2015, primarily due to changes in product and customer mix, costs savings from manufacturing efficiencies, lower third party costs and higher billings generated from new services offerings.

We expect gross margin on billings to fluctuate from period to period throughout 2016.

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Operating Expenses

The following table sets forth our operating expenses for the periods shown:

	Three Months Ended June 30,										Six Months Ended June 30,
	2016		2015		2016 vs. 2015						2016		2015		2016 vs. 2015
	(unaudited, in thousands)				$ Change			% Change			(unaudited, in thousands)				$ Change			% Change
Research and development	$	17,933	$	16,050	$	1,883			12	%	$	33,418	$	31,744	$	1,674			5	%
Sales and marketing		8,622		8,912		(290	)		(3	)%		18,172		18,209		(37	)		(0	)%
General and administrative		11,239		10,455		784			7	%		22,085		22,584		(499	)		(2	)%
Restructuring		-		1,078		(1,078	)		(100	)%		39		1,272		(1,233	)		(97	)%
Operating expenses	$	37,794	$	36,495	$	1,299			4	%	$	73,714	$	73,809	$	(95	)		(0	)%

Operating expenses consist primarily of employee compensation, including salaries, commissions, bonuses, benefits, and stock-based compensation, which fluctuate from period to period. We intend to continue to manage our operating expenses in line with our existing cash and available financial resources and anticipate continued spending in future periods in order to execute our long-term business plan. Facilities and information technology costs are allocated to each department based on usage and headcount.

Research and Development. We focus the bulk of our research and development activities on the continued development of existing products and the development of new offerings for emerging market opportunities. The increase in research and development expenses for the three and six months ended June 30, 2016 as compared to the same periods in 2015 is primarily driven by a $1.2 million increase in engineering projects spending, and a $0.5 million increase in the third party engineering spending on Gen5 development costs.

We intend to continue to invest significantly in our research and development efforts, which we believe are essential to enhancing our competitive position and developing new products.

Sales and Marketing. We focus a significant proportion of our sales and marketing activities on new and emerging market opportunities. Sales and marketing expenses for the three and six months ended June 30, 2016, as compared to the same periods in 2015 remained relatively flat.

General and Administrative. The increase in general and administrative expenses for the three months ended June 30, 2016, as compared to the same period in 2015 is primarily driven by increase in employee compensation due to an increase in headcount, and  outside services. These increases were partially offset by a decrease in acquisition-related expenses.

The decrease in general and administrative expenses for the six months ended June 30, 2016 as compared to the six months ended June 30, 2015 is primarily driven by decreases of $0.9 million in outside legal expense, $1.1 million in acquisition-related costs in connection with the Detectent acquisition, and $1.2 million in external consulting and other administrative expenses. These decreases were offset by increases of $1.3 million in stock-based compensation, and $1.3 million in employee compensation and personnel-related expenses due to an increase in headcount.

Restructuring. The restructuring expense during the three months ended June 30, 2015 is related to severance costs and professional fees incurred in connection with our restructuring plan initiated in September 2014. We have completed our restructuring plan and incurred no restructuring costs during the three months ended June 30, 2016.

Other Income, Net

Other income, net, consists primarily of interest income on cash balances, foreign currency-related gains and losses, and interest expense on capital leases. We have historically invested our cash in money market accounts and fixed income securities.

Other income, net, increased for the three and six months ended June 30, 2016 compared to the three and six months ended June 30, 2015, due to foreign currency-related gain.

Provision (Benefit) for Income Taxes

For the three months ended June 30, 2016 and 2015, we recorded a provision for income taxes of $1.0 million and a benefit for income taxes of $0.3 million, respectively. Our provision for income taxes for the three months ended June 30, 2016 reflects an

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effective tax rate of 3.5%. Our provision for income taxes for the three months ended June 30, 2016 consisted primarily of state and foreign taxes.  The effective tax rate for the three months ended June 30, 2015, reflects our recognition of a discrete tax benefit of approximately $0.2 million due to a release of our valuation allowance attributable to the Detectent acquisition in the period. In connection with the acquisition of Detectent, we recorded deferred tax liabilities of $0.1 million, which were netted against our existing deferred tax assets. As a result, we released valuation allowance of $0.1 million in the second quarter of 2015.

For the six months ended June 30, 2016 and 2015, we recorded a provision for income taxes of $1.0 million and a benefit for income taxes of $0.8 million, respectively. Our provision for income taxes for the six months ended June 30, 2016 reflects an effective tax rate of 11.5%. Our benefit for income taxes for the six months ended June 30, 2015 reflects an effective tax rate of (4.3%).

We have not reported a provision for federal taxes in the consolidated financial statements as the federal taxable income has been offset by the deferred tax asset arising from net operating losses from prior years. State provision arose from states where there are insufficient net operating losses from prior years to offset state taxable income.

Our effective tax rate differs from the U.S. federal statutory rate primarily due to the valuation allowance on our deferred tax assets, differences between the U.S. federal tax rate and tax rates applicable to our non-U.S. operations, and non-deductible stock-based compensation.

Liquidity and Capital Resources

As of June 30, 2016, we had $68.0 million in cash and cash equivalents and $45.1 million in short-term investments. Our investment portfolio consisted of money market funds and fixed income securities. Our fixed income securities were denominated in U.S. dollars and consisted of highly liquid debt instruments of the U.S. government and its agencies, foreign government and agency securities, and U.S. and foreign corporate debt securities. We limit the amount of our domestic and international investments with any single issuer and any single financial institution, and also monitor the diversity of the portfolio, thereby diversifying the credit risk. Within our portfolio, we held $2.0 million of foreign government and agencies securities as of June 30, 2016. These sovereign debt securities had an average credit rating of AAA and were predominantly from Germany. None of the securities deemed sovereign debt was from Greece, Ireland, Italy, Portugal or Spain. We believe our existing balances of cash, cash equivalents and short-term investments will be sufficient to satisfy our working capital needs, capital asset purchases, outstanding commitments, and other liquidity requirements associated with our existing operations through the next 12 months.

We expect that operating expenses will constitute a material use of our cash balances. In the near term, we intend to continue to manage our operating expenses in line with our existing cash and available financial resources and anticipate increased spending in future periods in order to execute our long-term business plan. In addition, we may use cash to fund acquisitions or invest in other businesses, technologies or product lines. Our cash flows from operating activities have fluctuated since our inception, and we expect cash flows to fluctuate from period to period in 2016 and beyond. We believe that our available cash balances and credit facilities will be sufficient to meet our presently anticipated working capital, capital expenditure and business expansion requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our rate of customer wins and related billings and the expansion of our production capacity, as well as sales and marketing activities, timing and extent of spending on research and development efforts and the continuing market acceptance of our networking platform and solutions.

On December 18, 2015, we entered into a senior secured credit facilities credit agreement, or Credit Facility, with Silicon Valley Bank and HSBC Bank USA, National Association, or HSBC, which provides a revolving loan facility in an aggregate amount not to exceed $75.0 million with an available letter of credit sub-facility in the aggregate amount of $75.0 million and an available swingline sub-facility in the aggregate amount of $5.0 million. As of June 30, 2016, there were no borrowings outstanding under the credit facility; however, this line of credit is backing $27.8 million of letters of credit, leaving $47.2 million of available capacity for cash borrowings or additional letters of credit or swingline loan, subject to compliance with financial covenants and other customary conditions to borrowings, which varies at each period end. As of June 30, 2016, we were in compliance with the financial covenants in the credit agreement.  

Uses of Capital

We are occasionally required to provide performance bonds to secure our performance under customer contracts. Our ability to obtain such bonds primarily depends upon our capitalization, working capital, past performance, management expertise and reputation and external factors beyond our control, including the overall capacity of the surety market. Surety companies consider those factors in relation to the amount of our tangible net worth and other underwriting standards that may change from time to time. Surety companies may require that we collateralize a percentage of the bond with our cash. Events that affect surety markets generally may result in bonding becoming more difficult to obtain in the future, or being available only at a significantly greater cost. For example, in December 2014, we filed a surety bond in the amount of $17.6 million in connection with a notice of appeal that we filed with the

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U.S. Court of Appeals for the Federal Circuit in Washington, D.C. in our ongoing patent infringement litigation with EON.In June 2016, the appellate court notified the District Court that the prior judgment in favor of EON was vacated and that judgment was in our favor, and the District Court released our appellate bond obligation. See Part I, Item 1. Financial Statements,Note 12, Commitments and Contingencies, of Notes to Consolidated Financial Statements for more information. In addition, some of our customers also require collateral in the form of letters of credit to secure performance or to fund possible damages as the result of an event of default under our contracts with them. If we enter into significant long-term agreements that require the issuance of letters of credit, our liquidity could be negatively impacted. Our inability to obtain adequate bonding or letters of credit and, as a result, to bid or enter into significant long-term agreements could have a material adverse effect on our future revenues and business prospects.

Capital Expenditures

Our capital expenditures were $17.2 million and $2.0 million in the six months ended June 30, 2016 and 2015, respectively. These expenditures were primarily related to investment in our new headquarters in San Jose, and to support increased network operations, hosting data centers, and corporate infrastructure. In 2016, we expect to have increased capital expenditures as we continue to invest in our new headquarters in San Jose, California and other facilities. We will continue to use a portion of our cash for capital expenditures in the development of new products and services and expansion of our infrastructure, including servers and equipment related to managed services, SaaS, and other information systems required to support increased demand for our offerings and the related infrastructure.

Cash Flows

The following table sets forth the major sources and uses of cash for each of the periods set forth below:

	Six Months Ended June 30,
	2016			2015			2016 vs. 2015
	(unaudited, in thousands)						$ Change			% Change
Net cash provided by operating activities	$	7,532		$	9,158		$	(1,626	)		(18	)%
Net cash used in investing activities		(3,004	)		(5,483	)		2,479			(45	)%
Net cash used in financing activities	$	(1,677	)	$	(2,232	)	$	555			(25	)%

As disclosed in Note 1, Basis of Presentation, in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, 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 Form 10-Q for the quarter ended March 31, 2016. The error is corrected in the statement of cash flows for the six months ended June 30, 2016.

Cash Flows from Operating Activities

Cash provided by operating activities decreased during the six months ended June 30, 2016 as compared to the same period in 2015, primarily due to lower net income, offset by a better management of working capital.

Cash Flows from Investing Activities

Cash used in investing activities decreased during the six months ended June 30, 2016 as compared to the same period in 2015, primarily due to increase in net cash  provided by sales of investments which were used to fund our capital expenditures driven by our investment in our new San Jose headquarters. In addition, we spent $7.1 million in the acquisition of Detectent in 2015.

Cash Flows from Financing Activities

Cash used in financing activities decreased during the six months ended June 30, 2016 as compared to the same period in 2015, primarily due to a $0.5 million decrease from payments on capital leases.

Concentration of Credit Risk

We typically extend credit to our customers and third-party device manufacturers and do not require collateral or other security in support of accounts receivable. We attempt to mitigate the credit risk in our trade receivables through our credit evaluation process and payment terms. We analyze the need to reserve for potential credit losses and record allowances for doubtful accounts when

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necessary. As of June 30, 2016, ComEd and CPSaccounted for 39% and 11%, respectively, of our accounts receivable. As of June 30, 2015, ComEd, Landis+Gyr Inc., and CPS accounted for 31%, 11%, and 10%, respectively, of our accounts receivable.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) or other contractually narrow or limited purposes.

During the ordinary course of business, we provide standby letters of credit or other guarantee instruments to third-parties as required for certain transactions initiated either by us or our subsidiaries. As of June 30, 2016, our financial guarantees that were not recorded on our balance sheet consisted of $27.8 million of standby letters of credit.

Contractual Obligations and Commitments

The following is a summary of our contractual obligations as of June 30, 2016 (in thousands)

	Payments Due by Period
			Less than 1		1 to 3		3 to 5		More than 5
Contractual Obligations	Total		Year		Years		Years		Years
Operating lease obligations(1)	$	69,962	$	2,325	$	13,023	$	14,160	$	40,454
Purchase commitments(2)		12,480		12,480		—		—		—
Total	$	82,442	$	14,805	$	13,023	$	14,160	$	40,454

(1) Consists of contractual obligations and non-cancelable office space under operating leases.

(2) Consists of agreements or purchase orders to purchase goods or services that are enforceable and legally binding. Purchase obligations exclude agreements that are cancelable without penalty.

Our consolidated balance sheet consists of other long-term liabilities which include gross unrecognized tax benefits, and related gross interest and penalties. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities; therefore, such amounts are not included in the contractual obligation table above.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. On an ongoing basis, we evaluate our estimates and assumptions. These estimates and assumptions are based on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances to determine reported amounts of assets, liabilities, revenue and expenses that are not readily apparent from other sources.

An accounting policy is considered to be critical if the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the effect of the estimates and assumptions on financial condition or operating performance is material. The accounting policies we believe to reflect our more significant estimates, judgments and assumptions and are most critical to understanding and evaluating our reported financial results are as follows:  

· Revenue Recognition

· Product Warranty

· Deferred Cost of Revenue

· Inventory Valuation

· Stock-Based Compensation

· Loss Contingencies

During the six months ended June 30, 2016, there were no significant changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in Management's Discussion and Analysis of Financial

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Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2015.

Recent Accounting Pronouncements

See Note 2, Significant Accounting Policies and Estimates, in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, for a full description of recent accounting pronouncements, including the actual and expected dates of adoption and estimated effects on our consolidated results of operations and financial condition, which is incorporated herein by reference.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Interest Rate Risk

Fixed Income Securities

Our exposure to changes in interest rates relates primarily to interest earned and market value of our cash equivalents and short-term fixed income securities.

Our fixed income investment portfolio is denominated in U.S. dollars and consists of various holdings, types, and maturities. Our primary objective for holding fixed income securities is to achieve an appropriate investment return consistent with preserving principal and managing risk. At any time, a sharp rise in interest rates or credit spreads could have a material adverse impact on the fair value of our fixed income investment portfolio. A sensitivity analysis is performed on our investment portfolio each quarter.

The following table presents the hypothetical changes in the fair value of our short-term investment portfolio as of June 30, 2016, arising from potential changes in interest rates. The modeling technique estimates the change in fair value from immediate hypothetical parallel shifts in the yield curve of plus or minus 50 basis points, or BPS, and 100 BPS.

(in thousands)	-100 BPS		-50 BPS		Fair Value June 30, 2016		+50 BPS		+100 BPS
Total fixed income securities	$	55,346	$	55,283	$	55,085	$	54,886	$	54,687

We monitor our interest rate and credit risk, including our credit exposures to specific rating categories and to individual issuers. There were no impairment charges on our cash equivalents and fixed income securities during the quarter. These instruments are not leveraged and we do not enter into speculative securities for trading purposes.

Interest rate risk also reflects our exposure to movements in interest rates associated with our credit facility. The interest bearing credit facility is denominated in U.S. dollars. The revolving loans and any swingline loans made pursuant to our credit facility bear interest at a rate per annum equal to (i) the higher of (a) the prime rate in effect on such day, and (b) the federal funds effective rate plus 0.5%, but in any case at a minimum rate of 0.0% per annum, plus (ii) 0.75%. As of June 30, 2016, we had not drawn on this credit facility.

Foreign Currency Exchange Risk

Our sales contracts are denominated primarily in U.S. dollars and, to a lesser extent, Australian dollars, Euro and Brazilian real. Consequently, our customer billings denominated in foreign currencies are subject to foreign currency exchange risk. A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are also subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Australian dollar, Euro and Brazilian real. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations. To date, we have not entered into derivatives or hedging strategies as our exposure to foreign currency exchange risk has not been material to our historical operating results, but we may do so in the future if our exposure to foreign currency exchange risk should become more significant. There were no significant foreign exchange gains or losses in the three and six months ended June 30, 2016 and 2015, respectively.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures are designed to ensure that information

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required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, or SEC. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2016. Based on the evaluation of our disclosure controls and procedures as of June 30, 2016, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were not effective for the reasons described below.

As reported in Note 1, "Basis of Presentation" of this Form 10-Q, 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. In addition, after the release of earnings disclosing the results of three and six months ended June 30, 2016, another error was identified in the consolidated statements of cash flows for the six months ended June 30, 2016 in which cash provided by operating activities and cash used in investing activities were overstated by $0.3 million. Both of these errors have been corrected in the condensed consolidated statements of cash flows for the six months ended June 30, 2016, included in this Form 10-Q. These errors resulted from a material weakness in our internal control over financial reporting due to inadequate design and operation of review controls that are intended to ensure the accuracy of the calculations and related disclosures in our consolidated statement of cash flows prepared in accordance with GAAP. More specifically, our internal control over the review of underlying schedules supporting the preparation of our cash flow statement did not operate at the necessary level of precision to identify any errors. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Despite the existence of this material weakness discussed above, we believe the condensed consolidated financial statements included in this Form 10-Q present fairly, in all material respects, our financial position, results of operations, comprehensive income (loss) and cash flows for the periods presented in conformity with GAAP.

We are in the process of remediating the material weakness in our internal control over financial reporting, including implementing a number of measures designed to address the underlying causes of the material weakness.

Changes in Internal Control over Financial Reporting

Other than with respect to the remediation efforts described above, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the second quarter of 2016 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

EON Patent Litigation. In June 2011, EON Corp. IP Holdings, LLC, a non-producing entity, or EON, filed suit in United States District Court for the Eastern District of Texas, Tyler Division against us and a number of smart grid providers. The lawsuit alleges infringement of United States Patent Nos. 5,388,101, 5,481,546, and 5,592,491, or the EON Patents, by certain networking technology and services that we and the other defendants provide. Other defendants included Landis+Gyr AG, Aclara Power-Line Systems Inc., Elster Solutions, LLC, Itron, Inc. and Trilliant Networks Inc., all of which settled with EON prior to trial. We filed answers, affirmative defenses and counterclaims denying the plaintiff’s allegations and asserting that the plaintiff’s patents are invalid.  A trial was held in June 2014. After the trial, the jury determined that we had infringed certain, but not all, of the claims under the EON Patents, and returned a verdict against us in the amount of $18.8 million. Following post-trial motions by both parties, the court reduced the damage award to approximately $13.0 million, and in December 2014, entered a final judgment in that amount plus approximately $1.5 million in pre-judgment interest. The court subsequently revised the final judgment to include additional costs of

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about $0.2 million and entered an amended final judgment in December 2014. All of the EON Patents have expired and therefore EON is not seeking, and EON may not recover, any additional sums as royalties for our sales of products going forward.

In December 2014, we filed a notice of appeal with the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. In order to stay the execution of the final judgment pending the appeal, in December 2014 we filed a surety bond in the amount of $17.6 million, which includes an additional 20% of the final judgment for post-judgment interest and expenses expected to be incurred during the appeal process, in accordance with court rules. The bond was issued by Zurich Insurance and is collateralized with a standby letter of credit in the amount of $13.0 million, the amount of the damage award.  Upon completion of the appeal process, both the surety bond and standby letter of credit will be released. In January 2015, the District Court accepted the bond and entered the stay of execution of the judgment. The appellate hearing took place in November 2015, and in February 2016 the appellate court issued a ruling reversing the District Court’s prior decision and judgment against us, and holding that no reasonable jury could find we infringed the EON patents.  In April 2016, EON filed a petition for a rehearing en banc, which the appellate court denied in May 2016.  In June 2016, the appellate court notified the District Court that the prior judgment in favor of EON was vacated and that judgment was in our favor, and the District Court released our appellate bond obligation.  We filed a renewed motion to recover certain costs of the trial and appeal from EON in June 2016, and in July 2016 the District Court awarded us $0.6 million. We intend to continue vigorously pursuing this motion and collection of the award, and defending the action as necessary.

Linex Patent Litigation.  In March 2013, Linex Technologies, Inc., a non-producing entity, or Linex, filed suit against us in United States District Court for the Southern District of Florida. Linex alleged that certain of our networking technology infringes United States Patent Nos. 6,493,377 and 7,167,503. We filed an answer in May 2013. In January 2014, the court granted the plaintiff’s request for a stay of the matter, pending reexamination of the patents at issue by the USPTO. In September 2014, Linex amended certain patent claims and canceled certain other patent claims based upon the USPTO’s completed reexaminations, and in October 2014, the court lifted the stay of the matter.  In January 2015, Linex filed an amended complaint to incorporate facts related to the completed reexaminations, and we filed an answer responding to the complaint and raising additional defenses.  In June 2015, the court stayed the action pending the USPTO’s completion of further ex parte reexaminations of the patents at issue.  We believe that we have meritorious defenses to Linex’s allegations and intend to continue vigorously defending against the action.

Atlas/ComEd, Atlas/PG&E, and Atlas/FP&L Patent Litigation. In November 2015, Atlas IP, LLC filed separate suits against our customers Commonwealth Edison Company, or ComEd, and Pacific Gas and Electric Co., or PG&E, alleging infringement of United States Patent No. 5,371,734 by communications between smart meters and access points over a neighborhood area network using wireless communication modules and networking equipment supplied by us. In May 2016, Atlas filed a similar suit against our customer Florida Power & Light Company, or FP&L. We have agreed to assume the defense in each of these suits.

ComEd.  The suit against ComEd was filed in the Northern District of Illinois in November 2015, and also named Exelon Corp., or Exelon, as a defendant. In January 2016, we filed a motion to dismiss the ComEd complaint and to remove Exelon as a defendant. In February 2016, the court granted our motion to dismiss the complaint, and dismissed Exelon from the case with prejudice. In March 2016, Atlas IP filed an amended complaint against ComEd, which the court dismissed in May 2016, finding the complaint to be legally insufficient. The court awarded us reasonable attorneys’ fees and costs in July 2016. Atlas IP filed a notice of appeal in June 2016, seeking to appeal the dismissal to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C.

PG&E.  The suit against PG&E was filed in the Northern District of California in November 2015. We filed a motion to dismiss the PG&E complaint in January 2016, which the court granted in March 2016.  Atlas IP filed an amended complaint against PG&E, which the court dismissed in June 2016, determining that Atlas IP is collaterally estopped from re-litigating the sufficiency of its complaint as the sufficiency of Atlas IP’s complaint was already decided against Atlas IP by the court in the ComEd suit.

FP&L.  The suit against FP&L was filed in the Southern District of Florida in May 2016.  In June 2016, the court stayed the action until the conclusion of Atlas IP’s appeal in the ComEd case, pursuant to an agreement between the parties that if the appellate court affirms the dismissal of the ComEd case, it will be dispositive of the FP&L action.

We believe that we have meritorious defenses to Atlas IP’s allegations in each of these matters, and intend to continue vigorously defending against the actions.

Acoustic Technology Patent Litigation.  On July 29, 2016, Acoustic Technology, Inc., a non-producing entity, filed suit in United States District Court for the Eastern District of Texas, Marshall Division against us. The lawsuit alleges infringement of United States Patent Nos. 5,986,574, and 6,509,841 by certain meters and networking technology and services that we provide. The patents will expire in late 2017 and early 2018. We have not yet received service of process in this matter. We believe that we have meritorious defenses to Acoustic’s allegations and intend to vigorously defend ourselves.

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In addition to the matters described above, from time to time we may be subject to other legal proceedings and claims in the ordinary course of business. We have received, and may in the future continue to receive, claims from third parties asserting infringement of their intellectual property rights. We may, from time to time, also be subject to various legal or government claims, disputes, or investigations. Such matters may include, but not be limited to, claims, disputes, or investigations related to warranty, refund, breach of contract, employment, intellectual property, government regulation, compliance or other matters. Future litigation may be necessary to defend ourselves and our customers by determining the scope, enforceability and validity of third-party rights or to establish our rights. There can be no assurance with respect to the outcome of any current or future litigation brought against us or pursuant to which we have indemnification obligations and the outcome could have a material adverse impact on our business, operating results and financial condition.

Item 1A. Risk Factors

Our business is subject to many risks and uncertainties, which may affect our future performance. If any of the events or circumstances described below occurs, our business and financial performance could be harmed, our actual results could differ materially from our expectations and the market value of our stock could decline. The risks and uncertainties discussed below are not the only ones we face. There may be additional risks and uncertainties not currently known to us or that we currently do not believe are material that may harm our business and financial performance.

We have a prior history of operating losses and we may not sustain profitability on a quarterly or annual basis.

Prior to our year ended December 31, 2015, we incurred significant losses in each annual year to date.  We have an accumulated deficit of $618.8 million as of June 30, 2016. We experienced net loss of ($89.2) million and ($66.8) million for the years ended December 31, 2014 and 2013, respectively, and we achieved profitability for the first time with net income of $80.0 million for the year ended December 31, 2015. Our ability to be profitable for 2016 and beyond will depend on our ability to continue to increase our revenues, and maintain proportional expense levels. We may not achieve profitability again in 2016 or future periods and may incur negative operating cash flow in future periods, as we expect to incur significant costs to sell our products and operating expenses in connection with the continued development and expansion of our business. Our expenses include research and development expenses, general and administrative expenses, selling and marketing expenses and customer service and support expenses. Some of these expenses relate to prospective customers that may never place any orders and products that may not be introduced or generate revenue until later periods, if at all. There can be no assurance that we will be able to sustain profitability on a quarterly or annual basis.

Our quarterly results are inherently unpredictable and subject to substantial fluctuations, and, as a result, we may fail to meet the expectations of securities analysts and investors, which could adversely affect the trading price of our common stock.

Our revenue, billings and other operating results may vary significantly from quarter to quarter due to a number of factors, many of which are outside of our control. Our revenue and billings have fluctuated in recent periods, and have in the past decreased on a quarterly basis and on an annual basis. There can be no assurances that our revenue and billings will increase, or will not continue to decrease on a quarterly or annual basis. We expect revenue, billings, gross margin on billings and adjusted EBITDA to fluctuate from period to period throughout 2016 and beyond. We also expect operating losses in certain future periods. See Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The factors that may affect the unpredictability of our quarterly results and cause our stock price to fluctuate include, but are not limited to:

· long, and sometimes unpredictable, sales and customer deployment cycles;

· changes in the mix of products and services sold;

· our dependence on a limited number of customers;

· the timing of acceptance of our products and services by our customers, which can have a material impact on when we recognize related revenue under our revenue recognition policies;

· delays in regulatory approvals for our customers and customer deployments;

· changing market conditions;

· competition;

· failures of our products, components that we use in our products, or third-party devices containing our products that delay deployments, cause bodily injury, death or property damage, harm our reputation or result in high warranty costs, contractual penalties or terminations;

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· product or project failures by third-party vendors, customers or competitors that result in the cancellation, slowing down or deferring of projects; 

· liquidated damages provisions in our contracts, which could result in significant financial penalties if triggered or, even if not triggered, could affect our ability to recognize revenue in a given period;

· the ability of our suppliers and manufacturers to deliver supplies and products to us on a timely basis;

· delays associated with government funding programs for smart grid projects;

· political and consumer sentiment and the related impact on the scope and timing of smart grid and smart city deployments; and

· economic, regulatory and political conditions in the markets where we operate or anticipate operating.

As a result, we believe that quarter to quarter comparisons of operating results are not necessarily a good indication of what our future performance will be. In some future quarters our operating results may be below our expectations or the expectations of securities analysts or investors, in which case the price of our common stock may decline.

Sales cycles to our customers can be lengthy and unpredictable and require significant employee time and financial resources with no assurances that a prospective customer will select our products and services.

Sales cycles with our prospective customers, particularly to utilities, which are our primary set of prospective customers, tend to be long and unpredictable. Utilities generally have extensive budgeting, procurement, competitive bidding, technical and performance review, and regulatory approval processes that can take up to several years to complete. Utilities may choose, and many historically have often chosen, to follow industry trends rather than be early adopters of new products or services, which can extend the lead time for or prevent acceptance of more recently introduced products or services such as ours. In addition, in many instances, a utility may require one or more pilot programs to test new products and services before committing to a larger deployment. These pilot programs may be quite lengthy and further delay the sales cycle with no assurance that they will lead to a larger deployment or future sales. Furthermore, to the extent our products are required to be deployed with the products of others, such as meters, delays related to such third-party products will further lengthen the sales cycle.

This extended sales process requires us to dedicate significant time by our senior management, sales and marketing personnel and customer services personnel, and to use significant financial resources without any assurance of success or recovery of our related expenses. Similarly, we are likely to incur these significant operating expenses well ahead of recognizing the related revenue because our ability to recognize revenue is typically dependent on meeting contractual customer acceptance and other requirements.

The lengthy sales cycles of our products and services also make it difficult to forecast new customer deployments, as well as the volume and timing of orders, which in turn makes forecasting our future results of operations challenging. In the event that we publicly disclose any forecasts of our future results of operations or other performance metrics and those forecasts ultimately turn out to be inaccurate, the value of our common stock could significantly decline.

Our revenue is not predictable and recognition of a significant portion of it will be deferred into future periods.

Once a customer decides to move forward with a large-scale deployment of our products and services, the timing of and our ability to recognize related revenue will depend on several factors, some of which may not be under our control. These factors include shipment schedules that may be delayed or subject to modification, the rate at which our customers choose to deploy our solutions, customer acceptance of all or any part of our products and services, our contractual commitments to provide new or enhanced functionality at some point in the future, other contractual provisions such as liquidated damages, our manufacturers’ ability to provide an adequate supply of components, our customers’ requirement to obtain regulatory approval, and our ability to deliver quality products according to expected schedules. In light of these factors, the application of complex revenue recognition rules to our products and services has required us to defer, and in the future could continue to require us to defer, a significant amount of revenue until undetermined future periods. As of June 30, 2016 and December 31, 2015, we had $371.9 million and $401.8 million in deferred revenue, respectively. It may be difficult to predict the amount of revenue that we will recognize in any given period, and amounts recognized may fluctuate significantly from one period to the next.

Amounts included in our total backlog and order backlog may not result in actual billings or revenue or translate into profits.

Our total backlog represents future product and services revenue and billings that we expect to generate pursuant to contracts that we have entered into with our customers and third-party device manufacturers. Order backlog represents future revenue and

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billings for open purchase orders and other firm commitments and is included in our total backlog. We anticipate that our total backlog and order backlog will fluctuate from period to period throughout 2016 and beyond.

We cannot guarantee that our total backlog or order backlog will result in actual billings or revenue in the originally anticipated period, or at all. In addition, the contracts reflected in our total backlog and order backlog may not generate margins equal to or better than our historical operating results. We have a short history of tracking total backlog and order backlog on a consistent basis as performance measures, and as a result, we do not have significant experience in determining the level of realization that we will actually achieve on our total backlog and order backlog. Our customer contracts are typically structured as master purchase and services agreements, or MSAs, under which the customer may place purchase orders over the course of a deployment. These deployments can extend for a number of years. Because our MSAs do not typically require a customer to purchase a minimum amount of product or services, total backlog is an estimate based upon contractual terms, existing purchase orders and other available information regarding the amount and timing of expected future purchase orders to be placed by our customers, including non-binding forecasts. No assurance can be made that firm purchase orders will be placed under these MSAs in the amounts we estimate, within the time period we expect, or at all. Total backlog is subject to adjustments due to the long-term nature of our customer deployments. Adjustments can result from a variety of factors, including changes in the nature or scope of customer deployments, the impact of contingency provisions related to future delivery or performance, customer cancellations, market conditions, delayed regulatory approvals and customer defaults. Delays due to external market factors or delays in deployments and required regulatory approvals have in the past and may in the future cause us to extend the deployment schedule or make modifications under customer contracts. In addition, under our MSAs, our customers generally have the right to terminate the MSA for any reason, including for their sole convenience, a material breach or insolvency on our part or their inability to obtain required regulatory approval. The occurrence of such adjustments or terminations could materially reduce the amount of, or delay the fulfillment of, our total backlog and order backlog. If our total backlog or order backlog fails to materialize as expected, we could experience a material reduction in future billings, revenue, operating results or cash flow.

We are dependent on the utility industry, which has experienced volatility in capital spending. This volatility could cause our results of operations to vary significantly from period to period.

We derive a substantial portion of our revenue and billings from sales of products and services directly and indirectly to utilities. Similar to other industries, the utility industry has been affected by recent economic factors, including continued global economic uncertainty. Purchases of our products and services may be reduced or deferred as a result of many factors including economic downturns and uncertainty, slowdowns in new residential and commercial construction, a utility’s access to capital on acceptable terms, the timing and availability of government grants or incentives, utility specific financial circumstances, mergers and acquisitions, regulatory decisions, weather conditions, consumer opposition and fluctuating interest rates. Even with economic recovery, it may take time for our customers to establish new budgets and return to normal purchasing patterns. We cannot predict the recurrence of any economic slowdown or the strength or sustainability of the economic recovery, worldwide, in the United States or in our industry. We have experienced, and may in the future experience, variability in operating results on an annual and a quarterly basis as a result of these factors. Because a significant portion of our expenses is fixed in the short term or is incurred in advance of anticipated sales, we may not be able to decrease our expenses in a timely manner to offset any shortfall of sales. This could materially and adversely affect our operating results, financial condition and cash flows.

Substantially all of our current products depend on the availability and are subject to the regulation of radio spectrum in the United States and abroad.

Substantially all of our current products are designed to communicate wirelessly via radio frequencies and therefore depend on the availability of adequate radio spectrum in order to operate. While these products are designed to operate in a variety of different frequencies to allow us to adapt our solutions to local market conditions, or by using other technologies such as cellular, in the United States they are primarily designed to form a wireless RF mesh using the unlicensed 902-928 megahertz, or MHz, band. The 902-928 MHz band is available for a wide variety of uses and requires us to manage interference by other users who operate in accordance with the Federal Communications Commission, or FCC, rules. The unlicensed frequencies are also often the subject of proposals to the FCC requesting a change in the rules under which such frequencies may be used. In the past, the FCC has re-allocated spectrum for new or additional uses, and has adopted changes to the requirements for equipment using radio spectrum. It is possible that the FCC or the U.S. Congress could adopt additional changes, which may be incompatible with our current or future product offerings, as well as products currently installed in the field, or require them to be modified at significant, or even prohibitive, cost. If the unlicensed frequencies become unacceptably crowded, restrictive or subject to changed laws, regulations or rules governing their use, our business, financial condition and results of operations could be materially and adversely affected.

Our international growth and future success also depend on the availability of radio spectrum that is compatible with our products, and on our ability to develop products that use alternative communications technology as we continue to integrate our products with products from additional device partners. Certain international markets, such as Europe, use and may continue to use

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different spectrum bands than the United States, which has in the past and may continue to require us to make modifications to our products in order to operate within the designated spectrum. Additionally, we have in the past and may in the future seek rights and seek to certify our products for using a variety of spectrum in various international markets, however we may not be granted such rights or certifications in all countries. In many other countries, there may not be spectrum available or we may be required to obtain a license to operate in a frequency band that is not immediately compatible with our products. Licenses to appropriate spectrum in these countries may be unavailable or only available at unreasonably high prices. Similarly, in the event that we were only able to obtain a license in a different frequency band, the cost of modifying or redesigning our products to make them compatible with available spectrum could be significant or even cost-prohibitive. Alternatively, if we are not able to obtain available spectrum on financially advantageous terms, we may not be able to compete without investing in alternative communication technology. Moreover, interference caused by others who do not comply with regulatory or statutory requirements could further limit the availability of spectrum that is compatible with our products. If limitations on the availability of spectrum or the cost of making necessary modifications or investments in new technology preclude us from selling our products in markets outside of the United States, our growth, prospects, financial condition and results of operations could be materially and adversely affected.

A limited number of our customers are responsible for a significant portion of our revenue, billings and cash flow. A decrease in sales to these customers or delays in customer deployments could have a material adverse effect on our operating results and financial condition.

A substantial majority of our revenue, billings and cash flow depends on relatively large sales to a limited number of customers.

The combination of lengthy sales cycles, challenges in securing new customers and relatively large sales to a small number of customers increases the risk of quarterly fluctuations in our billings, revenue and operating results. See Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information regarding customer concentration. Our MSAs do not impose purchase obligations on our customers until we have received a purchase order or agreed to a statement of work. Further, the MSAs are typically subject to termination for any reason, including for convenience following a specified notice period. We expect that a limited number of customers will continue to account for a substantial portion of our revenue and billings in future periods. Changes in the business requirements, vendor selection, or purchasing behavior of our customers could significantly decrease our sales. In addition, our MSAs are complex, often requiring close coordination with our customers over extended preparation and deployment periods and involving large-scale delivery of our products and services. From time to time we have experienced and may in the future experience challenges in satisfying our customers throughout these preparation and deployment periods regarding all aspects of our performance. Additionally, we have in the past received correspondence from customers claiming that there have been deficiencies in our timeliness and coordination regarding hardware, software and services for deployment, and requesting that we remedy the deficiencies noted. If we are unable to address customers’ concerns, we could be required to pay penalties, liquidated damages or other expenses, the customer could terminate our MSA and our reputation could be damaged. Additionally, delays in customer deployments have in the past, and could in the future, affect our results of operations. Any of these factors could materially and adversely affect our business, financial condition, and results of operations.

Our marketing efforts depend significantly on our ability to receive positive references from our existing customers.

Our marketing efforts depend significantly on our ability to call on our current customers to provide positive references to new, potential customers. Given our limited number of customers, the loss or dissatisfaction of any customer could substantially harm our brand and reputation, inhibit the market acceptance of our products and services, and impair our ability to attract new customers and maintain existing customers. Any of these consequences could have a material adverse effect on our business, financial condition and results of operations.

The markets for our products and services, smart grid, smart city, and broader IoT technology in general, are still developing. If the markets develop less extensively or more slowly than we expect, our business could be harmed.

The markets for our products and services, smart grid, smart city and broader IoT technology in general, are still developing, and it is uncertain whether our products and services will achieve and sustain high levels of demand and market acceptance. Our near-term and long-term success will depend to a substantial extent on the willingness and ability of utilities to implement smart grid technology. Many utilities lack the financial resources and/or technical expertise required to evaluate, deploy and operate smart grid technology. Utilities’ activities are governed by regulatory agencies, including public utility commissions, which may not create a regulatory environment that is conducive to the implementation of smart grid technologies in a particular jurisdiction. Furthermore, some utilities may be reluctant or unwilling to adopt smart grid technology because they do not perceive the benefits or are unable to develop a business case to justify the up-front and ongoing expenditures. If utilities do not implement smart grid technology or do so in fewer numbers or more slowly than we expect, our business and operating results would be adversely affected. For example, in the past, the rate of smart grid adoption slowed due to uncertainty surrounding the timing and tax treatment of U.S. government stimulus funding, negative publicity and consumer opposition, and regulatory investigations. These uncertainties caused many potential

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customers that had been considering smart grid programs in the United States to further evaluate their smart grid initiatives and delay their procurement processes or extend their deployment schedules. Smart grid adoption in international markets has trailed adoption in the United States as international markets continue to explore the technology and define the benefits and regulatory requirements for the smart grid.

Our success in the smart grid market also depends on our ability to expand beyond advanced metering sales and sell additional products and services, such as distribution automation, demand-side management, and our data analytics platform. There can be no assurance that these products and services will be accepted by utilities or consumers. Similarly, our future success depends on our ability to expand our business beyond the smart grid into smart city infrastructure, such as with our street light solution, and into the broader IoT markets, such as with our Starfish network service. There can be no assurance that these or other smart city and broader IoT products and services will be accepted by cities or other potential customers. Other competing products and services for the smart grid, smart city and broader IoT markets may emerge and may be more successful.

Adverse publicity about, or consumer or political opposition to, the smart grid could inhibit the growth of the overall market.

The safety and security of the power grid, the accuracy and protection of the data collected by meters and transmitted via the smart grid, concerns about the safety of smart meters following recent meter-related fires, and concerns about the safety and perceived health risks of using radio frequency communications have been the focus of adverse publicity. For example, in Northern California, PG&E’s full-scale deployment of our networking platform and advanced metering solution was subject to scrutiny following allegations of inaccurate bills generated by newly-installed “smart meters” and safety concerns about the levels of radio frequency electromagnetic fields emitted by the wireless communications technology used by the meters. As a result, the California State Senate created a special committee and the California Public Utilities Commission, or CPUC, and hired an independent investigator to review the installation and use of advanced metering products. Negative publicity and consumer opposition in California, Maine and elsewhere have caused other utilities or their regulators to respond by delaying or modifying planned smart grid initiatives, mandating that utilities allow their customers to opt out of smart metering programs, or calling for investigations and/or implementation of unfavorable regulations and legislation. Similarly, outside the United States, public concern over smart grid projects in places such as Victoria, Australia has resulted in increased government scrutiny. Additionally, testing commissioned by the CPUC and other organizations could, in the future, contain negative information regarding the accuracy and safety of smart grid solutions. Finally, smart grid projects by other companies may be, or could be viewed by the public as, unsuccessful. Any of the foregoing factors could directly impact our current or future deployments, as well as inhibit the growth of the overall smart grid market, either of which could cause our business to suffer.

Security breaches involving our products or services, publicized breaches in smart grid or smart city products and services offered by others, or the public perception of security risks or vulnerability created by the deployment of the smart grid or smart city in general, whether or not valid, could harm our business.

The security technologies we have integrated into our networking platform and solutions that are designed to detect unauthorized activity and prevent or minimize security breaches may not function as expected and there can be no assurance that our products and services, those of other companies with whose products our products and services are integrated or interact, or even the products of other smart grid and smart city solutions providers, will not be subject to significant real or perceived security breaches.

Our networking and analytics platforms allows utilities to collect, monitor, store, compile and analyze sensitive information related to consumers’ energy usage, as well as the performance of different parts of the power grid. As part of our data transfer and managed services and SaaS services, we may store and/or come into contact with sensitive consumer information and data when we perform operational, installation or maintenance functions for our customers. If, in handling this information, we, our partners or our customers fail to comply with privacy or security laws, we could face significant legal and financial exposure to claims of government agencies, customers and consumers whose privacy is compromised. Even the perception that we, our partners or our customers have improperly handled sensitive, confidential information could have a negative effect on our business. In addition, third parties may attempt to breach our security measures or inappropriately use or access our network services or the network hardware and software we have in the field through computer viruses, physical or electronic break-ins, and other means. If a breach is successful, sensitive information may be improperly obtained, manipulated or corrupted, and we may face legal and financial exposure. A breach could also lead to a loss of confidence in our products and services and our business could suffer.

Our current and anticipated future products and services allow authorized personnel to remotely control equipment at residential and commercial locations, at various points on the power grid, and at various points in a city’s critical infrastructure. For example, our software allows a utility to remotely connect and disconnect electricity at specific customer locations. If an unauthorized third-party were to breach our security measures and disrupt, gain access to or take control of any of our products or services, our business and reputation could be severely harmed.

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Our products and services may also be integrated or interface with products and services sold by third parties, and rely on the security of those products and their secure transmission of proprietary data over the internet and cellular networks. Because we do not have control over the security measures implemented by third-parties in their products or in the transmission of data over the internet and cellular networks, we cannot ensure the complete integrity or security of such third-party products and transmissions.

Concerns about security, customer or consumer privacy may result in the adoption of state or federal legislation that restricts the implementation of smart grid and smart city technology or requires us to make modifications to our products, which could significantly limit the deployment of our technologies or result in significant expense to modify our products.

Any real or perceived security breach could seriously harm our reputation and result in significant legal and financial exposure, including increased remediation costs and security protection costs, inhibit market acceptance of our products and services, halt or delay the deployment by customers of our products and services, cause us to lose customers, harm our reputation, trigger unfavorable legislation and regulatory action, and inhibit the growth of the overall market for the smart grid and smart cities. Any of these risks could have a material adverse effect on our business, financial condition and results of operations.

If our products contain defects or otherwise fail to perform as expected, we could be liable for damages and incur unanticipated warranty, recall and other related expenses, our reputation could be damaged, we could lose market share and, as a result, our financial condition or results of operations could suffer.

Our products are complex and may contain defects or experience failures due to any number of issues in design, materials, deployment and/or use. If any of our products contain a defect, compatibility or interoperability issue or other error, we may have to devote significant time and resources to find and correct the issue. Such efforts could divert the attention of our management team and other relevant personnel from other important tasks. A product defect, product recall or a significant number of product returns could be expensive, damage our reputation and relationships with our customers and third-party vendors, result in property damage or physical injury, result in the loss of business to competitors, and result in litigation against us. Costs associated with field replacement labor, hardware replacement, re-integration with third-party products, handling charges, correcting defects, errors and bugs, or other issues could be significant and could materially harm our financial results. We have in the past experienced product defects due to faulty components supplied by third-parties, and recorded significant costs associated with warranty claims, write-offs of returned products and customer repair programs implemented as a result.

Estimated future product warranty claims are based on the expected number of field failures over the warranty commitment period, the term of the product warranty period, and the costs for repair, replacement and other associated costs. Our warranty obligations are affected by product failure rates, claims levels, material usage and product re-integration and handling costs. Because our products are relatively new and we do not yet have the benefit of long-term experience observing the products’ performance in the field, our estimates of a product’s lifespan and incidence of claims may be inaccurate. Should actual product failure rates, claims levels, material usage, product re-integration and handling costs, defects, errors, bugs or other issues differ from the original estimates, we could end up incurring materially higher warranty or recall expenses than we anticipate.

Our customer contracts typically contain provisions that could cause us to incur penalties, be liable for damages, and/or incur unanticipated expenses with respect to the functionality, deployment, operation and availability of our products and services, and that provide the customer with the right to terminate the contract for any reason.

In addition to the risk of unanticipated warranty or recall expenses, our customer contracts typically contain provisions that could cause us to incur penalties, be liable for damages, including liquidated damages, or incur other expenses, if we experience difficulties with respect to the functionality, deployment, operation and availability of our products and services. In the event of late deliveries, late or improper installations or operations, failure to meet product or performance specifications or other product defects, interruptions or delays in our managed services offerings, our customer contracts may expose us to penalties, significant damages and other liabilities. For example, we have in the past agreed to reimburse customers for their costs and incurred liquidated damages by failing to timely meet contractual milestones or other contractual requirements. In addition, our customer contracts are typically subject to termination for any reason, including for convenience following a specified notice period, our material breach or insolvency, or the failure to obtain required regulatory approval. If a customer terminates its customer contract for any reason, our estimates of total backlog and order backlog will be reduced. Reductions in total backlog and order backlog may have a negative effect on future revenue, billings, profitability and liquidity. In the event we were to incur contractual penalties, such as liquidated damages or other related costs that exceed our expectations, or our customers terminate their contracts with us, our business, financial condition and operating results could be materially and adversely affected.

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Our success depends in part on our ability to integrate our technology into devices and our relationship with device manufacturers.

Our business depends on our ability to integrate our communications modules into devices manufactured by third-party vendors. For example, for our advanced metering solution, our communications modules are integrated into electricity meters that are manufactured by third parties such as Aclara Technologies LLC (which acquired GE Energy Management’s Grid Solutions electricity meter business from General Electric Company), Toshiba Corporation (which acquired Landis+Gyr AG), and Secure Meters Limited, among others. A similar structure is used in our street light solution, where fulfillment of our communications modules is often completed by our partners who manufacture lighting fixtures or control modules. In a typical deployment, our customer purchases integrated devices from one or more third-party device manufacturers after integration of our communications modules into the device. Accordingly, even if demand for our products is strong, we have in the past and may in the future be constrained by the production capacity and priorities of the device manufacturers. In addition, several of these device manufacturers offer competing products, partner with other providers or may otherwise choose not to integrate our communications modules with their devices. If for technical or any other reason we were to lose the ability to integrate our communications modules with devices manufactured by third parties, or if our relationships with device manufacturers were to be terminated or renegotiated on unfavorable terms, our business, financial condition, and operating results could suffer. Further, there have been instances where devices with which our technology had been integrated experienced defects or had other problems that were unrelated to our technology. If this occurs in the future and the defects or problems are more significant or occur more frequently, our reputation could suffer and our business could be harmed.

From time to time, we have worked and expect to continue to work with third parties to pursue smart grid, smart city and broader IoT market opportunities. If we are unable to establish and maintain these relationships, or if our initiatives with these third parties are unsuccessful, our business may suffer.

For some of our existing and anticipated future products and services, we expect to maintain and may seek to establish relationships with third parties in order to take advantage of smart grid, smart city and broader IoT market opportunities. For example, we have designed our products to interface with in-home devices and data analytics products, and will need to work with third parties to successfully deploy these products. Before a customer is willing to move forward with a deployment of our products, they may require that we partner with third-party vendors and/or obtain a certification from these vendors that our products will function as intended when integrated with their products. In addition, third-party vendors may offer competing products, partner with other networking providers or otherwise choose not to partner with us. In the event that we are unable to establish or maintain new relationships on favorable terms, or at all, our ability to successfully sell our existing and anticipated future products and services could be jeopardized.

We may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future.

Strategic business relationships may be an important factor in the growth and success of our business. However, there are no assurances that we will be able to identify or secure suitable business relationship opportunities in the future and our competitors may capitalize on such opportunities before we do. Moreover, identifying such opportunities could demand substantial management time and resources and involves significant costs and uncertainties. If we are unable to successfully source and execute on strategic relationship opportunities in the future, our business and results of operations could be significantly harmed.

As we continue to expand our business and evolve our technology, we may face unexpected challenges in the adoption, deployment and operation of our technology.

The smart grid, smart city, and broader IoT markets are still expanding and involve rapidly changing technology, which requires us to continue to expand our business and evolve our technology. The current generation of our networking platform and solutions has only been developed in the last several years. We announced our next generation networking platform and solutions, Gen5, in January 2015, and announced Starfish, a wireless network service for the IoT, in December 2015. We expect each of these technologies to continue to evolve over time. We may face unexpected problems or challenges in connection with the introduction and deployment of our new Gen5 platform and solutions and Starfish, including in the adoption and acceptance by our existing and potential customers, for a variety of reasons such as:

· real or perceived inability to operate effectively with the technologies, systems or applications of our existing or potential customers;

· defects, errors or failures in our products and solutions;

· negative publicity about its performance or effectiveness;

· delays in releasing Gen5, Starfish, or other new technologies to the market; and

· the introduction or anticipated introduction of competing products or technologies by our competitors.

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If the Gen5, Starfish, or other new technologies do not achieve adequate acceptance and adoption in the market, we may not realize our investments in their research and development, our competitive position will be impaired, and our results of operations could be adversely affected.

In addition, deploying and operating our technology is a complex endeavor. As the size, complexity and scope of our deployments have expanded, we have been able to test product performance at a greater scale and in a variety of new geographic settings and environmental conditions. These larger deployments have presented a number of unforeseen operational and technical challenges, which in some cases have caused delays and required us to commit significant resources to address these challenges. As the number, size and complexity of our deployments grow, we may continue to encounter unforeseen operational, technical and other challenges, some of which could cause significant delays, trigger contractual penalties, result in unanticipated expenses, and/or damage to our reputation, each of which could materially and adversely affect our business, financial condition and results of operations.

If we fail to respond to evolving technological changes, our products and services could become obsolete or less competitive.

Our industry is highly competitive and characterized by new and rapidly evolving technologies, standards, regulations, customer requirements, and frequent product introductions. Accordingly, our operating results depend upon, among other things, our ability to develop and introduce new products and services, as well as our ability to reduce production costs of our existing products. The process of developing new technologies and products is complex, and if we are unable to develop enhancements to, and new features for, our existing products or acceptable new products that keep pace with technological developments or industry standards, our products may become obsolete, less marketable and less competitive and our business could be significantly harmed.

We depend on our ability to develop new products and to enhance and sustain the quality of existing products.

Most of our current billings and revenue are derived from our networking platform and advanced metering solution, but our growth and future success will depend, in part, on our ability to continue to design and manufacture new competitive products that achieve market acceptance and to enhance and sustain the quality and marketability of our existing products. As such, we have made, and expect to continue to make, substantial investments in technology development. Any new technology or product that we develop may not be introduced in a timely or cost-effective manner, may not be priced appropriately, and may not achieve the broad market acceptance necessary to generate significant revenues. For example, in January 2015 we announced Gen5, our next generation networking platform and solutions, which should become commercially available in 2016, and in December 2015 we announced Starfish, a wireless network service for the IoT. In previous years, we introduced our street light and SilverLink Data Platform solutions. These new products and solutions may not be adopted by prospective or existing customers to the extent we anticipate, or at all. In the future, we may not have the necessary capital, or access to capital on acceptable terms, to fund necessary levels of research and development. Even with adequate capital resources, we may nonetheless experience unforeseen problems in the development or performance of our technologies or products. The markets for smart grid, smart city, and broader IoT technology products are still in their early stages, and we cannot assure you that we will be successful in developing or selling new products in these markets. In addition, we may not meet our product development schedules and, even if we do, we may not develop new products fast enough to provide sufficient differentiation from our competitors’ products, which may be more successful. If we are unable to develop new products or enhance or sustain the quality of our existing products, successfully develop and deploy new technology and products or integrate these new technologies into devices manufactured by our third-party devices, our business and operating results could be harmed.

We and our customers operate in a highly regulated business environment and changes in regulation could impose costs on us or make our products less economical.

Our products and our customers are subject to federal, state, local and foreign laws and regulations. Laws and regulations applicable to us and our products govern, among other things, the manner in which our products communicate, and the environmental impact and electrical reliability of our products. Additionally, our U.S. customers are often regulated by national, state and/or local bodies, including public utility commissions, the Department of Energy, the Federal Energy Regulatory Commission and other bodies. International customers are often subject to similar regulatory regimes. Prospective customers may be required to gain approval from any or all of these organizations prior to implementing our products and services, including specific permissions related to the cost recovery of these systems. Regulatory agencies may impose special requirements for implementation and operation of our products. We may incur material costs or liabilities in complying with government regulations applicable to us or our customers. In addition, potentially significant expenditures could be required in order to comply with evolving regulations and requirements that may be adopted or imposed on us or our customers in the future. Such costs could make our products less economical and could impact our customers’ willingness to adopt our products, which could materially and adversely affect our revenue, results of operations and financial condition.

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Furthermore, changes in the underlying regulatory conditions that affect utilities could have a potentially adverse effect on a utility’s interest or ability to implement smart grid technologies. For example, ongoing regulatory uncertainties have in the past delayed the timing of some deployments. Many regulatory jurisdictions have implemented rules that provide financial incentives for the implementation of energy efficiency and demand response technologies, often by providing rebates or through the restructuring of utility rates. If these programs were to cease, or if they were restructured in a manner inconsistent with the capabilities enabled by our products and services, our business, financial condition and results of operations could be significantly harmed.

The adoption of industry standards applicable to our products or services could limit our ability to compete in the marketplace.

Standards bodies, which are formal and informal associations that seek to establish voluntary, non-governmental product and technology standards, are influential in the United States and abroad. We participate in voluntary standards organizations in order to both help promote non-proprietary, open standards for interoperability with our products and prevent the adoption of exclusionary standards. However, we are not able to control the content of adopted voluntary standards and do not have the resources to participate in all voluntary standards processes that may affect our markets. Some of the standards bodies and alliances in which we participate may require that we license certain of our patent claims that are necessary or essential to practice a particular standard to other participants, including competitors who elect to produce products compliant with that standard. These obligations to license our necessary patent claims may allow our competitors to use our patents to develop and sell products that compete with our products without spending the time and expense that we incurred to develop the technology covered by the patents, thereby potentially reducing any time to market advantage we might have as a result of these patents. These obligations could also substantially restrict and may eliminate our ability to use our patents as a barrier to entry or as a significant source of revenue. Moreover, because the specifications for these industry standards are generally available to members of the applicable standards bodies and alliances for little or no cost, competitors might be able to more easily create products that compete with our products.

The adoption, or expected adoption, of voluntary standards that are incompatible with our products or technology or that favor our competitors’ products or technology could limit the market opportunity for our products and services or render them obsolete, any of which could materially and adversely affect our revenue, results of operations, and financial condition.

If our products do not interoperate with our customers’ other systems, the purchase or deployment of our products and services may be delayed or cancelled.

Our products are designed to interface with our customers’ back office billing and other systems, each of which may have different specifications and utilize multiple protocol standards and products from other vendors. Our products will be required to interoperate with many or all of these products as well as future products in order to meet our customers’ requirements. If we find errors in the existing software or defects in the hardware used in our customers’ systems, we may need to modify our products or services to fix or overcome these errors so that our products will interoperate with the existing software and hardware, which could be costly and negatively affect our business, financial condition, and results of operations. In addition, if our products and services do not interoperate with our customers’ systems, customers may seek to hold us liable, demand for our products could be adversely affected or orders for our products could be delayed or cancelled. This could hurt our operating results, damage our reputation, and seriously harm our business and prospects.

Interruptions or delays in services from our third-party data center facilities, or problems with the third-party hardware or software that we employ, could impair the delivery of our services and harm our business.

We currently offer managed services and SaaS, including disaster recovery services, utilizing two data center facilities operated by separate third parties in California and Nevada. These facilities may be vulnerable to damage or interruption from, among other things, fire, natural disaster, power loss, telecommunications failure, war, acts of terrorism, unauthorized entry, human error, and computer viruses or other defects. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. We rely on software and hardware technology provided by third-parties to enable us to provide these services. Any damage to, or failure of, these third-party data centers or the third-party hardware and software we employ, could result in significant and lengthy interruptions in the services we provide to our customers. Such interruptions could reduce our revenue and billings, cause us to issue credits or pay penalties, cause customers to terminate their services, harm our reputation and adversely affect our ability to attract new customers.

We do not control certain critical aspects of the manufacture of our products and depend on a limited number of contract manufacturers.

Our future success will depend significantly on our ability to manufacture our products timely and cost-effectively, in sufficient volumes, and in accordance with quality standards. Currently, our primary manufacturing relationships are with Plexus Corp. and Celestica, Inc. We are shifting the entire production of our products currently manufactured by Plexus to a combination of Flextronics

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International Ltd. and Celestica during 2016. These vendors provide or will provide us with a wide range of operational and manufacturing services, including material procurement, final assembly, test quality control, warranty repair, and shipment to our customers and third-party vendors. If we experience complication or delay as a result of our planned contract manufacturer change, we could be exposed to further reduction in control over product quality and product availability, which could lead to product reliability issues, product shortages as a result of manufacturing capacity issues at our manufacturers and delay of product shipment, which may result in lower revenue and damage to our customer relationships.

Our reliance on our contract manufacturers reduces our control over the manufacturing process, exposing us to risks, including reduced control over quality assurance, product costs and product supply. Any manufacturing disruption by our contract manufacturers could impair our ability to fulfill orders and warranty repair obligations. We may be unable to manage our relationships with our contract manufacturers effectively as they may experience delays, disruptions, capacity constraints or quality control problems in their manufacturing operations or otherwise fail to meet our future requirements for timely delivery. Similarly, to the extent that our contract manufacturers procure materials on our behalf, we may not benefit from any warranties received by the contract manufacturers from the suppliers or otherwise have recourse against the original supplier of the materials or even the contract manufacturer. In such circumstances, if the original supplier were to provide us or our contract manufacturers with faulty materials, we might not be able to recover the costs of such materials or be compensated for any damages that arise as a result of the inclusion of the faulty components in our products. For example, in the past we discovered that faulty components from third-party suppliers were used in a discrete number of our communications modules.

One or more of our contract manufacturers may suffer an interruption in its business, or experience delays, disruptions or quality control problems in its manufacturing operations, or seek to terminate its relationship with us, or we may choose to change or add additional contract manufacturers for other reasons. Additionally, we do not have long-term supply agreements with our contract manufacturers. As a result, we may be unable to renew or extend our agreement on terms favorable to us, if at all. Although the contract manufacturing services required to manufacture and assemble our products may be readily available from a number of established manufacturers, it is risky, time consuming and costly to qualify and implement contract manufacturer relationships.

We depend on a limited number of key suppliers and if such suppliers fail to provide us with sufficient quantities of components at acceptable levels of quality and at anticipated costs, our revenue and operating results could be materially and adversely affected.

Several of the components used in our products come from sole, limited source or geographically concentrated suppliers, such as Analog Devices and Renesas Electronics America Inc. Additionally, our suppliers are not typically contractually obligated to supply us with components in minimum quantities or at predetermined prices over the long term. Accordingly, we may be vulnerable to price increases, component quality issues, the discontinuance of certain components, and financial, natural disasters, or other difficulties faced by our suppliers, causing shortages or interruptions in supply of components and materials, which could cause us to delay shipments to our customers. For example, some of our key suppliers are located in Japan and their ability to timely provide us with the necessary components used in our products was compromised as a result of the catastrophic earthquake and tsunami in 2011, and we could experience similar disruptions as a result of the recent earthquake in Japan in April 2016. To help address these issues, we may purchase excess quantities of these items to hold in inventory to help ensure adequate available supply. As a result, we could be forced to record excess and obsolete inventory charges to provide for these excess quantities and we may also be subject to pricing risk or carrying charges, which could harm our operating results.

If we experience any shortages due to reliance on a limited number of suppliers, commodity supply constraints, capacity constraints, discontinuance, natural disasters or price fluctuations related to the raw materials used, or if we are not able to identify, test, qualify, and procure components from alternate sources at acceptable prices and within a reasonable period of time, our reputation could suffer and our business, financial condition and results of operations could be materially and adversely effected. We may not be able to obtain component replacements on commercially reasonable terms in the event of a natural disaster, act of God or similar catastrophic event. In such circumstances, we could be forced to exhaust our excess on-hand inventory and then face a delay in shipments of our products to our customers. In addition, we may also be subject to contractual penalties if we fail to deliver our products and services on time.

Further, our customers may reschedule or cancel orders on relatively short notice. If our customers cancel orders after we have ordered the corresponding product from our suppliers, we may be forced to incur cancellation fees or to purchase products that we may not be able to resell, which could have a material adverse effect on our business, financial condition and results of operations.

Our business could be severely harmed by natural disasters or other catastrophes.

A significant catastrophic event such as war, acts of terrorism, natural disasters, such as earthquakes, or global threats, including, but not limited to, the outbreak of epidemic disease, could disrupt our operations and impair deployment of our solutions by our customers, interrupt critical functions, cause our suppliers to be unable to meet our demand for parts and equipment, reduce

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demand for our products, prevent our customers from honoring their contractual obligations to us or otherwise affect our business negatively. To the extent that such disruptions or uncertainties result in delays or cancellations of customer orders or the deployment of our products, or the manufacture or shipment of our products, our business, operating results and financial condition could be materially and adversely affected.

We operate in a highly competitive industry and we compete against many companies with substantially greater financial and other resources, and our market share and results of operations may be reduced if we are unable to respond to our competitors effectively.

Competition in our market is intense and involves rapidly changing technologies, evolving industry standards, frequent new product introductions, and changes in customer requirements. To maintain and improve our competitive position, we must keep pace with the evolving needs of our customers and continue to develop and introduce new solutions, applications and services in a timely and efficient manner. Our competitors range from small companies to very large and established companies. These competitors offer a variety of products and services related to the smart grid and smart city and come from a number of industries, including traditional meter manufacturers, application developers, telecommunications vendors, street light providers, and other service providers. We compete with traditional meter manufacturers that incorporate various communications technologies that provide some level of connectivity to the utility’s back office. Our key competitors in this segment include Elster Group GmbH (which was acquired by Honeywell International Inc.), Itron Inc., Landis+Gyr AG (which was acquired by Toshiba Corporation), Sensus Metering Systems Inc. and Trilliant Holdings, Inc. Similarly, we compete with traditional providers of distribution automation equipment, such as Cisco Systems, Inc., General Electric Company, S&C Electric Company and Schweitzer Engineering Laboratories, Inc. We also face competition from newer entrants that are providing specific narrowly focused products for the smart grid, including C3 IoT Inc., Grid Net Inc., Opower Inc. (which is in process of being acquired by Oracle Corporation), and Tendril Networks Inc. In smart lighting and smart cities, we compete against companies such as Echelon Corporation, Harvard Engineering PLC, Telensa Limited, Sensity Systems Inc., and proprietary offerings from lighting manufacturers, such as General Electric, Royal Philips Electronics, Schreder Group and others. We expect to face additional competitors as we expand into the broader IoT from companies such as SIGFOX and Ingenu, as well as Semtech Corporation, which is working to build a broad IoT ecosystem within the cellular community through the LoRa Alliance, an open, non-profit association of members with a mission to enable the IoT.  Furthermore, other large companies such as Alcatel-Lucent S.A., AT&T Inc., Cisco Systems, Inc., Enel SpA, Électricité Réseau Distribution France, Fujitsu Limited, General Electric Company, International Business Machines Corporation, Siemens AG, Sprint Nextel Corporation, Vodafone Group Plc, Verizon Communications Inc. and others have announced plans to pursue business opportunities related to the smart grid, smart city, and the broader IoT.As we look to expand into new international markets, we expect to face additional competitors that may be more established in specific geographies. We anticipate that in the future, additional competitors will emerge that offer a broad range of competing products and services related to the smart grid, smart city, and the broader IoT, some of which may be competitive with our offerings.

Several of our competitors enjoy substantial competitive advantages such as:

· greater name recognition and longer operating histories;

· larger sales and marketing budgets and resources;

· greater ability to integrate their products with existing systems;

· broader distribution channels;

· established relationships with existing and potential partners and customers;

· lower labor and development costs; and

· significantly greater financial, technical, customer support and other resources.

Some of these larger competitors have substantially broader product offerings and may be able to leverage the existing relationships they have with customers. In some cases, our larger competitors are also currently vendors of ours, and they could decide in the future to develop their own products instead of working with us. Any inability to effectively manage these relationships could have a material adverse effect on our business, operating results, and financial condition, and accordingly affect our chances of success. In addition, some of our competitors may have larger patent portfolios than we have, which may provide them with a competitive advantage and may require us to engage in costly litigation to protect and defend our freedom to operate and/or intellectual property rights.

Conditions in our market could change rapidly and significantly as a result of technological advancements or market consolidation. The development and market acceptance of alternative technologies could decrease the demand for our products or render them obsolete. Our competitors may introduce products and services that are less costly, provide superior performance or

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achieve greater market acceptance than our products and services. In order to remain competitive, we may need to lower prices or attempt to add incremental features and functionality, which could negatively impact our revenue, billings, gross margin and financial condition. In addition, our larger competitors often have broader product lines and are in a better position to withstand any significant reduction in capital spending by customers in the smart grid and smart city markets, and will therefore not be as susceptible to downturns in a particular market. If we are unable to compete successfully in the future, our business may be harmed.

We have experienced, and may in the future experience, rapid changes in the pace of our growth. If we fail to manage our growth effectively, our financial performance may suffer.

We have substantially expanded our overall business, customer base, employee headcount and operations both domestically and internationally in the past, and may do so in the future in response to market conditions and opportunities. Our expansion has placed, and any future growth could continue to place, a significant strain on our managerial, customer operations, research and development, sales and marketing, manufacturing, administrative, financial and other resources. If we are unable to manage our growth successfully, our operating results will suffer. Moreover, we have in the past undertaken cost savings initiatives, including a restructuring in 2014 that involved a reduction in force. We may from time to time decide to undertake additional cost savings initiatives, such as restructurings, disposing of, and/or otherwise discontinuing certain products, in an effort to focus our resources on key strategic initiatives and streamline our business. Any decision to take these actions may result in charges to earnings associated with, among other things, inventory or other fixed, intangible or goodwill asset reductions (including, without limitation, impairment charges), workforce and facility reductions and penalties and claims from customers or other third parties. These charges would affect our operating results. In addition to the costs associated with these activities, we may not realize any of the anticipated benefits of the underlying cost savings initiatives.

We rely on our management team and need additional personnel to grow our business, and the loss of one or more key employees or our inability to attract and retain qualified personnel could harm our business.

Our success and future growth depend on the skills, working relationships and continued services of our management team and other key personnel. The loss of any member of our senior management team could adversely affect our business.

In September 2015, Michael Bell was appointed as our new President and Chief Executive Officer, and Scott Lang transitioned to the role of Executive Chairman and remains Chairman of the Board. In July 2016, Aysegul Ilendiz was appointed as our Chief Operating Officer, and we made executive and organization changes in connection with Ms. Ildendiz’s appointment. Leadership transitions can be inherently difficult to manage and may cause operational and administrative inefficiencies, added costs, uncertainty and decreased productivity among our employees and increase the likelihood of turnover, which could result in significant disruptions to our operations. In addition, we must successfully integrate the new CEO and COO within our organization in order to achieve our operating objectives, and changes in key management positions may temporarily affect our financial performance and results of operations as new management becomes familiar with our business. The presence of a new CEO and COO may also impact our relationships with customers and vendors, resulting in loss of business and loss of vendor relationships. The uncertainty inherent in our recent management changes could also lead to concerns from current and potential third parties with whom we do business, any of which could damage our business prospects.

Our future success will also depend on our ability to attract, retain and motivate highly skilled management, product development, operations, sales, technical and other personnel in the United States and abroad. We have in the past lost members of our senior management team, and the loss of additional members of our senior management team could adversely affect our business. We could also be adversely affected if we fail to adequately plan for the succession of members of our senior management team should we have departures. Even in today’s economic climate, competition for these types of personnel is intense, particularly in the Silicon Valley, where our headquarters are located. All of our employees in the United States work for us on an at-will basis. Given the lengthy sales cycles with customers and deployment periods of our networking platform and solutions, the loss of key personnel could adversely affect our business.

Volatility or lack of performance in our stock price may also affect our ability to attract and retain our senior management, key personnel and other employees. Many of our longest-tenured employees, including members of our senior management and key personnel with deep institutional knowledge, hold significant vested stock options and shares of our common stock. Employees may be more likely to leave us if the shares they own or the shares underlying their vested stock options have significantly appreciated in value relative to the original purchase prices of the shares or the exercise prices of the options, or if the exercise prices of the options that they hold are significantly above the market price of our common stock. As a result of these factors, we may be unable to attract or retain qualified personnel. Our inability to attract and retain the necessary personnel could adversely affect our business.

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Our ability to provide bid bonds, performance bonds or letters of credit is limited and could negatively affect our ability to bid on or enter into significant long-term agreements.

We have in the past been, and may in the future be, required to provide bid bonds or performance bonds to secure our performance under customer contracts or, in some cases, as a pre-requisite to submit a bid on a potential project. For example, in connection with the litigation with EON Corp. IP Holdings, LLC, we were required to provide a surety bond that was later released by the district court in order to stay the execution of a judgment pending our appeal. Our ability to obtain such bonds primarily depends upon our capitalization, working capital, past performance, management expertise and reputation and external factors beyond our control, including the overall capacity of the surety market. Surety companies consider those factors in relation to the amount of our tangible net worth and other underwriting standards that may change from time to time. Surety companies may require that we collateralize a percentage of the bond with our cash or other form of credit enhancement. Events that affect surety markets generally may result in bonding becoming more difficult to obtain in the future, or being available only at a significantly greater cost. In addition, some of our customers also require collateral guarantees in the form of letters of credit to secure performance or to fund possible damages as the result of an event of default under our contracts with them. If we enter into significant long-term agreements that require the issuance of letters of credit, our liquidity could be negatively impacted. Our inability to obtain adequate bonding or letters of credit to meet bid requirements or enter into significant long-term agreements could have a material adverse effect on our future revenues and business prospects.

We are subject to international business uncertainties.

Our ability to grow our business and our future success will depend to a significant extent on our ability to expand our operations and customer base worldwide. Operating in international markets requires significant resources and management attention, and other than our existing international operations, we have limited experience entering new geographic markets. There can be no assurance that our international efforts will be successful. International sales and operations may be subject to risks such as:

· technology compatibility;

· the imposition of government controls;

· government expropriation of facilities;

· lack of a well-established system of laws and enforcement of those laws;

· compliance with multiple, conflicting and changing governmental laws and regulations, including United States laws such as the Foreign Corrupt Practices Act and local laws that prohibit bribes and certain payments to governmental officials such as the UK Bribery Act 2010, data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, governmental rebate requirements and export requirements;

· lack of a legal system free of undue influence or corruption;

· exposure to a business culture in which improper sales practices may be prevalent;

· political instability;

· terrorist activities;

· restrictions on the import or export of critical technology;

· currency exchange rate fluctuations;

· adverse tax burdens;

· lack of availability of qualified third-party financing;

· generally longer receivable collection periods than in the United States;

· trade restrictions;

· changes in tariffs;

· labor disruptions;

· difficulties in staffing and managing foreign operations;

· preference for local vendors;

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· burdens of complying with different permitting standards; and 

· a wide variety of foreign laws and obstacles to the repatriation of earnings and cash.

Fluctuations in the value of the U.S. dollar may impact our ability to compete in international markets. International expansion and market acceptance depend on our ability to modify our business approach and technology to take into account such factors as differing customer business models, product requirements and needs, the applicable regulatory and business environment, labor costs and other economic conditions. In addition, the laws of certain countries do not protect our intellectual property to the same extent as do the laws of the United States. There can be no assurance that these factors will not have a material adverse effect on our future international sales and, consequently, on our business, financial condition and results of operations.

Developments in data protection laws and regulations may affect technology relating to smart grid products and solutions, which could adversely affect the demand for our products and solutions.

Our products and services may be subject to data protection laws and regulations that impose a general framework for the collection, processing and use of personal data. Our networking platform and solutions rely on the transfer of data relating to individual energy use and may be affected by these laws and regulations. It is unclear how the regulations governing the transfer of personal data in connection with privacy requirements will further develop in the United States and internationally, and to what extent this may affect technology relating to smart grid products and solutions. This could have a material adverse effect on our business, financial condition and results of operations.

Adverse changes in general economic or political conditions in any of the major countries in which we do business could adversely affect our operating results.

Our business can be affected by a number of factors that are beyond our control, such as general geopolitical, economic, and business conditions. The continued global economic uncertainty and continued global monetary, financial and sovereign debt crisis could have a negative effect on our business. For example, the worldwide financial and credit crisis reduced the availability of liquidity and credit to fund the continuation and expansion of business operations worldwide. Even with economic recovery, it may take time for our customers or potential customers to establish new budgets and return to normal purchasing patterns. We cannot predict the recurrence of any economic slowdown or the strength or sustainability of the economic recovery, worldwide, in the United States or in our industry. These and other economic factors could adversely affect the demand for our products and services and, consequently, our business, financial condition and results of operations.

There can be no assurance that a deterioration in financial markets will not impair our ability or our customers’ ability to obtain financing in the future, including, but not limited to, our or our customers’ ability to incur indebtedness if necessary. In addition, there could be several residual effects from the credit crisis on our business, including insolvency of certain of our key customers or suppliers, which could result in the inability of our customers to obtain credit to finance purchases of our products.

Our inability to acquire and integrate other businesses, products or technologies could seriously harm our competitive position.

In order to remain competitive, obtain key competencies or accelerate our time to market, we may seek to acquire additional businesses, products or technologies. To date, we have completed only three small acquisitions, and we therefore have limited experience in successfully acquiring and integrating additional businesses, products or technologies. If we identify an appropriate acquisition candidate, we may not be successful in negotiating the terms of the acquisition, financing the acquisition, or effectively integrating the acquired business, product or technology into our existing business and operations. We may have difficulty integrating acquired businesses, technologies or products with our existing products and services. Our due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business, product or technology, including issues related to intellectual property, product quality or product architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee or customer issues. If we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted, which could affect the market price of our stock. In addition, any acquisitions we are able to complete may not result in the synergies or any other benefits we had expected to achieve, which could result in substantial write-offs. Further, contemplating or completing an acquisition and integrating an acquired business, product or technology will significantly divert management and employee time and resources.

Our business may suffer if it is alleged or found that our products infringe the intellectual property rights of others.

Our industry is characterized by the existence of a large number of patents and by litigation based on allegations of infringement or other violations of intellectual property rights. Moreover, in recent years, individuals and groups have purchased patents and other intellectual property assets for the purpose of making claims of infringement in order to extract settlements from companies like ours. From time to time, third parties have claimed and may continue to claim that we are infringing upon their patents or other intellectual property rights. For example, we are currently engaged in litigation as further described in Part II, Item 1. Legal Proceedings. In

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addition, we may be contractually obligated to indemnify our customers or other third parties that use or resell our products in the event our products are alleged to infringe a third-party’s intellectual property rights. Responding to such claims, regardless of their merit, can be time consuming, costly to defend in litigation, divert management’s attention and resources, damage our reputation and brand, and cause us to incur significant expenses. Even if we are indemnified against such costs, the indemnifying party may be unable to uphold its contractual obligations. Further, claims of intellectual property infringement might require us to redesign affected products, delay affected product offerings, enter into costly settlement or license agreements or pay costly damage awards or face a temporary or permanent injunction prohibiting us from marketing, selling or distributing the affected products. If we cannot or do not license alleged infringed technology on reasonable terms or at all, or substitute similar technology from another source, our revenue and earnings could be adversely impacted. Additionally, our customers may not purchase our products if they are concerned that our products infringe third-party intellectual property rights. This could reduce the market opportunity for the sale of our products and services. The occurrence of any of these events may have a material adverse effect on our business, financial condition and results of operations.

The success of our business depends on our ability to protect and enforce our intellectual property rights.

We rely on a combination of patent, trademark, trade dress, copyright, unfair competition and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights. These laws, procedures and restrictions provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated. Further, the laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States and, therefore, in certain jurisdictions, we may be unable to protect our proprietary technology adequately against unauthorized third-party copying, infringement or use, which could adversely affect our competitive position.

As of June 30, 2016, we had 104 issued patents and 61 patent applications pending in the United States. In foreign jurisdictions, we have 158 patents granted and 65 patent applications pending, which are collectively based on 66 U.S. patent applications. Our patents expire at various times between 2017 and 2034. We cannot ensure that any of our pending applications will be granted or that any of our issued patents will adequately protect our intellectual property. In addition, third parties have in the past and could in the future bring infringement, invalidity, co-inventorship, re-examination, or similar claims with respect to any of our currently issued patents or any patents that may be issued to us in the future. Any such claims, whether or not successful, could be extremely costly to defend, divert management’s attention and resources, damage our reputation and brand, and substantially harm our business and results of operations.

In order to protect or enforce our patent rights, protect our trade secrets or know-how, or determine the enforceability, scope and validity of the proprietary rights of others, we may initiate patent litigation or other proceedings against third parties, such as infringement suits or interference proceedings. Any lawsuits or proceedings that we initiate could be expensive, take significant time and divert management’s attention from other business concerns. Litigation and other proceedings also put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, we may provoke third parties to assert claims against us. We may not prevail in any lawsuits or other proceedings that we initiate and the damages or other remedies awarded, if any, may not be commercially valuable. The occurrence of any of these events may have a material adverse effect on our business, financial condition and results of operations.

Some of our products rely on technologies developed or licensed by third-parties. We may seek to license technology from third parties for future products and services. We may not be able to obtain or continue to obtain licenses and technologies from these third parties on commercially reasonable terms or at all. Our inability to retain our current third-party licenses or obtain third-party licenses required to develop new products or product enhancements could require us to obtain alternate technology that may be of lower quality or performance standards or at greater cost, or could require that we change our product and design plans, any of which could limit or delay our ability to manufacture and sell our products.

If we are unable to protect the confidentiality of our proprietary information, the value of our technology and products could be adversely affected.

In addition to patented technology, we rely on our unpatented technology and trade secrets. We generally seek to protect this information by confidentiality, non-disclosure and assignment of invention agreements with our employees and contractors and with parties with which we do business. These agreements may be breached and we may not have adequate remedies for any such breach. We cannot be certain that the steps we have taken will prevent unauthorized use or reverse engineering of our technology. Moreover, our trade secrets may be disclosed to or otherwise become known or be independently developed by competitors. To the extent that our employees, contractors, or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. If, for any of the above reasons, our intellectual property is disclosed or misappropriated, it would harm our ability to protect our rights and have a material adverse effect on our business, financial condition, and results of operations.

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We use open source software in our products and services that may subject our products and services to general release or require us to re-engineer our products and services, which may cause harm to our business.

We use open source software in connection with our products and services. From time to time, companies that incorporate open source software into their products have faced claims challenging the ownership of open source software and/or compliance with open source license terms. Therefore, we could be subject to suits by parties claiming ownership of what we believe to be open source software or noncompliance with open source licensing terms. Some open source software licenses require users who distribute open source software as part of their software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code on unfavorable terms or at no cost. While we monitor the use of open source software in our products and services and try to ensure that none is used in a manner that would require us to disclose the source code to the related product or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur and we may be required to release our proprietary source code, pay damages for breach of contract, re-engineer our products, discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business, operating results and financial condition.

Some of our customers and potential customers have applied for government grants and may also seek to participate in other government incentive programs, and if those grants or other incentives are not received or are significantly delayed, our results of operations could suffer.

Many utilities, including some of our customers and potential customers, apply for grants and may seek to participate in other government incentive programs, designed to stimulate the economy and support environmental initiatives, including smart grid technologies. Our customers and potential customers who apply for these government grants or incentives may delay or condition the purchase of our products and services upon receipt of such funds or upon their confidence in the future disbursement of those funds. If our customers and potential customers do not receive these funds or if receipt is significantly delayed, our results of operations could suffer. Similarly, the receipt of government funds or incentives may be conditioned upon utilities meeting milestones and other requirements, some of which may not be known until a future point in time. In addition, if our products and services do not meet the requirements necessary for receipt of government funds or other incentives, or if third parties fail to meet their obligations, our customers and potential customers may delay or condition the purchase of our products and services until they meet these requirements and our results of operations could suffer. Furthermore, there can be no assurance of government funds or incentives in future periods, either in the United States or in other countries where we may pursue business. As a result, our customers and potential customers may not have the resources or incentives to purchase our products and services.

We are an “emerging growth company,” and any decision on our part to comply with certain reduced disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

We are an “emerging growth company,” or EGC, as defined in the JOBS Act, and, for as long as we continue to be an EGC, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years from our initial public offering date, although if our annual revenue exceeds $1.0 billion in any year or our market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of any year before the end of that five-year period, we would cease to be an EGC as of December 31 of that year. If we lose our EGC status before the end of that five-year period, we will be required to comply with all the reporting requirements applicable to other public companies including, but not limited to, the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. We cannot predict if investors will find our common stock less attractive as we continue to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and our stock price may decline or be more volatile.

Under Section 107(b) of the JOBS Act, EGCs can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail our company of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not EGCs.

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We identified a material weakness in our internal control over financial reporting as of June 30, 2016 that, if not properly remediated, could result in a material misstatement in our financial statements in future periods and impair our ability to comply with the accounting and reporting requirements applicable to public companies.

For the quarter ended June 30, 2016, we identified a material weakness in our internal control over financial reporting. As reported in Note 1, "Basis of Presentation" of this Form 10-Q, 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. In addition, after the release of earnings disclosing the results of three and six months ended June 30, 2016, another error was identified in the consolidated statements of cash flows for the six months ended June 30, 2016 in which cash provided by operating activities and cash used in investing activities were overstated by $0.3 million. Both of these errors have been corrected in the condensed consolidated statements of cash flows for the six months ended June 30, 2016, included in this Form 10-Q.These errors resulted from a material weakness in our internal control over financial reporting due to inadequate design and operation of review controls that are intended to ensure the accuracy of the calculations and related disclosures in our consolidated statement of cash flows prepared in accordance with GAAP. More specifically, our internal control over the review of underlying schedules supporting the preparation of our cash flow statement did not operate at the necessary level of precision to identify any errors. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Our remediation efforts are in process and have not yet been completed. Because of this material weakness, there is heightened risk that (1) our management might not be able to certify, and our independent registered public accounting firm might not be able to report on, the adequacy of our internal control over financial reporting, which would cause us to fail to meet our reporting obligations, and (2) a material misstatement of our annual or quarterly financial statements may not be prevented or detected. In addition, the planned remediation steps we expect to take may not effectively remediate the material weakness, in which case our internal control over financial reporting would continue to be ineffective. We cannot guarantee that we will be able to complete our remedial actions successfully. In addition, it is possible that we will discover additional material weaknesses in our internal control over financial reporting.

We will be required to disclose changes in our internal control and procedures on a quarterly basis. However, we are not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 until the earlier of five years from our initial public offering date or the date we would cease to be an EGC as of December 31 of that year. At such time, our independent registered public accounting firm may issue a report that is adverse in the event that such firm is not satisfied with the level at which our internal control and procedures are documented, designed or operating. As a result, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. Ensuring that we have adequate internal financial and accounting control and procedures in place to help produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be evaluated frequently.

If we are unable to adequately remediate the foregoing material weakness or comply or continue to comply with the foregoing obligations, it could subject us to a variety of administrative sanctions, including the suspension or delisting of our common stock from the New York Stock Exchange and the inability of registered broker-dealers to make a market in our common stock, which could reduce the market price of our common stock. In addition, ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of shares of our common stock. In the event that we do not adequately remediate this material weakness, or if we fail to maintain proper and effective internal control and procedures in future periods, our business, results of operations and financial condition and our ability to run our business effectively could be adversely affected and investors could lose confidence in our financial reporting.

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Our business is subject to changing regulations regarding corporate governance and public disclosure that will increase both our costs and the risk of noncompliance.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the New York Stock Exchange. Achieving and maintaining compliance with these rules and regulations, particularly after we cease to be an emerging growth company, has increased and may further increase our legal, accounting and financial compliance costs, has made and may further make some activities more difficult, time-consuming and costly and may also place undue strain on our personnel, systems and resources.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our prior period financial statements. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports filed with the SEC under Section 404(a) of the Sarbanes-Oxley Act, or the annual auditor attestation reports regarding effectiveness of our internal controls over financial reporting that we will be required to include in our annual reports filed with the SEC beginning for the year ending December 31, 2018, unless, under the JOBS Act, we meet certain criteria that would require such reports to be included prior to then, under Section 404(b) of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock.

In order to maintain the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we will need to continue to expend significant resources and provide significant management oversight. We are in the process of implementing appropriate business processes, documenting our system of internal control over relevant processes, assessing their design, remediating any deficiencies identified and testing their operation. As a result, management’s attention may be diverted from other business concerns, which could harm our business, operating results and financial condition. These efforts will also involve substantial accounting-related costs. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the New York Stock Exchange.

Implementing any appropriate changes to our internal controls may require specific compliance training of our directors, officers and employees, entail substantial costs in order to modify our existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. In the event that our internal controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and our stock price could decline.

The Sarbanes-Oxley Act and the rules and regulations of the New York Stock Exchange make it difficult and expensive for us to maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain or increase coverage. If we are unable to maintain adequate directors’ and officers’ insurance, our ability to recruit and retain qualified directors, especially those directors who may be considered independent for purposes of the New York Stock Exchange rules, and officers may be curtailed.

The effects of regulations relating to the source of materials used in the manufacture of our products may adversely affect our business.

The SEC has recently adopted regulations concerning the supply of certain minerals, known as conflict minerals, originating from the conflict zones of the Democratic Republic of Congo, or DRC, and adjoining countries. These regulations require us to determine the origin of certain materials used in our products and disclose whether we use any materials containing conflict minerals originating from the DRC and adjoining countries. Since our supply chain is complex, we may face reputational harm if our customers or other stakeholders conclude that we are unable to verify sufficiently the origins of the minerals used in the products we sell. If it is determined that our products do contain or use any conflict minerals from the DRC or adjoining countries, additional requirements will be triggered. Compliance with these regulations may results in increased costs of regulatory compliance, potential risks to our reputation, difficulty satisfying any customers that insist on conflict-free products, and harm to our business.

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We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.

In the future we may require additional capital to respond to business opportunities, challenges, acquisitions or unforeseen circumstances and may determine to engage in equity or debt financings, replace our current line of credit, or enter into new credit facilities for other reasons. We may not be able to timely secure additional debt or equity financing on favorable terms, or at all. Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

Our investment portfolio may become impaired by deterioration of the capital markets.

Our cash, cash equivalent and short-term investment portfolio as of June 30, 2016 consisted of $133.1 million of money market mutual funds, highly liquid debt instruments of the U.S. government and its agencies, foreign government, commercial paper, and agency securities, and U.S. and foreign corporate debt securities.

Should financial market conditions worsen in the future, investments in some financial instruments may pose risks arising from market liquidity and credit concerns. In addition, any deterioration of the capital markets could cause our other income and expense to vary from expectations. As of June 30, 2016, we had no impairment charges associated with our short-term investment portfolio, and although we believe our current investment portfolio has little risk of material impairment, we cannot predict future market conditions or market liquidity, or credit availability, and can provide no assurance that our investment portfolio will remain materially unimpaired.

We may not be able to utilize a significant portion of our net operating loss or research tax credit carryforwards, which could adversely affect our operating results.

As of June 30, 2016, we had federal and state net operating loss carryforwards due to prior period losses, which if not utilized will begin to expire in 2029 and 2016 for federal and state purposes, respectively. We also have federal research tax credit carryforwards that will begin to expire in 2024, as well as state research tax credit carryforwards that have no expiration date.  Realization of these net operating loss and research tax credit carryforwards is dependent upon future income, and there is a risk that our existing federal and state net operating loss carryforwards and federal research tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our results.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. It is possible that an ownership change, or any future ownership change, could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our operating results.

Our business and financial performance could be negatively impacted by changes in tax laws or regulations.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time. Those enactments could adversely affect our domestic and international business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. These events could require us or our customers to pay additional tax amounts on a prospective or retroactive basis, as well as require us or our customers to pay fines and/or penalties and interest for past amounts deemed to be due. If we raise our prices to offset the costs of these changes, existing and potential future customers may elect not to continue or purchase our products and services in the future. Additionally, new, changed, modified or newly interpreted or applied tax laws could increase our customers’ and our compliance, operating and other costs, as well as the costs of our products. Further, these events could decrease the capital we have available to operate our business. Any or all of these events could adversely impact our business and financial performance.

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Our stock price has been and may continue to be volatile and may decline regardless of our operating performance.

There has not been a long history of a public market for our common stock, and an active or liquid market in our common stock may not be sustainable. The trading prices of the securities of technology companies have been highly volatile, and the trading price of our common stock has been and may continue to be volatile. The market price of our common stock has in the past and may in the future fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

· actual or anticipated fluctuations in our revenue, billings and other operating results or our backlog;

· the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

· delays in regulatory approvals for our customers and customer deployments;

· failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, our failure to meet these estimates or the expectations of investors, or the publishing inaccurate or unfavorable research about our business by securities analysts;

· ratings changes by any securities analysts who follow our company;

· announcements by us or our competitors of significant customer wins, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;

· changes in operating performance and stock market valuations of our customers, technology companies generally, or those in our industry in particular;

· political and consumer sentiment, including concerns over accuracy of advanced metering technology, economic impact on consumers, privacy, security, consumer choice and the safety, health and environmental aspects of smart grid and smart city technology;

· price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

· lawsuits threatened or filed against us; and

· other events or factors, including those resulting from war, incidents of terrorism or responses to these events.

In addition, the stock markets, and in particular the New York Stock Exchange on which our common stock is listed, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. During the three months ended June 30, 2016, the closing price of our common stock on the New York Stock Exchange ranged from $10.29 to $14.93 per share. In the past, stockholders have instituted securities class action litigation against other companies following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, operating results and financial condition.

If there are substantial sales of shares of our common stock, the price of our common stock could decline.

Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and may make it more difficult for you to sell your common stock at a time and price that you deem appropriate. We are unable to predict the effect that sales may have on the prevailing market price of our common stock. In addition, the holders of an aggregate of 13,732,453 shares of our common stock have rights, subject to some conditions, that require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders. Registration of the resale of these shares under the Securities Act would generally result in the shares becoming freely tradable without restriction. Any sales of securities by existing stockholders could adversely affect the trading price of our common stock.

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Our directors, executive officers and their respective affiliates have substantial control over us and could delay or prevent a change in corporate control.

As of June 30, 2016, our directors, executive officers and their respective affiliates beneficially owned in the aggregate 25.6%of our outstanding shares of common stock. As a result, these stockholders, acting together, would likely have the ability to significantly influence the outcome of matters submitted to our stockholders for approval, including the election of directors and other significant matters such as a merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders, acting together, would likely have the ability to significantly influence the management and affairs of our company. Accordingly, this concentration of ownership might harm the market price of our common stock by:

· delaying, deferring or preventing a change in control of us;

· impeding a merger, consolidation, takeover or other business combination involving us; or

· discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. In addition, the terms of our credit facility with Silicon Valley Bank currently restricts our ability to pay dividends. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases.

Delaware law and provisions in our amended and restated certificate of incorporation and bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.

We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and restated bylaws contain provisions that may make the acquisition of our company more difficult without the approval of our Board of Directors, including the following:

· our Board of Directors is classified into three classes of directors with staggered three-year terms;

· only Chairman of the Board, our lead independent director, our CEO, our President or a majority of our Board of Directors is authorized to call a special meeting of stockholders;

· our stockholders are only able to take action at a meeting of stockholders and not by written consent;

· vacancies on our Board of Directors are able to be filled only by our Board of Directors and not by stockholders;

· directors may be removed from office only for cause;

· our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be issued, without stockholder approval; and

· advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Sales of Unregistered Securities

Not applicable.

(b) Use of Proceeds

Not applicable.

(c) Issuer Purchases of Equity Securities

Not applicable.

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Item 3. Defaults upon Senior Securities 

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits. 

				Incorporated by Reference		Filed
Number	Description of Exhibit	Form	File No.	Exhibit	Filing Date	Herewith
10.1	First Amendment to Credit Agreement, dated as of June 3, 2016, amending that certain Credit Agreement, dated as of December 18, 2015, by and between the Registrant, lenders parties thereto and Silicon Valley Bank.					X
10.2‡	Offer Letter Employment Agreement, dated May 31, 2014, between the Company and Kenneth P. Gianella.					X
10.3‡	Letter Agreement, dated January 29, 2015, between the Company and Kenneth P. Gianella.					X
10.4‡	Letter Agreement, dated June 12, 2016, between the Company and Kenneth P. Gianella.					X
10.5‡	Offer Letter Employment Agreement, dated July 6, 2016, between the Company and Aysegul Ilendiz.					X
10.6‡	Letter Agreement, dated July 18, 2016, between the Registrant and Donald L. Reeves.					X
10.7†	Amendment No. 3, effective as of February 29, 2016, and Amendment No. 4, effective as of June 29, 2016, amending that certain Amended and Restated Services and Materials Agreement, dated January 25, 2012, as amended, by and between the Registrant and Commonwealth Edison Company.					X
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
32.2*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
101.INS	XBRL Instance Document.					X
101.SCH	XBRL Taxonomy Extension Schema Document.					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.					X

† Registrant has omitted portions of the referenced exhibit and filed such exhibit separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Exchange Act.

‡ Management contract or compensatory plan or arrangement.

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* As contemplated by SEC Release No. 33-8212, the certifications attached as Exhibit 32.1 and Exhibit 32.2 are furnished with this Quarterly Report on Form 10-Q and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of Silver Spring Networks, Inc. under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in such filings. 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on August 9, 2016.

		SILVER SPRING NETWORKS, INC.
By:	/s/ Michael Bell
	Michael Bell President and Chief Executive Officer (Principal Executive Officer)
By:	/s/ Kenneth P. Gianella
	Kenneth P. Gianella Chief Financial Officer (Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

FIRST AMENDMENT TO CREDIT AGREEMENT

This FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of June 3, 2016, is by and among (a) SILVER SPRING NETWORKS, INC., a Delaware corporation (the “Borrower”), (b) each of the lenders listed on the signature pages hereto, and (c) SILICON VALLEY BANK (“SVB”), as administrative agent for the Lenders (in such capacity, the “Administrative Agent”), and as Swingline Lender and Issuing Lender.

W I T N E S S E T H:

WHEREAS, reference is hereby made to that certain Credit Agreement, dated as of December 18, 2015 (as amended, amended and restated, supplemented, restructured or otherwise modified, renewed or replaced from time to time, the “Credit Agreement”), by and among, among others, (i) the Borrower, (ii) the banks and other financial institutions or entities from time to time party thereto (each a “Lender” and, collectively, the “Lenders”), and (iii) the Administrative Agent; and

WHEREAS, the Borrower has requested that the Administrative Agent and the Lenders amend certain terms and conditions of the Credit Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Capitalized Terms.  All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.

2. Amendments to Section 1.1 of the Credit Agreement.  

(a) The definition of “First Amendment Effective Date” is hereby inserted in its appropriate alphabetical position:

“First Amendment Effective Date”: is June 3, 2016.

(b) The definition of “Adjusted Quick Ratio” is hereby amended and restated as follows:

“Adjusted Quick Ratio”: the ratio of (a) Quick Assets plus, without duplication, any short-term or long-term Investments permitted by the Borrower’s Investment Policy effective March 4, 2016 and as in effect as of the First Amendment Effective Date, as may be modified from time to time thereafter with the approval of its board of directors or duly appointed committee thereof, provided that prior to inclusion in this calculation, any such amendments or modifications thereto must be approved in writing by the Required Lenders, such approval to be made on a commercially reasonable basis and within 30 days of delivery to the Administrative Agent of any such amendment or modification, to (b) Current Liabilities minus current Deferred Revenue.”

3.Amendments to Section 6 of the Credit Agreement.  

(a) Section 6.1(b) of the Credit Agreement is hereby amended and restated as follows:

“(b) as soon as available, but in any event not later than 30 days after the end of each of the first two months of each fiscal quarter occurring during each fiscal year of the Borrower (commencing with the fiscal month ended October 30, 2015), the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such month and the related unaudited consolidated statements of income and of cash flows for such month and the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer of the Borrower as being fairly stated in all material respects (subject to normal year-end audit adjustments).”

(b) Section 6.2(g) of the Credit Agreement is hereby amended and restated as follows:

“(g) (i) not later than 30 days after the end of each month and (ii) prior to any borrowing of Revolving Loans, accounts receivable agings, aged by invoice date, accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, reconciliations of accounts receivable agings (aged by invoice date), a Transaction Report summarizing and calculating (where applicable) the Borrowing Base; provided that unless a Streamline Period is in effect, Transaction Reports will be required to be delivered weekly;”

4. Amendments to Exhibits to Credit Agreement.

(a) Exhibit B to the Credit Agreement is hereby amended and restated in its entirety as set forth in Exhibit B attached hereto.

5. Streamline Period.  The Lenders hereby by acknowledge and agree that the Borrower shall be deemed to be in a Streamline Period as of the date hereof.

6. Conditions Precedent to Effectiveness.  This Amendment shall not be effective until each of the following conditions precedent have been fulfilled to the satisfaction of the Administrative Agent:

(a) This Amendment shall have been duly executed and delivered by the respective parties hereto.  The Administrative Agent shall have received a fully executed copy hereof.

(b) All necessary consents and approvals to this Amendment shall have been obtained.

(c) After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing.

(d) The Administrative Agent shall have received the fees, costs and expenses required to be paid pursuant to Section 8 of this Amendment.  

2

7. Representations and Warranties.  Each Loan Party hereby represents and warrants to the Administrative Agent and the Lenders as follows:

(a) This Amendment is, and each other Loan Document to which it is or will be a party, when executed and delivered by each Loan Party that is a party thereto, will be the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally and general equitable principals (whether enforcement is sought by proceedings in equity or at law).

(b) The representations and warranties set forth in this Amendment, Section 4 of the Credit Agreement, as amended by this Amendment and after giving effect hereto, and the other Loan Documents to which it is a party are (i) to the extent qualified by materiality, true and correct in all respects and (ii) to the extent not qualified by materiality, true and correct in all material respects, in each case, on and as of the date hereof, as though made on such date (except to the extent (i) that such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date, and (ii) that such representations and warranties relate to ongoing patent infringement suits, for which the Borrower provides updated information in the Borrower’s most recent quarterly or annual report, as applicable, filed with the Securities and Exchange Commission).

(c) The execution and delivery by each Loan Party of this Amendment and the performance by each Loan Party of its obligations under the Credit Agreement and the other Loan Documents, as amended by this Amendment, (i) have been duly authorized by all necessary organizational action on the part of such Loan Party and (ii) will not (A) violate any provisions of the certificate of incorporation or formation or organization or by-laws or limited liability company agreement or limited partnership agreement of such Loan Party or (B) constitute a violation by such Loan Party of any applicable material Requirement of Law.

Each Loan Party acknowledges that the Administrative Agent, the Issuing Lender and the Lenders have acted in good faith and have conducted in a commercially reasonable manner its relationships with each Loan Party in connection with this Amendment and in connection with the other Loan Documents.  Each Loan Party understands and acknowledges that the Administrative Agent, the Issuing Lender and the Lenders are entering into this Amendment in reliance upon, and in partial consideration for, the above representations, warranties, and acknowledgements, and agrees that such reliance is reasonable and appropriate.  

8. Payment of Costs and Expenses.  The Borrower shall pay to the Administrative Agent all reasonable costs and out-of-pocket expenses of every kind in connection with the preparation, negotiation, execution and delivery of this Amendment and any documents and instruments relating hereto or thereto (which costs include, without limitation, the reasonable and documented fees and expenses of any attorneys retained by the Administrative Agent).

9. Choice of Law.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.  Each party hereto submits to the exclusive jurisdiction of the State and Federal courts in the Southern District of the State of New York; provided, however, that nothing in the Credit Agreement as amended by this Amendment shall be deemed to operate to preclude the

3

Administrative Agent or any Lender from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of the Administrative Agent or such Lender. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AMENDMENT, THE OTHER LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS AMENDMENT.  EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

10. Counterpart Execution.  This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Amendment.  Delivery of an executed counterpart of this Amendment by telefacsimile or by e-mail transmission of an Adobe file format document (also known as a PDF file) shall be equally as effective as delivery of an original executed counterpart of this Amendment. Any party delivering an executed counterpart of this Amendment by telefacsimile or by e-mail transmission of an Adobe file format document (also known as a PDF file) also shall deliver an original executed counterpart of this Amendment but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment.

11. Effect on Loan Documents.

(a) The amendments set forth herein shall be limited precisely as written and shall not be deemed: (i) to be a forbearance, waiver, or modification of any other term or condition of the Credit Agreement or of any Loan Documents or to prejudice any right or remedy which the Administrative Agent or any Lender may now have or may have in the future under or in connection with the Loan Documents; (ii) to be a consent to any future consent or modification, forbearance, or waiver to the Credit Agreement or any other Loan Document, or to any waiver of any of the provisions thereof; or (iii) to limit or impair the Administrative Agent’s or any Lender’s right to demand strict performance of all terms and covenants as of any date.  Each Loan Party hereby ratifies and reaffirms its obligations under the Credit Agreement and the other Loan Documents to which it is a party and agrees that none of the amendments or modifications to the Credit Agreement set forth in this Amendment shall impair such Loan Party’s obligations under the Loan Documents or the Administrative Agent’s or any Lender’s rights under the Loan Documents.  Each Loan Party hereby further ratifies and reaffirms the validity and enforceability of all of the Liens heretofore granted, pursuant to and in connection with the Guarantee and Collateral Agreement or any other Loan Document to the Administrative Agent on behalf and for the benefit of the Secured Parties, as collateral security for the obligations under the Loan Documents, in accordance with their respective terms, and acknowledges that all of such Liens, and all collateral heretofore pledged as security for such obligations, continues to be and remain collateral for such obligations from and after the date hereof.  Each Loan Party acknowledges and agrees that the Credit Agreement and each other Loan Document is still in full force and effect and acknowledges as of the date hereof that such Loan Party has no defenses to enforcement of the Loan Documents.  Each Loan Party waives any and all defenses to enforcement of the Credit Agreement as amended hereby and each other Loan Documents as amended hereby that might otherwise be available as a result of this Amendment.  To the extent

4

any terms or provisions of this Amendment conflict with those of the Credit Agreement or other Loan Documents, the terms and provisions of this Amendment shall control.

(b) To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby.

(c) This Amendment is a Loan Document.  

12. Entire Agreement.  This Amendment constitutes the entire agreement between the Loan Parties and the Lenders pertaining to the subject matter contained herein and supersedes all prior agreements, understandings, offers and negotiations, oral or written, with respect hereto and no extrinsic evidence whatsoever may be introduced in any judicial or arbitration proceeding, if any, involving this Amendment.  All of the terms and provisions of this Amendment are hereby incorporated by reference into the Credit Agreement, as applicable, as if such terms and provisions were set forth in full therein, as applicable.  All references in the Credit Agreement to “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like import shall mean the Credit Agreement, as applicable, as amended hereby.  

13. Severability.  The provisions of this Amendment are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Amendment in any jurisdiction.

[SIGNATURE PAGES FOLLOW]

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In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

BORROWER:

SILVER SPRING NETWORKS, INC.,

as the Borrower

By:	/s/ Kenneth P. Gianella
Name:	Kenneth P. Gianella
Title:	VP Finance
	6/3/2016

First Amendment to Credit Agreement

In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

BORROWER:

SILVER SPRING NETWORKS, INC.,

as the Borrower

By:	/s/ James L. Callahan
Name:	James L. Callahan
Title:	Treasurer

First Amendment to Credit Agreement

SILICON VALLEY BANK,

as Administrative Agent, as a Lender, as Issuing

Lender and as Swingline Lender

By:	/s/ Vince O’Hara
Name:	Vince O’Hara
Title:	VP

First Amendment to Credit Agreement

HSBC BANK USA, NATIONAL

ASSOCIATION,

as a Lender

By:	/s/ Mark Hillhouse
Name:	Mark Hillhouse
Title:	SVP

First Amendment to Credit Agreement

EXHIBIT B

FORM OF COMPLIANCE CERTIFICATE

SILVER SPRING NETWORKS, INC.

Date:  ___________ ____, 20____

This Compliance Certificate is delivered pursuant to Section 6.2(b) of that certain Credit Agreement, dated as of December 18, 2015, by and among SILVER SPRING NETWORKS, INC., a Delaware corporation (the “Borrower”), the Lenders party thereto, and Silicon Valley Bank, as Administrative Agent (as amended, restated, amended and restated, supplemented, restructured or otherwise modified from time to time, the “Credit Agreement”).  Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

The undersigned, a duly authorized and acting Responsible Officer of the Borrower, hereby certifies, in his/her capacity as an officer of the Borrower, and not in any personal capacity, as follows:

I have reviewed and am familiar with the contents of this Compliance Certificate.

I have reviewed the terms of the Credit Agreement and the other Loan Documents and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and condition of the Borrower and its Subsidiaries during the accounting period covered by the financial statements attached hereto as Attachment 1 (the “Financial Statements”).  Except as set forth on Attachment 2, such review did not disclose the existence during or at the end of the accounting period covered by the Financial Statements, and I have no knowledge of the existence as of the date of this Compliance Certificate, of any condition or event which constitutes a Default or an Event of Default.

Attached hereto as Attachment 3 are the computations showing compliance with the covenants set forth in Section 7.1 of the Credit Agreement and other calculations required by the Credit Agreement.

To the extent not previously disclosed to the Administrative Agent, a description of any change in the jurisdiction of organization of any Loan Party is as follows: [________________] or [None].

To the extent not previously disclosed to the Administrative Agent, a list of any patents, registered trademarks or registered copyrights issued to or acquired by any Loan Party since the date of the most recent report delivered is as follows: [________________] or [None]

Delivery of an executed counterpart of a signature page of this Compliance Certificate by fax transmission or other electronic mail transmission (e.g. “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart hereof.

[Remainder of page intentionally left blank; signature page follows]

IN WITNESS WHEREOF, I have executed this Compliance Certificate as of the date first written above.

SILVER SPRING NETWORKS, INC.

By:

Name:

Title:

Attachment 1

to Compliance Certificate

[Attach Financial Statements]

Attachment 2

to Compliance Certificate

Except as set forth below, no Default or Event of Default has occurred.  [If a Default or Event of Default has occurred, the following describes the nature of the Default or Event of Default in reasonable detail and the steps, if any, being taken or contemplated by the Borrower to be taken on account thereof.]

EXHIBIT B

Attachment 3

to Compliance Certificate

The information described herein is as of [____________], [____] (the “Statement Date”), and pertains to the Subject Period defined below.

I.	Section 7.1(a) — Adjusted Quick Ratio
	Actual:
	A.	Adjusted Quick Ratio for the applicable month:
		1.	cash:			$___________
		2.	Cash Equivalents:			$___________
		3.	total accounts receivable:			$___________
		4.	Quick Assets (the sum of items 1-3):			$___________
		5.	without duplication, any short-term or long-term Investments permitted by the Borrower’s Investment Policy effective March 4, 2016 and as in effect as of the First Amendment Effective Date, as may be modified from time to time thereafter with the approval of its board of directors or duly appointed committee thereof, provided that prior to inclusion in this calculation, any such amendments or modifications thereto must be approved in writing by the Required Lenders, such approval to be made on a commercially reasonable basis and within 30 days of delivery to the Administrative Agent of any such amendment or modification			$___________
		6.	total Obligations:			$___________
		7.	Total Liabilities that mature within one (1) year:			$___________
		8.	Current Liabilities (the sum of items 6 and 7):			$___________
		9.	current Deferred Revenue:			$___________
		Adjusted Quick Ratio for the applicable month (ratio of (Line I.A. 4 plus Line I.A. 5) to (Line I.A 8 minus line I.A 9)):				________ to 1
		Minimum required:				1.10 to 1
		Covenant compliance :		Yes  o	No  o

II.	Section 7.1(b) — Consolidated Adjusted EBITDA Required:   Actual:
	A.	Consolidated Non-GAAP Net Income:			$___________
	B.	Consolidated Interest Expense:			$___________
	C.	provisions for taxes based on income			$___________
	D.	total depreciation expense			$___________
	E.	total amortization expense			$___________
	F.	non-cash stock compensation expenses			$___________
	G.	losses on the disposition of assets			$___________
	H.	non-cash foreign exchange translation losses or other realized non-cash losses from foreign currency exchange			$___________
	I.	other non-cash and non-recurring expenses approved in the discretion of the Administrative Agent			$___________
	J.	gains on the disposition of assets			$___________
	K.	non-cash foreign exchange translation gains or other realized non-cash gains from foreign currency exchange			$___________
	L.	interest income			$___________
		Consolidated Adjusted EBITDA (the sum of lines II A-I minus the sum of lines J-L):			$___________
		Minimum required:			$___________
		Covenant compliance:	Yes  o	No  o

EX-10.2

Exhibit 10.2

May 31, 2014

Ken Gianella

[email]

Dear Ken:

On behalf of Silver Spring Networks, Inc. (the “Company”), I am pleased to offer you the position of Vice President, Finance.

The terms of your new position with the Company are as set forth below:

1. Position. You will be employed as a Vice President, Finance and will report to Jim Burns the Company’s CFO and Executive Vice President. You will begin this new position with the Company on July 14, 2014 (your “Start Date”).

2. Proof of Right to Work. For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.

3. Compensation.

a) Base Salary. Your starting salary will be $240,000 per year (your “Base Salary”), subject to applicable withholding taxes and paid pursuant to the Company’s regular payroll schedule.

b) Bonus. You are eligible to participate in Silver Spring Networks’ 2014 Bonus Plan. Your bonus target is equivalent to 30% of your Base Salary for the applicable bonus period, and subject to the terms and conditions of the applicable bonus plan. The Company’s Human Resources Department will inform you of the details of the plan. The Company reserves the right to vary or terminate (with or without replacement by a further scheme) any bonus scheme in place at any time.

c) Annual Review. Following your first year of employment, your base salary will be reviewed at the end of each calendar year as part of the Company’s normal salary review process.

4. Stock Options. In connection with the commencement of your employment, the Company will recommend to its Board of Directors that it grant you an option (the “Option”) to purchase 15,000 shares of Common Stock (the “Shares”) with an exercise price equal to the fair market value of the Common Stock on the date of grant. This Option will vest and become exercisable, subject to your continued employment with the Company or one of its subsidiaries on each applicable vesting date, as to 25% of the Shares after your first year of employment and as to 1/48^th of the

Shares each month thereafter. The Option will be granted under and subject to the terms and conditions of the Company’s equity incentive plan and will be contingent on your execution of the Company’s standard Stock Option Agreement. A copy of the Company’s equity incentive plan and the Stock Option Agreement will be provided to you as soon as practicable after the grant date. You agreeto sign and return any Stock Option Agreement provided to you by the Company in connection with this grant. You also agree to sign any other agreements or documents provided by the Company that may be required under applicable laws to receive the Option or any shares of common stock upon exercise of the Option. 

5. Restricted Stock Units. In connection with the commencement of your employment, the Company will recommend to its Board of Directors that it grant you an award of 7,500 restricted stock units (“RSUs”), which vest into shares of the Company’s common stock. The RSUs will be granted under and subject to the terms and conditions of the Company’s equity incentive plan and will be contingent on your execution of the Company’s standard RSU Agreement. The RSUs will vest, subject to your continued employment with the Company or one of its subsidiaries on each applicable vesting date, as follows: (a) 25% of the RSUs shall vest on the first anniversary of the grant date; and (b) the remaining RSUs shall vest in twelve equal quarterly installments following the first anniversary of the grant date until the RSUs have become fully vested four years from the grant date. A copy of the Company’s equity incentive plan and the RSU agreement will be provided to you as soon as practicable after the grant date. You agree to sign and return any RSU agreement provided to you by the Company in connection with this grant. You also agree to sign any other agreements or documents provided by the Company that may be required under applicable laws to receive the RSUs and any shares of common stock upon settlement of the RSUs.

6.Benefits.

a) Employee Benefits. You are eligible to participate in any medical insurance plans, 401(k) plans, deferred compensation plans, life insurance plans, retirement or other employee benefit plans or fringe benefit plans or perquisites established by the Company for its employees which may become effective from time to time during your employment with the Company.

b) Vacation. You are eligible to participate in the Company’s Exempt Employees’ Vacation Program. There is no prescribed annual vacation allotment for exempt employees, meaning you will not accrue vacation. Vacation requests are subject to approval by your manager in accordance with the terms of the vacation policy.

c) Sick Leave. You are eligible for paid sick leave in accordance with the terms of the Company’s sick leave policy. You may take up to ten (10) paid sick days per calendar year, pro-rated for the remainder of this year.

7. Confidential Information and Invention Assignment Agreement. Your acceptance of this offer and commencement of employment with the Company is contingent upon your execution, and delivery to an officer of the Company, of the Company’s Confidential Information and Invention Assignment Agreement, a copy of which is enclosed for your review and execution (the “Confidentiality Agreement”), prior to or on your Start Date.

8. At-Will Employment. You understand that your employment with the Company is not for any specified term and will at all times be on an “at will” basis, meaning that either you or the Company may terminate your employment at any time for any reason or no reason. This letter will reflect the final, total and complete agreement between you and the Company regarding how your employment may be terminated. No other agreements exist regarding the subject of termination. Even though your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time during your tenure with the Company, neither you nor the Company can change the “at will” nature of your

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555Broadway Street, RedwoodCity, CA94063

employment, unless the Chief Executive Officer of the Company signs a written contract which explicitly changes your status as an “at will” employee. 

9. No Conflicts. You represent to the Company that your performance of all the terms of this agreement will not breach any other agreement to which you are a party and that you have not, and will not during the term of your employment with the Company, enter into any oral or written agreement in conflict with any of the provisions of this agreement. In addition, as we have advised you, you are not to bring with you to the Company, or use or disclose to any person associated with the Company, any confidential or proprietary information belonging to any former employer or other person or entity with respect to which you owe an obligation of confidentiality under any agreement or otherwise. The Company does not need and will not use such information and we will assist you in any way possible to preserve and protect the confidentiality ofproprietary Information belonging to third parties. Also, as we have advised you, we expect you to abide by your obligations to refrain from soliciting any person employed by or otherwise associated with any former employer and suggest that you refrain from having any contact with such persons until such time as anynon­solicitation obligation expires.

10. Background & Reference Checks. This offer is contingent upon successful completion ofbackground investigation and reference checks.

This offer letter, once accepted, constitutes the entire agreement between you and the Company with respect to the subject matter hereof and supersedes and replaces any prior representations or agreements, whether written or oral, relating to such subject matter.

We are all delighted to be able to extend you this offer and look forward to working with you. To indicate your acceptance of the Company’s offer, please sign and date this letter in the space provided below and return It to me, no later than June 4, 2014 at which time this employment offer will expire. Additionally, as part of your acceptance of the Company’s offer, please return a signed and dated copy of the enclosed Confidentiality Agreement.

Very truly yours,

Silver Spring Networks, Inc.

/s/ Amy Cappellanti-Wolf

Amy Cappellanti-Wolf

Chief Human Resources Officer

ACCEPTED AND AGREED:

Kenneth P. Gianella

/s/ Kenneth P. Gianella

Signature

6/3/2014

Date

Attachments:

1. Attachment A -— Confidential Information and Invention Assignment Agreement

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555Broadway Street, RedwoodCity, CA94063

Attachment A

Confidential Information and Invention Assignment Agreement

Page 4

555Broadway Street, RedwoodCity, CA94063

SILVER SPRING NETWORKS, INC.

EMPLOYEE CONFIDENTIAL INFORMATION AND

INVENTION ASSIGNMENT AGREEMENT

As a condition of my becoming employed (or my employment being continued) by Silver Spring Networks, Inc., a Delaware corporation or any of its current or future subsidiaries, affiliates, successors or assigns (collectively, the “Company”), and in consideration of my employment with the Company and my receipt of the compensation now and hereafter paid to me by the Company, I agree to the following:

1. At-Will Employment Relationship. I understand and acknowledge that my employment with the Company is and shall continue to be at-will, as defined under applicable law, meaning that either I or the Company may terminate my employment at any time for any reason or no reason, with or without notice, without further obligation or liability.

2. Confidential Information.

(a) Company Information. I agree at all times during the term of my Employment with the Company and thereafter, to hold in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm, corporation or other entity without written authorization of the Board of Directors of the Company, any Confidential Information of the Company which I obtain or create. I further agree not to make copies of such Confidential Information except as authorized by the Company, as necessary to carry out my assigned responsibilities as a Company employee. I understand that “Confidential Information” means any Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, services, suppliers, customer lists and customers (including, but not limited to, customers of the Company on whom I call or called, or with whom I become or became acquainted during my employment), prices and costs, markets, software, developments, inventions, laboratory notebooks, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, licenses, finances, budgets or other business information disclosed to me by the Company either directly or indirectly in writing, orally or by drawings or observation of parts or equipment or created by me during the period of my employment, whether or not during working hours. I understand that “Confidential Information” includes, but is not limited to, information pertaining to any aspects of the Company’s business which is either information not known by actual or potential competitors of the Company or is proprietary information of the Company or its customers or suppliers, whether of a technical nature or otherwise. I further understand that Confidential Information does not include any of the foregoing items which has become publicly and widely known and made generally available through no wrongful act of mine or of others who were under confidentiality obligations as to the item or items involved.

(b) Former Employer Information. I represent that my performance of all terms of this Agreement as an employee of the Company has not breached and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by me in confidence or trust prior or subsequent to the commencement of my employment with the Company, and I will not disclose to the Company, or induce the Company to use, any inventions, confidential or proprietary information or material belonging to any previous employer or any other party.

(c) Third Party Information. I recognize that the Company has received and in the future will receive confidential or proprietary information from third parties subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. I agree to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out my work for the Company consistent with the Company’s agreement with such third party.

3.Inventions.

(a) Inventions Retained and Licensed. I have attached hereto, as Exhibit A, a list describing with particularity all inventions, original works of authorship, developments, improvements, and trade secrets which were made by me prior to the commencement of my employment (collectively referred to as “Prior Inventions”), which belong solely to me or belong to me jointly with another, which relate in any way to any of the Company’s proposed businesses, products or research and development, and which are not assigned to the Company hereunder; or, if no such list is attached, I represent that there are no such Prior Inventions. If, in the course of my employment with the Company, I incorporate into a Company product, process or machine a Prior Invention owned by me or in which I have an interest, the Company is hereby granted and shall have a non-exclusive, royalty- free, irrevocable, perpetual, worldwide license (with the right to sublicense) to make, have made, copy, modify, make derivative works of, use, sell and otherwise distribute such Prior Invention as part of or in connection with such product, process or machine.

(b) Assignment of Inventions. I agree that I will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee, all my right, title and interest throughout the world in and to any and all inventions, original works of authorship, developments, concepts, know-how, improvements or trade secrets, whether or not patentable or registrable under copyright or similar laws, which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time in which I am employed by or a consultant of the Company (collectively referred to as “Inventions”), except as provided in Section 3(e) below. I further acknowledge that all inventions, original works of authorship, developments, concepts, know- how, improvements or trade secrets which are made by me (solely or jointly with others) within the scope of and during the period of my employment with the Company are “works made for hire” (to the greatest extent permitted by applicable law) and are compensated by my wages, unless regulated otherwise by the mandatory law of the state of California.

(c) Maintenance of Records. I agree to keep and maintain adequate and current written records of all Inventions made by me (solely or jointly with others) during the term of my employment with the Company. The records may be in the form of notes, sketches, drawings, flow charts, electronic data or recordings, laboratory notebooks, and any other format. The records will be available to and remain the sole property of the Company at all times. I agree not to remove such records from the Company’s place of business except as expressly permitted by Company policy which may, from time to time, be revised at the sole election of the Company for the purpose of furthering the Company’s business.

(d) Patent and Copyright Rights. I agree to assist the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in the Inventions and any copyrights, patents, trademarks, mask work rights, moral rights, or other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, recordations, and all other instruments which the Company shall deem necessary in order to apply for, obtain, maintain and transfer such rights and in order to assign and convey to the Company, its successors, assigns and nominees the sole and exclusive rights, title and interest in and to such Inventions, and any copyrights, patents, mask work rights or other intellectual property rights relating thereto. I further agree that my obligation to execute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after the termination of this Agreement until the expiration of the last such intellectual property right to expire in any country of the world. If the Company is unable because of my mental or physical incapacity or unavailability or for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions or original works of authorship assigned to the Company as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the application for, prosecution, issuance, maintenance or transfer of letters patent or copyright registrations thereon with the same legal force and

Silver Spring Networks-CaliforniaECIIAA

2

effect as if originally executed by me.I hereby waive and irrevocably quitclaim to the Company any and all claims, of any nature whatsoever, which I now or hereafter have for infringement of any and all proprietary rights assigned to the Company.

(e) Exception to Assignments. I understand that the provisions of this Agreement requiring assignment of Inventions to the Company do not apply to any invention which qualifies fully under the provisions of California Labor Code Section 2870 (attached hereto as Exhibit B). I will advise the Company promptly in writing of any inventions that I believe meet such provisions and are not otherwise disclosed on Exhibit A.

4. Returning Company Documents and Property. I agree that, at the time of termination of my employment with the Company, I will deliver to the Company (and will not keep in my possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, laboratory notebooks, materials, flow charts, equipment, other documents or property, or reproductions of any aforementioned items developed by me pursuant to my employment or otherwise belonging to the Company, its successors or assigns. I further agree that any property situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice. In the event of the termination of my employment, I agree to sign and deliver the “Termination Certification” attached hereto as Exhibit C.

5. Notification to Other Parties. I hereby consent that, after my employment ends, the Company may notify my subsequent employer(s), and any other persons or entities that I render services for in any capacity, about my rights and obligations under this Agreement.

6. Solicitation of Employees, Consultants and Other Parties. I agree that during the term of my employment with the Company, and for a period of twelve (12) months immediately following the (voluntary or involuntary) termination of my employment with the Company for any reason, whether with or without cause, I shall not either directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees or consultants to terminate their relationship with the Company, or attempt to solicit, induce, or recruit employees or consultants of the Company, either for myself or for any other person or entity. Further, following (voluntary or involuntary) termination of my employment with the Company for any reason, with or without cause, I shall not at any time use Company trade secrets to solicit any licensor to or customer of the Company or licensee of the Company’s products, in each case, that are known to me, with respect to any business, products or services that are competitive to the products or services offered by the Company or under development as of the date of termination of my employment with the Company.

7. Representations and Covenants.

(a) Facilitation of Agreement. I agree to execute promptly any proper oath or verify any proper document required to carry out the terms of this Agreement upon the Company’s written request to do so.

(b) Conflicts. I represent that my performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by me in confidence or in trust prior to commencement of my employment with the Company. I have not entered into, and I agree I will not enter into, any oral or written agreement in conflict with any of the provisions of this Agreement. I agree that, during the term of my employment with the Company, I will devote full time to the business of the Company and will not engage in any other employment, occupation, consulting or other business activity directly related to the business in which the Company is now involved or becomes involved during the term of my employment nor will I engage in any other activities that conflict with my obligations to the Company.

Silver Spring Networks-CaliforniaECIIAA

3

(c)Voluntary Execution.I certify and acknowledge that I have carefully read all of the provisions of this Agreement and that I understand and will fully and faithfully comply with such provisions.

8. General Provisions.

(a) Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California, without giving effect to the principles of conflict of laws.

(b) Entire Agreement. This Agreement sets forth the entire agreement and understanding between the Company and me relating to the subject matter herein and merges all prior discussions between us. No modification or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing signed by the party to be charged. Any subsequent change or changes in my duties, obligations, rights or compensation will not affect the validity or scope of this Agreement.

(c) Severability. If one or more of the provisions in this Agreement are deemed void by law, then the remaining provisions will continue in full force and effect.

(d) Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.

(e) Survival. The provisions of this Agreement shall survive the termination of my employment and the assignment of this Agreement by the Company to any successor in interest or other assignee.

(f) Remedies. I acknowledge and agree that violation of this Agreement by me may cause the Company irreparable harm, and therefore agree that the Company will be entitled to seek extraordinary relief in court, including but not limited to temporary restraining orders, preliminary injunctions and permanent injunctions without the necessity of posting a bond or other security and in addition to and without prejudice to any other rights or remedies that the Company may have for a breach of this Agreement.

(g) ADVICE OF COUNSEL. I ACKNOWLEDGE THAT, IN EXECUTING THIS AGREEMENT, I HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND I HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.

Silver Spring Networks-CaliforniaECIIAA

4

The parties have executed this Agreement on the respective dates set forth below:

COMPANY: EMPLOYEE:

SILVER SPRING NETWORKS, INC Kenneth P.Gianella an Individual:

/s/ Scott Lang		/s/ Kenneth P. Gianella
Signature		Signature
By:	Scott Lang	Name	Kenneth P. Gianella
Title:	Chairman, President and CEO
Date:		Date:	6/3/2014
Address:	555 Broadway Street	Address:	[address]
	Redwood City, CA 94063

Silver Spring Networks-CaliforniaECIIAA

5

EXHIBIT A

LIST OF PRIOR INVENTIONS

AND ORIGINAL WORKS OF AUTHORSHIP

EXCLUDED FROM SECTION 3

Title Date Identifying Number or Brief Description

x No inventions or improvements

o Additional Sheets Attached

Signature of Employee:	/s/ Kenneth P. Gianella
Printed Name of Employee:	Kenneth P. Gianella
Date:	6/3/2014

EXHIBIT B

Section 2870 of the California Labor Code is as follows:

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

Date:	6/3/2014
		/s/ Kenneth P. Gianella
		(Employee’s Signature)
		Kenneth P. Gianella
		(Printed Name)

EXHIBIT C

TERMINATION CERTIFICATION

This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, laboratory notebooks, flow charts, materials, equipment, other documents or property, or copies or reproductions of any aforementioned items belonging to Silver Spring Networks, Inc., its subsidiaries, affiliates, successors or assigns (together the "Company").

I further certify that I have complied with all the terms of the Company’s Employee Confidential Information and Invention Assignment Agreement signed by me, including the reporting of any inventions and original works of authorship (as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement.

I further represent that, in compliance with my Employee Confidential Information and Invention Assignment Agreement, I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases, other original works of authorship, customer lists, business plans, financial information or other subject matter pertaining to any business of the Company or any of its employees, clients, consultants or licensees.

I further represent that, in compliance with my Employee Confidential Information and Invention Assignments Agreement, for twelve (12) months from the date of the termination of my employment with the Company, I shall not either directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees or consultants to terminate their relationship with the Company, or attempt to solicit, induce, or recruit employees or consultants of the Company, either for myself or for any other person or entity. Further, I shall not at any time use Company trade secrets to solicit any licensor to or customer of the Company or licensee of the Company’s products, in each case, that are known to me, with respect to any business, products or services that are competitive to the products or services offered by the Company or under development as of the date of termination of my employment with the Company.

Date:	6/3/2014
		/s/ Kenneth P. Gianella
		(Employee’s Signature)
		6/3/2014
		(Printed Name)

EX-10.3

Exhibit 10.3

January 29, 2015

Kenneth Gianella

[address]

Dear Ken:

On behalf of Silver Spring Networks, Inc. (the "Company"), I am pleased to offer you the opportunity to receive certain benefits in the event of your termination without cause or "constructive termination" from the Company in connection with a Change of Control.  These benefits are summarized below and are qualified in their entirety by the definitions, terms and conditions in Attachment A.

Benefits Upon Termination Without Cause or Constructive Termination in Connection with a Change of Control*

If your termination occurs 2 months prior to or 12 months after a change of control:

• 6 months of your base salary + pro-rated bonus (if any)

• 6 months ongoing medical and other related benefits

• Equity vesting acceleration - 50% of your unvested equity will accelerate and become vested

* You may be required by the acquirer to continue employment for up to 3 months in order to receive these benefits.

Prior Agreements

To receive these benefits, you must waive any rights you have relating to similar severance benefits  contained in any other agreement (including your offer letter of employment or prior versions of this award letter) or award you have previously entered into with or received from the Company.

To indicate your acceptance of the Company's offer (including the terms and conditions in Attachment A), please sign and date this agreement in the space provided at the end of Attachment A, initial the other pages where indicated, and return it to me no later than 10 days from the date of this letter, at which time this offer will expire.

Very truly yours,

James Burns

CFO & Executive Vice President

Silver Spring Networks, Inc.

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ATTACHMENT A

Definitions, Terms and Conditions

1. Termination of Employment.

a. At-Will Employment. Your employment with the Company is at-will, meaning either you or the Company can terminate your employment at any time, with or without cause, and with or without notice. Neither you nor the Company can change the "at will" nature of your employment, unless the CEO of the Company and you sign a written contract that explicitly changes your status as an "at will" employee.

b. Payment & Benefits Upon Termination. Your entitlement to payment and benefits upon termination is as follows:

(i) Termination Without "Cause" or "Constructive Termination" in Connection with a Change of Control.  If, within the period beginning two months prior to and ending twelve months following a Change of Control (as defined in Section 3((b) below), your employment is (1) terminated involuntarily other than (x) for Cause (as defined in Section 3(a), below), (y) your Disability (as defined in Section 3(e), below) or (z) your death or (2) in the event of your "Constructive Termination" (as defined in Section 3(d) below):

(A) you will receive payment for any earned and unpaid salary, bonus and commissions, and unpaid vacation accrued as of the date of your termination of employment; and,

(B) in the event you execute and do not revoke a separation agreement, including a release of claims ("Release"), to be drafted by the Company based upon its standard forms, you will be offered the Separation Compensation (as defined in Section 2,below).  You will not be entitled to or offered any form of additional severance pay or benefits other than the Separation Compensation (e.g., you will not be entitled to pay or benefits under any employee severance plan that is generally applicable to employees).

(ii) Termination Without Cause or Constructive Termination Other Than in Connection with a Change of Control.If your employment is terminated without Cause or your Constructive Termination does not occur within the period beginning two months prior to and ending twelve months following a Change of Control you will receive payment(s) for all earned and unpaid salary, bonus and commissions, and unpaid vacation accrued as of the date of your termination of employment.   You will not be entitled to the Separation Compensation, or any other form of severance pay or benefits.

(iii) Voluntary Termination. If you voluntarily terminate your employment, or give notice that you will voluntarily terminate your employment at a future date (and whether or not the Company accelerates the effective date of your resignation date that you provide to an earlier termination date), you will receive payment(s) for all earned and unpaid salary, bonus and commissions, and unpaid vacation accrued as of the date of termination.  You will not be entitled to the Separation Compensation, or any other form of severance pay or benefits.

(iv) Termination for Cause. If your employment is terminated for Cause, you will receive payment(s) for all earned and unpaid salary, bonus and commissions, and unpaid vacation accrued as of the date of your termination of employment.  You will not be entitled to the Separation Compensation, or any other form of severance pay or benefits.

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(v) Termination due to death or Disability.If your employment is terminated due to your death or Disability, you will receive payment(s) for all earned and unpaid salary, bonus and commissions, and unpaid vacation accrued as of the date of your termination of employment.   You will not be entitled to the Separation Compensation, or any other form of severance pay or benefits.

2. Separation Compensation. If you are entitled to Separation Compensation under Section   (b)(i) above and your Termination  without  Cause or your Constructive Termination  occurs within  the period beginning two months prior to and ending twelve months following a Change of Control, your "Separation Compensation" will include each of the following, provided however that you may be required by the successor entity  (at its sole discretion) to continue  your employment for up to three (3) months from the effective date of a Change of Control in order to be eligible to receive any or all of the following:

a. Salary Continuance. You will be offered pay equal to six (6) months of your regular base salary and a pro-rated bonus (if any), subject to applicable payroll deductions and withholdings.   The first salary continuance payment equal to three (3) months of your regular base salary shall be made on the thirtieth (30th) day following your termination of employment (unless a longer period is required by law to make the Release effective, in which case the first salary continuance payment shall me made on the sixtieth (60^th) day following your termination of employment)  provided the Release is effective at such time, and the remainder shall be paid in monthly installments  beginning on the 1st day of the fourth month following  your termination of employment, and on the 1st day of each month thereafter, until the total payment obligation is fulfilled.

b. Acceleration of Vesting. The vesting applicable to any equity grants previously made by the Company to you shall accelerate (or the Company's repurchase right  with respect to such shares underlying such equity grants shall lapse) as to fifty percent (50%)  of the unvested shares underlying  such equity grant or grants at the time of termination, such acceleration effective immediately prior to such termination.

c. Other Benefits.  The Company will reimburse  you for your expenses in continuing  medical insurance benefits for you and your family (meaning  medical, dental, optical, and mental health, but not life, insurance) under the Company's benefit plans (or otherwise in obtaining coverage substantially comparable to the coverage provided to you prior to the termination) over the period beginning on the date your employment terminates and ending on the earlier of (a) six (6) months  following such date, or (b) the date you commence employment  with another entity.

3. Definitions.

a. Cause. For the purposes of this letter agreement, "Cause" for termination of your employment  will exist if you are terminated for any of the following reasons: (i) your material failure to perform your duties and responsibilities to the Company, including but not limited to a failure to cooperate with the Company in any investigation  or formal proceeding; (ii) your commission of any act of fraud, embezzlement, dishonesty or any other  intentional  misconduct that results in material injury to the Company; (iii) the unauthorized use or disclosure by you of any proprietary  information or trade secrets of the Company or any other party to whom you owe an obligation of nondisclosure as a result of your relationship with the Company; (iv) you are convicted of, or enter a no contest plea to, a felony; or (v) your willful, wrongful and uncured breach of any of your obligations under any Company policy, written  agreement or covenant with the Company (including  this letter agreement).  The determination as to whether you are being terminated for cause shall be made in good faith by the Company's Board of Directors (the "Board").  The foregoing definition does not in any way limit the Company's ability to terminate your employment at any time as provided in Section 1 above.

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b. Change of Control.For purposes of this letter agreement,"Change of Control" of the Company is defined as: (i) the date any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes,subsequent  to the date hereof, the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly,of securities of the Company representing 50% or more of the total voting power represented by the Company's then outstanding  voting securities,other than pursuant to a sale by the Company of its securities in a transaction or series of related transactions the primary purpose of which is to raise capital for the Company; (ii) the date of the consummation of a merger or consolidation of the Company with any other corporation that has been approved by the stockholders of the Company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto  continuing  to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting powerrepresented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (iii) the date of the consummation of the sale or disposition by the Company of all or substantially all the Company's assets; or (iv) the date of a change in the composition of the Board such that a majority of the members of the Board immediately following such change in composition are no longer "Incumbent Directors." For purposes of the foregoing clause (iv),"Incumbent Directors" means (a) members of the Board as of the date of this letter agreement, or (b) members of the Board elected or appointed to the Board following the date of this letter agreement other than in connection with an actual or threatened proxy contest.

c. Code. For purposes of this letter agreement, "Code" means the Internal Revenue Code of 1986, as amended.

d. Constructive Termination.  For the purposes of this letter agreement, "Constructive Termination" means the termination of your employment by you after the occurrence of any of the following events: (A) within the period beginning two months prior to and ending twelve months following a Change of Control, a material reduction in your job duties and responsibilities, or a material adverse change to your title to which you have not consented to in advance of such change; provided, however, that following a Change of Control, neither a change in your title to a substantially equivalent title within any successor entity nor a reassignment to a position that is substantially similar to your position prior to the Change of Control shall constitute a material adverse change to your title or a material reduction in your job duties or responsibilities; (B) without your prior written approval, the Company requires you to relocate to a facility or location more than thirty-five (35) miles from the location of the primary location at which you were working for the Company immediately before the required change of location; (C) except as otherwise agreed by you, any reduction of your base salary in effect immediately prior to such reduction (other than as part of an across-the­ board, proportional reduction); or (D) following a Change of Control, the failure of a successor entity to assume this letter agreement.  Notwithstanding anything else contained herein, in the event of the occurrence of a condition listed above, as a condition to receiving any benefits triggered by a Constructive Termination, you must provide notice to the Company within ninety (90) days of the occurrence of a condition listed above and allow the Company thirty (30) days in which to cure such condition.  Additionally, in the event the Company fails to cure the condition within the cure period provided, as a condition to receiving any benefits triggered by a Constructive Termination, you must terminate employment with the Company within thirty (30) days of the end of the cure period.

e. Disability. For the purposes of this letter agreement, "Disability" means "disability" within the meaning of Section 22(e)(3) of the Code.

4. Code Section 409A. For purposes of this Agreement, a termination of employment will be determined consistent with the rules relating to a "separation from service" as defined in Section 409A of the Code and the regulations thereunder ("Section 409A").  Notwithstanding anything else provided herein, to the extent any payments provided under this Agreement in connection with your termination of employment constitute deferred compensation subject to Section 409A, and you are deemed at the time of such

4 Initial: KPG

termination of employment to be a "specified employee" under Section 409A, then such payment shall not be made or commence until the earlier of (i) the expiration of the 6-month period measured from your separation from service from the Company or (ii) the date of your death following such a separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to you including, without limitation, the additional tax for which you would otherwise be liable under Section409A(a)(l)(B) in the absence of such a deferral.  The first payment thereof will include a catch-up payment covering the amount that would have otherwise been paid during the period between your termination of employment and the first payment date but for the application of this provision, and the balance of the installments (if any) will be payable in accordance with their original schedule. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A, the provision will be read in such a manner so that all payments hereunder comply with Section 409A. To the extent any payment underthis Agreement may be classified as a "short-term deferral" within the meaning of Section 409A, such paymentshall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

5. Code Section 280G. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to you (i) constitute "parachute payments" within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then your benefits under this Agreement shall be either:

a. delivered in full; or

b. delivered as to such lesser extent that would result in no portion of such benefits being subject to the Excise Tax, (with first a pro rata reduction of (i) cash payments subject to Section 409A of the Code as deferred compensation and (ii) cash payments not subject to Section 409A of the Code, then (i) employee benefits that are subject to Section 409A of the Code as deferred compensation and (ii) employee benefits not subject to Section 409A of the Code and then a pro rata cancellation of (i) equity-based compensation subject to Section 409A of the Code as deferred compensation and (ii) equity-based compensation not subject to Section 409A of the Code), whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in your receipt on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code.

Unless you and the Company otherwise agree in writing, the determination of your excise tax liability and the amount required to be paid under this Section shall be made in writing by an accounting firm to be selected by reasonable agreement between you and the Company, whose determination shall be conclusive and binding upon you and the Company for all purposes.  For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section 280G and 4999 of the Code. You and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.

6. Other Agreements. This Attachment A sets forth the terms of the benefits you are eligible to receive in the event your employment with the Company is terminated in the manner described herein and supersedes any prior representations or agreements, whether written or oral.  In the event of a conflict between the terms of this Attachment A and any other agreement you have entered into with the Company (including the cover letter to this Attachment A), the terms of this Attachment A shall apply.   By signing below, you hereby agree to waive any rights you have relating to severance benefits that may be

5 Initial: KPG

contained in your offer letter of employment (including, but not limited to, benefits related to salary,bonus, continuation of benefits, and the acceleration of vesting of equity awards), any stock option or other equity award,or anyother agreement or award you have previously entered into with or received from the Company (including prior versions of this award).  The definitions, terms and conditions contained herein may not be modified or amended except by a written agreement,signed by an authorized representative of the Company and by you.

* * *

ACCEPTED AND AGREED:

Kenneth Gianella

/s/ Kenneth P. Gianella

Signature

Kenneth P. Gianella

Name

2/10/2015

Date

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EX-10.4

Exhibit 10.4

June 12, 2016

Kenneth P. Gianella

[address]

Dear Ken:

I am pleased you have agreed to serve as interim Chief Financial Officer (“Interim CFO”) of Silver Spring Networks, Inc. (the “Company”) during the Company’s search for a permanent Chief Financial Officer. This letter (the “Agreement”) sets forth the terms of your employment as the Company’s Interim CFO and is effective as of June 10, 2016 (the “Effective Date”).

1. Position. In your position as Interim CFO, you will report to Michael Bell, the Company’s President & Chief Executive Officer (the “CEO”). The Interim CFO position is a full-time position with its principal work place at the Company’s headquarters in San Jose, California.

2. Term. From the Effective Date, your position as Interim CFO may continue, at the latest, until the date on which a permanent successor Chief Financial Officer is hired and commences employment with the Company (the “Interim Term”). Notwithstanding the foregoing, the nature of your employment remains “at will,” and may be terminated by you or the Company at any time with or without cause or with or without advance notice. The Company expects that you will continue in your role as Vice President, Finance and Treasurer following the end of the Interim Term in the event you are not selected as the permanent Chief Financial Officer.

3. Compensation and Benefits. During the Interim Term, the Company will continue to pay you your current annual salary of Two Hundred Sixty-one Thousand Six Hundred Dollars ($261,600) per year, payable pursuant to the Company’s normal payroll schedule.  In addition:

a. The Company will pay you a bonus of $3,500 per month, subject to the applicable withholding taxes, for the duration of the Interim Term, to be paid on the 15^th of each month with the first payment to occur on July 15, 2016;

b. The Company will pay you a one-time lump sum bonus equal to $3,500 multiplied by the number of months during which you serve as Interim CFO during the Interim Term, subject to the applicable withholding taxes, to be paid on the 15^th of the month following the end of the Interim Term; and

c. Your current bonus target of 30% will be increased to 50% for the duration of the Interim Term, so that when the Company’s corporate bonus plan is payable, your bonus will include a factor for the number of months during which you serve as Interim CFO with a bonus target of 50% of regular earnings.

4. Clawback. You hereby agree that the Company may recover, or require reimbursement of, any bonus or equity award made to you, pursuant to a clawback policy which may be adopted by the Board of Directors of the Company for the purpose of complying with current or proposed U.S. law or regulation.

Silver Spring Networks • 230 West Tasman Drive • San Jose, California 95134 • T + 1 669 770 4000 • ssni.com

5. Entire Agreement. This Agreement, together with your Employment Offer Letter dated May 31, 2014, and the letter agreement dated January 29, 2015 with respect to certain benefits in the event of your termination in connection with a change of control, sets forth the complete agreement regarding the terms of your employment as the Company’s Interim CFO. This Agreement may not be amended or modified, except by an express written agreement signed by both you and the CEO.  

On behalf of Silver Spring Networks, we are delighted to extend you this additional compensation in connection with your service as Interim CFO.  To indicate your acceptance of the terms of this Agreement, please sign and date in the space provided below and return it to me no later than Friday, June 15, 2016.

Very Truly Yours,	ACCEPTED AND AGREED:
Silver Spring Networks, Inc.	Kenneth P. Gianella
/s/ Michael Bell	/s/ Kenneth P. Gianella
Michael Bell	Signature
President & CEO
	June 10, 2016
	Date

Silver Spring Networks, Inc. • 230 West Tasman Drive • San Jose, California 95134 • T + 1 669 770 4000 • ssni.com

EX-10.5

Exhibit 10.5

July 6, 2016

Aysegul Ildeniz

[address]

Dear Ayse:

On behalf of Silver Spring Networks, Inc. (the “Company”), I am pleased to offer you the position of Chief Operating Officer.

The terms of your new position with the Company are as set forth below:

1. Position.  You will be employed as Executive Vice President and will report to Mike Bell, President and Chief Executive Officer. You will begin this new position with the Company on July 18, 2016 (your “Start Date”).

2. Proof of Right to Work. For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your Start Date, or our employment relationship with you may be terminated.

3. Compensation.

a) On-Target Earnings (OTE).  Your OTE compensation will be governed by the Company’s 2016 Sales Compensation Plan, and the Company’s Corporate Bonus Plan. Your annual OTE will be $800,000, and will consist of the following.

I. Base Salary.  Your starting salary will be $400,000 per year(your “Base Salary”), subject to applicable withholding taxes and paid pursuant to the Company’s regular payroll schedule.  

II. Corporate Bonus. You will be entitled to participate in the Silver Spring Networks’ Bonus Plan.  Your bonus target is 50% of base salary paid for the applicable bonus period and subject to the terms and conditions of the applicable bonus plan. The Company’s Human Resources Department will inform you of the details of the plan.  The Company reserves the right to vary or terminate (with or without replacement by a further plan) any bonus plan in place at any time.

III. Variable Compensation. Your variable compensation will be governed by the Company’s 2016 Sales Incentive Compensation Plan. Your variable compensation, known as commissions, will be equal to 25% of your On-Target Earnings or $200,000.

Initials	A.I		Page 1
		555 Broadway Street, Redwood City, CA 94063

Provided that you remain an employee at the time the Company pays out bonuses:

(i) For fiscal year 2016, the Company will guarantee your bonus to be paid at 100% of target and

(ii) For fiscal year 2017, the Company will guarantee your bonus to be paid at 50% of target.

c) Additional bonuses. In addition to the Silver Spring Networks’ Bonus plan, provided that you remain an employee at the time payment is to be made, you will receive the following:

(i) The amount of $125,000 to be paid on August 15, 2016.

(ii) The amount of $125,000 to be paid on February 15, 2017.

(iii) The amount of $125,000 to be paid on August 15, 2017.

(iv) The amount of $125,000 to be paid on February 15, 2018.

d) Annual Review. Following your first year of employment, your base salary will be reviewed at the end of each calendar year by the Compensation Committee and Board of Directors.

e) Equity.  In connection with the commencement of your employment, the Company will recommend to its Board of Directors that it grant you the following equity awards (the “Awards”) in accordance with the Company’s standard equity grant policy:

(i) An option (the “Option”) to purchase 120,000 shares of common stock of the Company (the “Shares”) with an exercise price equal to the fair market value of a Share on the date of grant.  The Option will vest and become exercisable, subject to your continued employment with the Company on each applicable vesting date, as to 25% of the Shares on the first anniversary of the date of grant and as to 1/48^th of the Shares each month thereafter; and

(ii) An award of 80,000 restricted stock units (the “RSUs”) which vest into Shares of the Company’s common stock.  The RSUs will vest, subject to your continued employment with the Company on each applicable vesting date, as follows: (a) 25% of the RSUs shall vest on the first anniversary of the grant date; and (b) the remaining RSUs shall vest in twelve equal quarterly installments following the first anniversary of the grant date until the RSUs have become fully vested four years from the grant date; and

If approved, your Awards will be granted pursuant to inducement award agreements, the terms of which will be substantially similar to the terms of the Company’s 2012 Equity Incentive Plan and the terms of the Company’s standard form of Option and RSU Agreement, as applicable, and will be contingent upon your execution of such agreements.  A copy of the agreements will be provided to you as soon as practicable after the grant date.  You agree to sign any other agreements or documents provided by the Company that may be required under applicable laws to receive the Awards and any Shares upon exercise or settlement of the Awards, as applicable.  Your Awards will also be subject to the applicable termination and change of control provisions set forth in Attachment A.

4. Benefits.

a) Employee Benefits.  You are eligible to participate in any medical insurance plans, 401(k) plans, deferred compensation plans, life insurance plans, retirement or other employee benefit plans or fringe benefit plans or perquisites established by the Company

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for its employees which may become effective from time to time during your employment with the Company. 

b) Vacation. You are eligible to participate in the Company’s Exempt Employees’ Vacation Program.  There is no prescribed annual vacation allotment for exempt employees, meaning you will not accrue vacation.  

c) Sick Leave.  You are eligible for paid sick leave in accordance with the terms of the Company’s sick leave policy.  You may take up to ten (10) paid sick days per calendar year, pro-rated for the remainder of this year.

8. Background & Reference Checks.  This offer is contingent upon successful completion of background investigation and reference checks.

9. Termination of Employment and Severance Benefits. We are pleased to provide you with certain benefits in the event of your termination without “cause” or “constructive termination” from the Company as specifically set forth in Attachment A.

10. Confidential Information and Invention Assignment Agreement. Your acceptance of this offer and commencement of employment with the Company is contingent upon your execution, and delivery to an officer of the Company, of the Company’s Employee Confidential Information and Invention Assignment Agreement, a copy of which is enclosed for your review and execution (the “Confidentiality Agreement”) as Attachment B, prior to or on your Start Date.

11. At-Will Employment. You understand that your employment with the Company is not for any specified term and will at all times be on an “at will” basis, meaning that either you or the Company may terminate your employment at any time for any reason or no reason, without further obligation or liability (except as set forth on Attachment B).

12. No Conflicts. You represent to the Company that your performance of all the terms of this letter agreement will not breach any other agreement to which you are a party and that you have not, and will not during the term of your employment with the Company, enter into any oral or written agreement in conflict with any of the provisions of this agreement. In addition, as we have advised you, you are not to bring with you to the Company, or use or disclose to any person associated with the Company, any confidential or proprietary information belonging to any former employer or other person or entity with respect to which you owe an obligation of confidentiality under any agreement or otherwise. The Company does not need and will not use such information and we will assist you in any way possible to preserve and protect the confidentiality of proprietary information belonging to third parties.You hereby agree that any service by you on an outside corporate board (public or private) or committee will require the prior approval of the Company’s Board of Directors.

13. Location. Your principal place of work will be the Company’s corporate headquarters.

14. Cooperation.  During and after employment, you hereby agree that you will reasonably cooperate with the Company and its affiliates and representatives in connection with any action, investigation, proceeding, litigation or otherwise with regard to matters in which you have knowledge as a result of your employment. The Company will use its reasonable business efforts, whenever possible, to provide you with reasonable advance notice of its need for assistance and will attempt to coordinate with you the time and place at which such assistance is provided to minimize the impact of such assistance on any other material and pre-scheduled business commitment that you may have. The Company will reimburse you for the reasonable out-of-

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pocket expenses incurred by you in connection with such cooperation. Your cooperation will be subject to the Company’s standard indemnification and D&O liability insurance coverage. 

15. Clawback.  You hereby agree that the Company may recover, or require reimbursement of, any bonus or equity award made to you, pursuant to a clawback policy which may be adopted by the Board of Directors of the Company for the purpose of complying with current or proposed U.S. law or regulation.

16. Nondisparagement. You agree that you will not disparage the Company or its owners, agents, officers, stockholders, employees, directors, attorneys, subscribers, subsidiaries, affiliates, successors and assigns, or their products, services, agents, representatives, directors, officers, stockholders, attorneys, employees, vendors, affiliates, successors or assigns, or any person acting by, through, under or in concert with any of them, with any written or oral statement.

17. Governing Law.  The validity, interpretation, construction and performance of this agreement shall be governed by the laws of the State of California, without giving effect to the principles of conflict of laws.

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We are all delighted to be able to extend you this offer and look forward to working with you. To indicate your acceptance of the Company's offer, please sign and date this letter agreement in the space provided below no later than July 11, 2016. Additionally, as part of your acceptance of the Company’s offer, please return a signed and dated copy of Attachment A (Termination of Employment and Severance Benefits) and Attachment B (Confidentiality Agreement). This offer letter, together with Attachment A and Attachment B, set forth the terms of your employment with the Company and supersede any prior representations or agreements, whether written or oral. Neither this letter agreement nor Attachment A andAttachment B may be modified or amended except by a written agreement, approved by the Company’s Board of Directors and signed by the Company’s General Counseland by you.

Very truly yours,

Silver Spring Networks, Inc.

/s/ Terri Stynes

Terri Stynes

Vice President, Human Resources

ACCEPTED AND AGREED:

Aysegul Ildeniz

/s/ Aysegul Ildeniz

Signature

7/6/16

Date

Attachments:

1.Attachment A — Termination of Employment and Severance Benefits

2.Attachment B — Employee Confidential Information and Invention Assignment Agreement

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Attachment A

Termination of Employment and Severance Benefits

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Termination of Employment and Severance Benefits

1. Termination of Employment.

a) At-Will Employment.  Your employment with the Company is at-will, meaning either you or the Company can terminate your employment at any time, with or without cause, and with or without notice.  Neither you nor the Company can change the “at will” nature of your employment, unless approved by the Company’s Board of Directors and the General Counsel of the Company and you sign a written contract that explicitly changes your status as an “at will” employee.

b) Payment & Benefits Upon Termination.  Your entitlement to payment and benefits upon termination is as follows:

(i) Termination Without “Cause” or “Constructive Termination”.  If your employment is (1) terminated involuntarily other than (x) for Cause (as defined in Section 3(a), below), (y) your Disability (as defined in Section 3(e), below) or (z) your death or (2) in the event of your “Constructive Termination” (as defined in Section 3(d) below):

(A) you will receive payment for any earned and unpaid salary, bonus and commissions as of the date of your termination of employment; and,

(B) in the event you execute and do not revoke a separation agreement, including a release of claims (“Release”), to be drafted by the Company based upon its standard forms, you will be offered the applicable Separation Compensation (as defined in Section 2, below).  You will not be entitled to or offered any form of additional severance pay or benefits other than the applicable Separation Compensation (e.g., you will not be entitled to pay or benefits under any employee severance plan that is generally applicable to employees).

(ii) Voluntary Termination.  If you voluntarily terminate your employment, or give notice that you will voluntarily terminate your employment at a future date (and whether or not the Company accelerates the effective date of your resignation date that you provide to an earlier termination date), you will receive payment(s) for all earned and unpaid salary, bonus and commissions as of the date of termination.  You will not be entitled to the Separation Compensation, or any other form of severance pay or benefits.

(iii) Termination for Cause.  If your employment is terminated for Cause, you will receive payment(s) for all earned and unpaid salary, bonus and commissions as of the date of your termination of employment.  You will not be entitled to the Separation Compensation, or any other form of severance pay or benefits.

(iv) Termination due to death or Disability.  If your employment is terminated due to your death or Disability, you will receive payment(s) for all earned and unpaid salary, bonus and commissions as of the date of your termination of employment.  You will not be entitled to the Separation Compensation, or any other form of severance pay or benefits.

2. Separation Compensation.

a. Termination Other Than in Connection with a Change of Control.  If you are entitled to Separation Compensation under Section 1 above and your Termination without Cause or your Constructive Termination does not occur within the period beginning two months prior to and ending twelve months following a Change of Control, your “Separation Compensation” will include each of the following:

(i) Salary Continuance.You will be offered pay equal to twelve (12) months of your regular base salary and a pro-rated bonus (if any), subject to applicable payroll deductions and withholdings.  

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The first salary continuance payment equal to three (3) months of your regular base salary shall be made on the sixtieth (60th) day following your termination of employment provided the Release is effective at such time, and the remainder shall be paid in monthly installments beginning on the 1st day of the fourth month following your termination of employment, and on the 1st day of each month thereafter, until the total payment obligation is fulfilled.

(ii) Acceleration of Vesting.  The vesting applicable to any equity grants previously made by the Company to you shall accelerate (or the Company’s repurchase right with respect to such shares underlying such equity grants shall lapse) as to that number of shares that would have vested on the first anniversary of the date your employment terminates, such acceleration effective immediately prior to the termination of your employment.  Notwithstanding the foregoing, acceleration of vesting of any performance-based equity grants, such as performance stock units, shall be subject to and qualified by the terms of any performance-based equity grant that provides for satisfaction of applicable performance vesting requirements (as set forth in the agreement(s) governing such performance-based equity grant(s)), as determined on the date of your termination, and the acceleration of vesting pursuant this section shall occur only if the above-referenced performance vesting requirements have been satisfied.

(iii) Other Benefits.  The Company will reimburse you for your expenses in continuing medical insurance benefits for you and your family (meaning medical, dental, optical, and mental health, but not life, insurance) under the Company’s benefit plans (or otherwise in obtaining coverage substantially comparable to the coverage provided to you prior to the termination) over the period beginning on the date your employment terminates and ending on the earlier of (a) twelve (12) months following such date, or (b) the date you commence employment with another entity.  Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the benefits described herein without violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide you a lump sum payment in an amount equal to the monthly premium that you would be required to pay to continue group health coverage for a period of up to twelve (12) months, subject to applicable payroll deductions and withholdings, which payment shall be made regardless of whether you elect continuation of medical insurance coverage.

b. Termination in Connection with a Change of Control.  If you are entitled to Separation Compensation under Section 1 above and your Termination without Cause or your Constructive Termination occurs within the period beginning two months prior to and ending twelve months following a Change of Control, your “Separation Compensation” will include each of the following, provided however that you may be required by the successor entity (at its sole discretion) to continue your employment for up to three (3) months from the effective date of a Change of Control in order to be eligible to receive any or all of the following:

(i) Salary Continuance.You will be offered pay equal to twelve (12) months of your regular base salary and a pro-rated bonus (if any), subject to applicable payroll deductions and withholdings.  The first salary continuance payment equal to three (3) months of your regular base salary shall be made on the thirtieth (30th) day following your termination of employment (unless a longer period is required by law to make the Release effective, in which case the first salary continuance payment shall me made on the sixtieth (60^th) day following your termination of employment) provided the Release is effective at such time, and the remainder shall be paid in monthly installments beginning on the 1st day of the fourth month following your termination of employment, and on the 1st day of each month thereafter, until the total payment obligation is fulfilled.

(ii) Acceleration of Vesting.  The vesting applicable to any equity grants previously made by the Company to you shall accelerate (or the Company’s repurchase right with respect to such shares underlying such equity grants shall lapse) (a) as to fifty percent (50%) of the unvested shares underlying such equity grant or grants at the time of the Change of Control if the Change of Control occurs within the first twelve (12) months of your employment with the Company or (b) as to one-hundred percent (100%)

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of the unvested shares underlying such equity grant or grants at the time of the Change of Control if the Change of Control occurs after the first twelve (12) months of your employment with the Company, in each case, such acceleration effective as of immediately prior to the termination of your employment. Notwithstanding the foregoing, acceleration of vesting of any performance-based equity grants, such as performance stock units, shall be subject to and qualified by the terms of any performance-based equity grant that provides for satisfaction of applicable performance vesting requirements (as set forth in the agreement(s) governing such performance-based equity grant(s)), as determined on the date of your termination, and the acceleration of vesting pursuant this section shall occur only if the above-referenced performance vesting requirements have been satisfied.

(iii) Other Benefits.  The Company will reimburse you for your expenses in continuing medical insurance benefits for you and your family (meaning medical, dental, optical, and mental health, but not life, insurance) under the Company’s benefit plans (or otherwise in obtaining coverage substantially comparable to the coverage provided to you prior to the termination) over the period beginning on the date your employment terminates and ending on the earlier of (a) twelve (12) months following such date, or (b) the date you commence employment with another entity.  

3. Definitions.

a) Cause.  For the purposes of this letter agreement, “Cause” for termination of your employment will exist if you are terminated for any of the following reasons: (i) your failure to perform your duties and responsibilities to the Company, including but not limited to a failure to cooperate with the Company in any investigation or formal proceeding; (ii) your commission of any act of fraud, embezzlement, dishonesty or any other intentional misconduct that results in injury to the Company; (iii) the unauthorized use or disclosure by you of any proprietary information or trade secrets of the Company or any other party to whom you owe an obligation of nondisclosure as a result of your relationship with the Company; (iv) you are convicted of, or enter a no contest plea to, a felony; or (v) your willful, wrongful and uncured breach of any of your obligations under any Company policy, written agreement or covenant with the Company (including this letter agreement).  The determination as to whether you are being terminated for Cause shall be made in good faith by the Company’s Board of Directors (the “Board”).  The foregoing definition does not in any way limit the Company’s ability to terminate your employment at any time as provided in Section 1 above.

b) Change of Control.  For purposes of this letter agreement, “Change of Control” of the Company is defined as: (i) the date any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes, subsequent to the date hereof, the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding voting securities, other than pursuant to a sale by the Company of its securities in a transaction or series of related transactions the primary purpose of which is to raise capital for the Company; (ii) the date of the consummation of a merger or consolidation of the Company with any other corporation that has been approved by the stockholders of the Company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (iii) the date of the consummation of the sale or disposition by the Company of all or substantially all the Company’s assets; or (iv) the date of a change in the composition of the Board such that a majority of the members of the Board immediately following such change in composition are no longer “Incumbent Directors.”  For purposes of the foregoing clause (iv), “Incumbent Directors” means (a) members of the Board as of the date of this letter agreement, or (b) members of the Board elected or appointed to the Board following the date of this letter agreement other than in connection with an actual or threatened proxy contest.

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c)Code.  For purposes of this letter agreement, “Code” means the Internal Revenue Code of 1986, as amended.

d) Constructive Termination.  For the purposes of this letter agreement, “Constructive Termination” means the termination of your employment by you after the occurrence of any of the following events: (A) within the period beginning two months prior to and ending twelve months following a Change of Control, a material reduction in your job duties and responsibilities to which you have not consented to in advance of such change; provided, however, that following a Change of Control, neither a change in your title to a substantially equivalent title within any successor entity nor a reassignment to a position that is substantially similar to your position prior to the Change of Control shall constitute a material reduction in your job duties or responsibilities; (B) following a Change of Control and without your prior written approval, the Company requires you to relocate to a facility or location more than thirty-five (35) miles from the location of the primary location at which you were working for the Company immediately before the required change of location; (C) except as otherwise agreed by you, any reduction of your base salary in effect immediately prior to such reduction (other than as part of an across-the-board, proportional reduction); or (D) following a Change of Control, the failure of a successor entity to assume this letter agreement.  Notwithstanding anything else contained herein, in the event of the occurrence of a condition listed above, as a condition to receiving any benefits triggered by a Constructive Termination, you must provide notice to the Company within ninety (90) days of the occurrence of a condition listed above and allow the Company thirty (30) days in which to cure such condition.  Additionally, in the event the Company fails to cure the condition within the cure period provided, as a condition to receiving any benefits triggered by a Constructive Termination, you must terminate employment with the Company within thirty (30) days of the end of the cure period.

e) Disability. For the purposes of this letter agreement, “Disability” means “disability” within the meaning of Section 22(e)(3) of the Code.

4. Code Section 409A.  For purposes of this letter agreement, a termination of employment will be determined consistent with the rules relating to a “separation from service” as defined in Section 409A of the Code and the regulations thereunder (“Section 409A”).  Notwithstanding anything else provided herein, to the extent any payments provided under this letter agreement in connection with your termination of employment constitute deferred compensation subject to Section 409A, and you are deemed at the time of such termination of employment to be a “specified employee” under Section 409A, then such payment shall not be made or commence until the earlier of (i) the expiration of the 6-month period measured from your separation from service from the Company or (ii) the date of your death following such a separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to you including, without limitation, the additional tax for which you would otherwise be liable under Section 409A(a)(1)(B) in the absence of such a deferral.  The first payment thereof will include a catch-up payment covering the amount that would have otherwise been paid during the period between your termination of employment and the first payment date but for the application of this provision, and the balance of the installments (if any) will be payable in accordance with their original schedule.  To the extent that any provision of this letter agreement is ambiguous as to its compliance with Section 409A, the provision will be read in such a manner so that all payments hereunder comply with Section 409A.  To the extent any payment under this letter agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A.  Payments pursuant to this section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

5. Code Section 280G.  In the event that the severance and other benefits provided for in this letter agreement or otherwise payable to you (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then your benefits under this letter agreement shall be either:

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a) delivered in full; or

b) delivered as to such lesser extent that would result in no portion of such benefits being subject to the Excise Tax, (with first a pro rata reduction of (i) cash payments subject to Section 409A of the Code as deferred compensation and (ii) cash payments not subject to Section 409A of the Code, then (i) employee benefits that are subject to Section 409A of the Code as deferred compensation and (ii) employee benefits not subject to Section 409A of the Code and then a pro rata cancellation of (i) equity-based compensation subject to Section 409A of the Code as deferred compensation and (ii) equity-based compensation not subject to Section 409A of the Code), whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in your receipt on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code.  

Unless you and the Company otherwise agree in writing, the determination of your excise tax liability and the amount required to be paid under this Section shall be made in writing by an accounting firm to be selected by reasonable agreement between you and the Company (the “Accountants”), whose determination shall be conclusive and binding upon you and the Company for all purposes.  For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. You and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section.  The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.

6. Other Agreements.  This Attachment A sets forth the terms of the benefits you are eligible to receive in the event your employment with the Company is terminated in the manner described herein and supersedes any prior representations or agreements, whether written or oral.  In the event of a conflict between the terms of this Attachment A and any other agreement you have entered into with the Company (including the cover letter to this Attachment A), the terms of this Attachment A shall apply.  The definitions, terms and conditions contained herein may not be modified or amended except by a written agreement, approved by the Company’s Board of Directors and signed by the Company’s General Counsel and by you.

*  *  *

ACCEPTED AND AGREED:

Aysegul Ildeniz

/s/ Aysegul Ildeniz

Signature

Aysegul Ildeniz

Name

7/6/16

Date

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Attachment B

Employee Confidential Information and Invention Assignment Agreement

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SILVERSPRINGNETWORKS, INC.

EMPLOYEE CONFIDENTIAL INFORMATION AND

INVENTION ASSIGNMENT AGREEMENT

As a condition ofmybecomingemployed (ormyemployment being continued)bySilver SpringNetworks,Inc.,aDelaware corporation oranyofits current or futuresubsidiaries, affiliates, successors orassigns(collectively, the“Company”), and in consideration ofmyemployment with the Companyand myreceipt ofthe compensation now and hereafterpaid tomebytheCompany,Iagree to the following:

1. At-Will Employment Relationship. Iunderstand and acknowledgethat my employment with theCompanyis and shall continueto be at-will, as defined under applicablelaw, meaningthat eitherIortheCompanymayterminatemyemployment at anytime foranyreasonorno reason, with or without notice, without furtherobligation orliability.

2.CONFIDENTIAL INFORMATION.

(a) Company Information. Iagree at all times duringtheterm ofmyEmployment with theCompanyand thereafter, to hold in strictest confidence,and not to use, except forthebenefit oftheCompany, orto discloseto anyperson,firm, corporation orother entitywithout written authorization oftheBoard of Directors oftheCompany,anyConfidentialInformation oftheCompany whichIobtain orcreate. Ifurther agreenot to make copies ofsuch ConfidentialInformation exceptas authorized bytheCompany, as necessaryto carryout myassigned responsibilities as aCompany employee. Iunderstand that “ConfidentialInformation”means anyCompanyproprietaryinformation, technical data, tradesecrets orknow-how, including, but not limited to, research, product plans, products, services, suppliers, customerlists and customers (including, but not limited to, customers of theCompanyon whomI call or called, or with whomIbecomeorbecameacquainted duringmy employment), prices andcosts, markets, software,developments, inventions, laboratorynotebooks, processes,formulas, technology, designs, drawings, engineering, hardwareconfiguration information, marketing, licenses, finances, budgets orotherbusiness information disclosed to mebytheCompany eitherdirectlyorindirectlyin writing, orallyorbydrawings orobservationofparts or equipment or created bymeduringtheperiod ofmyemployment, whetherornot during workinghours.Iunderstand that “ConfidentialInformation”includes, but is not limited to, informationpertainingtoanyaspects of theCompany’s businesswhich is eitherinformation not known byactual orpotential competitors of theCompanyoris proprietaryinformation oftheCompanyorits customers orsuppliers, whetherofa technical natureorotherwise. Ifurtherunderstand that ConfidentialInformation does not include any ofthe foregoingitems which has becomepubliclyand widelyknown andmadegenerallyavailable through no wrongful act ofmineorofotherswhowereunder confidentialityobligations as to theitem oritems involved.

Former Employer Information. I represent that my performance of all terms of this Agreement as an employee of the Company has not breached and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by me in confidence or trust prior or subsequent to the commencement of my employment with the Company, and I will not disclose to the Company, or induce the Company to use, any inventions, confidential or proprietary information or material belonging to any previous employer or any other party.

(b) Third Party Information. Irecognizethat theCompanyhas receivedandin the future will receiveconfidential orproprietaryinformation from third parties subject to adutyonthe Company’s part to maintain the confidentialityofsuch information and touseit onlyforcertain limited purposes. Iagreeto hold all such confidential orproprietaryinformation in thestrictest confidence and not to discloseit to anyperson, firm or corporation orto useit except as necessaryin carryingout myworkfortheCompanyconsistentwith theCompany’s agreement with such third party.

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3.INVENTIONS.

(a) Inventions Retained and Licensed. Ihave attached hereto,as Exhibit A, alist describingwith particularityall inventions, original works of authorship, developments, improvements, and tradesecrets whichweremadebymepriorto the commencement ofmyemployment (collectively referred toas “PriorInventions”), which belongsolelyto meorbelongtomejointlywith another, which relateinanywayto anyoftheCompany’sproposed businesses, products or researchand development, and whicharenot assigned to theCompanyhereunder; or, ifno such list is attached,I represent that thereareno such PriorInventions. If, in the courseofmyemployment with the Company,Iincorporateinto aCompanyproduct,process ormachineaPriorInvention owned byme  orin whichIhave an interest, theCompanyis hereby granted and shall haveanon-exclusive, royalty- free, irrevocable, perpetual, worldwidelicense (with the right to sublicense)to make, havemade, copy, modify, makederivativeworks of, use, sell and otherwisedistributesuch PriorInvention as part ofor in connection with suchproduct, process ormachine.

(b) Assignment of Inventions. IagreethatIwill promptlymake full written disclosureto theCompany,will hold in trust forthesole right and benefit oftheCompany,and hereby assign to theCompany, orits designee, all myright, title and interest throughout the world in and to anyand all inventions, original works of authorship, developments, concepts, know-how, improvements ortradesecrets, whetherornot patentableor registrableunder copyright orsimilarlaws, whichImaysolelyorjointlyconceiveordevelopor reduceto practice, or causeto be conceived or developed orreduced topractice, duringtheperiod oftimein whichIam employed byora consultant oftheCompany(collectivelyreferred to as “Inventions”),except as provided in Section 3(e)below. I furtheracknowledgethatall inventions, originalworks of authorship, developments, concepts, know- how, improvements ortradesecrets whicharemadebyme (solelyorjointlywith others) within the scopeof and duringtheperiod ofmyemploymentwith theCompanyare“works made forhire” (tothe greatest extent permitted byapplicablelaw) and are compensated bymywages, unlessregulated otherwisebythemandatorylawofthestateofCalifornia.

(c) Maintenance of Records. Iagreeto keepand maintain adequate and current written records of allInventions madebyme (solelyorjointlywith others)duringtheterm ofmy employment with theCompany.  The records maybein the form ofnotes, sketches, drawings, flow charts, electronicdataorrecordings, laboratorynotebooks, and anyotherformat.  The records will be availableto and remain thesolepropertyoftheCompanyat all times. Iagreenot to removesuch recordsfrom theCompany’s placeofbusiness except as expresslypermitted byCompanypolicy which may, from timetotime, be revised at thesole election oftheCompanyforthepurposeof furtheringtheCompany’s business.

(c) Patent and Copyright Rights. Iagreeto assist theCompany, orits designee, at theCompany’sexpense, in everyproperwayto securetheCompany’srights in theInventions and any copyrights, patents, trademarks, mask work rights,moral rights, orotherintellectual propertyrights relatingthereto in anyand all countries, includingthe disclosureto theCompanyof all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, recordations, and all otherinstruments which theCompanyshall deem necessaryin order to applyfor, obtain, maintain and transfersuch rights and in orderto assignand conveyto the Company, its successors,assigns and nominees thesole and exclusive rights, title and interest in and to suchInventions, and anycopyrights, patents, maskwork rights orotherintellectual propertyrights relatingthereto. I furtheragreethat myobligationto executeor causeto beexecuted, when it is in my powerto do so, anysuchinstrument orpapers shall continue afterthetermination ofthis Agreement until the expiration ofthelast such intellectual propertyright to expirein anycountryofthe world. If theCompanyis unablebecauseofmymental orphysical incapacityorunavailabilityor foranyother reason to securemysignatureto applyfororto pursue anyapplication foranyUnited States or foreign patents or copyright registrations covering Inventions ororiginal works ofauthorship assigned to the Companyasabove, thenIherebyirrevocablydesignate and appoint theCompanyand its duly authorized officers and agents as

Initials	A.I		Page 3
		555 Broadway Street, Redwood City, CA 94063

myagent andattorneyin fact, to act for and in mybehalfand stead to execute and file anysuchapplications and to do all otherlawfullypermitted acts to furtherthe application for, prosecution, issuance, maintenanceortransferofletters patent or copyright registrations thereon withthesamelegal forceandeffect as iforiginallyexecuted byme. Ihereby waive and irrevocablyquitclaim to theCompanyanyandall claims, of anynature whatsoever,whichI noworhereafterhave forinfringement of anyandall proprietaryrights assigned to theCompany.

(d) Exception to Assignments. Iunderstand that theprovisions ofthis Agreement requiringassignment ofInventions to theCompanydo not applyto anyinvention which qualifies fully undertheprovisions ofCaliforniaLaborCodeSection 2870 (attached hereto as Exhibit B). Iwill advisetheCompanypromptlyin writingofanyinventions thatIbelievemeet such provisions andare not otherwisedisclosed on Exhibit A.

4. Returning Company Documents and Property. Iagreethat, at thetimeof termination ofmyemployment with theCompany,Iwill deliverto theCompany(and will not keepin mypossession, recreateordeliverto anyone else)anyand all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, laboratorynotebooks, materials, flow charts, equipment, otherdocuments orproperty, orreproductions of any aforementioned items developed bymepursuant to myemployment orotherwisebelongingto the Company, its successorsor assigns. Ifurtheragreethat anypropertysituated on theCompany’s premises and owned bytheCompany, includingdisks and otherstoragemedia, filingcabinets orother work areas, is subject to inspection byCompanypersonnel at anytime withor without notice. In the event ofthetermination ofmyemployment,Iagreeto signand deliverthe“Termination Certification” attached hereto as Exhibit C.

5. Notification to Other Parties. Iherebyconsentthat, aftermyemployment ends, the Companymaynotifymysubsequent employer(s),and anyotherpersons orentities thatIrender services forin anycapacity, about myrights and obligations underthis Agreement.

6. Solicitation of Employees, Consultants and Other Parties. Iagreethat duringthe term ofmyemployment with theCompany, andforaperiod oftwelve (12)months immediately followingthe (voluntaryorinvoluntary)termination ofmyemployment with theCompanyforany reason, whether with orwithout cause,Ishall noteitherdirectlyorindirectlysolicit, induce, recruitor encourage anyoftheCompany’semployees or consultants to terminatetheir relationship with the Company, orattempt to solicit, induce, or recruit employees or consultantsoftheCompany,eitherfor myselforforanyotherperson or entity.Further,following(voluntaryorinvoluntary)terminationof myemployment with theCompanyfor anyreason, with or without cause,Ishall not at anytimeuse Companytradesecrets tosolicit anylicensorto orcustomeroftheCompanyorlicenseeofthe Company’s products, in eachcase, thatareknown to me, with respect to anybusiness, products or services that arecompetitiveto theproducts orservices offered bytheCompanyorunderdevelopment as ofthedateoftermination ofmyemployment with theCompany.

7. REPRESENTATIONS AND COVENANTS.

(a) Facilitation of Agreement.Iagreeto executepromptlyanyproperoath or verifyanyproperdocument required tocarryout theterms ofthis Agreement upon theCompany’s written request to do so.

(b) Conflicts. Irepresent that myperformanceof alltheterms ofthis Agreement will not breach anyagreement to keep in confidenceproprietaryinformation acquired bymein confidenceorin trust priorto commencement ofmyemployment with theCompany. Ihavenot entered into, andIagreeI will not enterinto, anyoral or written agreementin conflict with anyofthe provisions ofthis Agreement. Iagreethat, duringtheterm ofmyemployment withtheCompany,I will devote full timeto thebusiness oftheCompanyandwill not engageinanyother employment, occupation, consultingorotherbusiness

Initials	A.I		Page 4
		555 Broadway Street, Redwood City, CA 94063

activitydirectlyrelated to thebusiness in which theCompany is nowinvolved orbecomes involved duringtheterm ofmyemployment nor willIengageinanyother activities that conflict with myobligations to theCompany.

(c) Voluntary Execution. IcertifyandacknowledgethatIhavecarefullyread all oftheprovisions ofthis Agreementand thatIunderstand and will fullyandfaithfullycomplywith such provisions.

8. GENERAL PROVISIONS.

(a) Governing Law.  Thevalidity, interpretation, construction and performanceof this Agreement shall begoverned bythelaws oftheStateofCalifornia, without giving effect to the principles of conflict oflaws.

(b) Entire Agreement.  ThisAgreement sets forth theentireagreement and understandingbetween theCompanyand merelatingto thesubject matterherein and merges all prior discussions between us. No modification or amendment to this Agreement,nor anywaiverofany rights underthis Agreement, will be effectiveunless approved by the Company’s Board of Directors and in writingsigned bythe Company’s General Counsel and me.Any subsequent changeor changes in myduties, obligations, rights or compensation will not affect the validityorscopeofthis Agreement.

(c) Severability. Ifoneormoreoftheprovisions in this Agreement aredeemed void bylaw, then the remainingprovisions will continuein full force andeffect.

(d) Successors and Assigns.  This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.

(e) Survival.  The provisions of this Agreement shall survive the termination of my employment and the assignment of this Agreement by the Company to any successor in interest or other assignee.

(f) Remedies. I acknowledgeand agreethat violation ofthis Agreement byme maycausetheCompanyirreparableharm, and thereforeagreethat theCompanywill be entitled to seek extraordinaryreliefin court, includingbut not limited to temporaryrestrainingorders, preliminary injunctions and permanent injunctions without thenecessityofpostingabond orothersecurityandin addition to and without prejudiceto anyother rights or remedies that theCompanymayhave fora breach ofthis Agreement.

(g) ADVICE OF COUNSEL. IACKNOWLEDGETHAT,IN EXECUTING THIS AGREEMENT,I HAVE HADTHE OPPORTUNITY TOSEEKTHE ADVICEOF INDEPENDENTLEGALCOUNSEL, ANDIHAVEREAD ANDUNDERSTOODALLOF THE TERMS ANDPROVISIONS OFTHIS AGREEMENT.THIS AGREEMENTSHALLNOTBE CONSTRUED AGAINST ANYPARTYBYREASON OFTHE DRAFTING OR PREPARATION HEREOF.

Initials	A.I		Page 5
		555 Broadway Street, Redwood City, CA 94063

Theparties have executed this Agreement on therespectivedates set forthbelow:

COMPANY:	EMPLOYEE:
SILVER SPRING NETWORKS, INC.	Aysegul Ildeniz, anIndividual:
/s/ Richard S. Arnold, Jr.	/s/ Aysegul Ildeniz
Signature	Signature

By:	Richard S. Arnold, Jr.	Name:	Aysegul Ildeniz
Title:	General Counsel
Date:	7/6/16	Date:	7/6/16
Address:	555 BroadwayStreet Redwood City, CA94063	Address:

Initials	A.I		Page 6
		555 Broadway Street, Redwood City, CA 94063

EXHIBIT A

LIST OF PRIORINVENTIONS

AND ORIGINAL WORKS OF

AUTHORSHIP EXCLUDED FROM

SECTION3

Title Date Identifying Number or Brief Description

     x      No inventions or improvements

Additional Sheets Attached

Signatureof Employee: /s/ Aysegul Ildeniz

Printed Nameof Employee: Aysegul Ildeniz

Date: 7/6/16

Silver Spring Networks-CaliforniaECIIAA

EXHIBIT B

Section 2870 oftheCaliforniaLabor Codeisas follows:

(a) Anyprovision in an employment agreement whichprovides that an employeeshall assign, orofferto assign,anyofhis orherrights in an invention to his orher employershall not apply to an invention that the employeedevelopedentirelyon his orherown time without usingthe employer’s equipment, supplies, facilities, ortradesecret information except forthoseinventions that either:

(1) Relate at thetimeofconception orreduction to practiceoftheinvention to the employer’s business, or actual ordemonstrablyanticipated research ordevelopment ofthe employer; or

(2) Result from anywork performed bythe employee forthe employer.

(b) To the extent aprovision in an employmentagreement purports to requirean employee to assign an invention otherwise excluded from beingrequired to be assigned undersubdivision (a), the provision is against thepublicpolicyofthis stateand is unenforceable.

Date: 7/6/16

/s/ Aysegul Ildeniz

Signature

Aysegul Ildeniz

Silver Spring Networks-CaliforniaECIIAA

EX-10.6

Exhibit 10.6

July 18, 2016

Don Reeves

Dear Don,

On behalf of Silver Spring Networks, Inc. (the “Company”) I am pleased to offer the following changes in your compensation.

You will be paid a base salary of $425,000, subject to applicable withholding taxes and paid pursuant to the Company’s regular payroll schedule, effective July 1, 2016. This represents a 13.3% increase.

In addition, the Company will recommend to its Board of Directors that it grant you an award of 30,000 restricted stock units (“RSUs”), which vest into shares of the Company’s common stock.  The RSUs will be granted under and subject to the terms and conditions of the Company’s equity incentive plan and will be contingent on your execution of the Company's standard RSU Agreement.  The RSUs will vest, subject to your continued employment with the Company or one of its subsidiaries on each applicable vesting date, as follows: (a) 25% of the RSUs shall vest on the first anniversary of the grant date; and (b) the remaining RSUs shall vest in twelve equal quarterly installments following the first anniversary of the grant date until the RSUs have become fully vested four years from the grant date.  A copy of the Company's equity incentive plan and the RSU agreement will be provided to you as soon as practicable after the grant date.  You agree to sign and return any RSU agreement provided to you by the Company in connection with this grant.  You also agree to sign any other agreements or documents provided by the Company that may be required under applicable laws to receive the RSUs and any shares of common stock upon settlement of the RSUs.

We are delighted to extend you this offer.

Very truly yours,

Silver Spring Networks, Inc.

/S/ Terri Stynes

Terri Stynes

Vice President, Human Resources

Silver Spring Networks, Inc. • 230 West Tasman Drive • San Jose, California 95134 • T + 1 669 770 4000 • ssni.com

EX-10.7

Exhibit 10.7

*** Confidential Treatment Requested

	Amendment #3
	Amended and Restated Services and Material Agreement

This Amendment Number 3 (“Amendment #3”), effective as of February 29, 2016 (“Amendment #1 Effective Date”), between Silver Spring Networks, Inc. (“Silver Spring”) and Commonwealth Edison Company (“ComEd”) amends the Amended and Restated Services and Material Agreement, dated January 25, 2012, between Silver Spring and ComEd (the “Agreement”). Silver Spring and ComEd are referred to herein as the “Parties” or a “Party,” as applicable.  Capitalized terms not defined in this Amendment #3 will have the same meaning as in the Agreement.  

The Parties agree to amend the Agreement as follows:

1. Section 25.3 is hereby deleted in its entirety and the following inserted in its stead:

“25.3 Receiving Party’s Obligations

During the term of this Agreement and thereafter, except as a Disclosing Party may otherwise authorize in writing in advance, each Receiving Party shall use the other Party’s Confidential Information only to fulfill its commitments and exercise its rights under this Agreement.  Each Receiving Party agrees not to disclose any Confidential Information of the other Party to anyone other than those employees, agents, contractors or Subcontractors of the Receiving Party who need to know such Confidential Information for the purposes of this Agreement and who have entered into binding written obligations of confidentiality substantially similar to the obligations set forth herein.  Upon reasonable request by the Disclosing Party, the receiving Party will provide copies of the confidentiality agreements entered into with its employees, agents or contractors.  Each Receiving Party shall treat all Confidential Information of the Disclosing Party with the degree of care it accords to its own Confidential Information, but not less than reasonable care.  Neither Receiving Party shall reverse engineer, disassemble or decompile any prototypes, firmware, software or other tangible objects which embody the other Party’s Confidential Information.  Each Receiving Party will notify and cooperate with the other Party in enforcing the Disclosing Party’s rights if such Receiving Party becomes aware of a threatened or actual violation of the confidentiality requirements of this Section.  Upon completion of Work pursuant to this Agreement, except as otherwise provided in this Agreement, except as otherwise provided in the Agreement, upon written request, a Receiving Party shall return any and all tangible embodiments of Confidential Information to the Disclosing Party or destroy any and all electronic copies of Confidential Information maintained by each Receiving Party using a media sanitization process mutually agreed to by the Parties.”`

2. The attached Exhibit O “Special Terms and Conditions for Personally Identifiable Information (SF) shall be added to the Agreement.

3. Integration; Conflict. The foregoing provisions shall govern notwithstanding any contrary provision in the Agreement or any previously executed agreement between the Parties. Except as otherwise expressly provided or modified herein, the (i) terms and conditions of the Agreement remain in full force and effect, and (ii) this Amendment #1 and the Agreement constitute the entire and exclusive agreement between the Parties regarding the subject matter hereof, and supersede all proposals and prior agreements, oral or written, and all other communications.  In the event of a conflict between this Amendment #3 and the Agreement, this Amendment #3 shall govern.

*** Certain omitted portions of this exhibit have been filed with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934

IN WITNESS WHEREOF, the Parties have caused this Amendment#1 to be executed by their duly authorized representatives.

Commonwealth Edison Company		Silver Spring Networks, Inc.
By:	/s/ ***	By:	/s/ Jim P. Burns
Name:	***	Name:	Jim P. Burns
Title:	Principal Category Manager	Title:	CFO
Date:	02/29/2016	Date:	02/29/2016

Approved by Legal:

***

***

ComEd-SSN Amendment #3 (20160201) Page 2 of 5 Confidential

EXHIBIT O

SPECIAL TERMS AND CONDITIONS

FOR

PERSONALLY IDENTIFIABLE INFORMATION (SF)

Safeguarding Personally Identifiable Information

1.1 Definition. “Personally Identifiable Information” means any name or number that may be used, alone or in conjunction with any other information, to identify a specific person, including any (a) name, address, email address, password, account number, social security number, date of birth, official state or government issued driver’s license or identification number, alien registration number, government passport number, employer or taxpayer identification number, or any similar identification, (b) personal, financial, or healthcare information, credit card information, bank account number, credit card number or debit card number, (c) unique biometric data, such as fingerprint, voice print, retina or iris image, or other unique physical representation, (d) unique electronic identification number, address, or routing code, (e) telecommunication identifying information or access device (as defined in 18 U.S.C. §1029(e)), or (f) personal preferences, demographic data, marketing data, or any other identification data, including customer’s utility account number and usage data. For the avoidance of doubt, Personally Identifiable Information includes all “nonpublic personal information,” as defined under the Gramm-Leach-Bliley Act (15 U.S.C. §6801 et seq.) and “protected health information” as defined under the Health and Insurance Portability and Accountability Act of 1996 (42 U.S.C. §1320d), and “Personal Data” as that term is defined in EU Data Protection Directive (Directive 95/46/EEC) on the protection of individuals with regard to processing of personal data and the free movement of such data.

1.2 Treatment of Personally Identifiable Information. Without limiting any warranty or obligation in the Agreement, and in particular the confidentiality provisions of the Agreement, during the Term and thereafter in perpetuity, Contractor will not gather, store, log, archive, use, or otherwise retain any Personally Identifiable Information to which it has gained access in connection with the Agreement in any manner, and will not disclose, distribute, sell, share, rent, or otherwise transfer any Personally Identifiable Information to any party or person, except (a) as expressly provided in the Agreement, or (b) as specifically and expressly directed in advance in writing by Exelon. Contractor represents, covenants, and warrants that Contractor will use Personally Identifiable Information in compliance with (i) the Agreement, and (ii) all applicable federal, state, and local privacy, confidentiality, consumer protection, advertising, electronic mail, and data security laws and regulations, whether in effect now or in the future and as they may be amended from time-to-time, including the Gramm-Leach-Bliley Act of 1999 (Public Law 106-102, 113 Stat. 1138) and its implementing regulations and the Fair and Accurate Credit Act of 2003 (collectively, “Privacy/Consumer Laws”). In addition to and in no way  limiting Contractor’s indemnity obligations under Section 16.5 of the Agreement, Contractor shall indemnify, hold harmless, and defend Exelon and its affiliates and the officers, directors, employees, agents, representatives,  successors, and assigns of Exelon and its affiliates (“Exelon Parties”) for any and all claims against Exelon Parties by governmental authorities for actual or alleged failure of an Exelon Party to comply with any applicable laws, including privacy laws, to the extent caused by any act, omission, conduct, negligence, or default by Contractor or Contractor’s failure to comply with the terms of this Addendum. Contractor shall pay any and all costs, losses, damages, awards of settlement, and expenses (including claims, internal administrative costs, third-party fees, attorneys’ fees and expenses, and consultant’s fees and expenses) incurred as a result of such claims, to the extent caused by Contractor’s failure to comply with the terms of this Addendum.

1.3 Retention of Personally Identifiable Information. Contractor will not retain any Personally Identifiable Information for any period longer than necessary for Contractor to fulfill its obligations under the Agreement. As soon as Contractor no longer needs to retain such Personally Identifiable Information in order to perform its duties under the Agreement, Contractor will comply with Section 1.4 (Return of Personally Identifiable Information) with respect to the return or destruction of Personally Identifiable Information.

ComEd-SSN Amendment #3 (20160201) Page 3 of 5 Confidential

1.4 Return of Personally Identifiable Information. On Exelon’s written request or upon expiration or termination of the Agreement for any reason, the Contractor will promptly, and no later than thirty (30) days after such request, expiration or termination (a) return or destroy, at Exelon’s option, all originals and copies of all documents and materials it has received containing Personally Identifiable Information, (b) deliver or destroy, at Exelon’s option, all originals and copies of all summaries, records, descriptions, modifications, negatives, drawings, adaptations, and other documents or materials, whether in writing or in machine-readable form, prepared by Contractor, prepared under its direction, or at its request, from the documents and materials referred to in clause (a), and (c) provide a notarized written statement to Exelon certifying that all documents and materials referred to in clauses (a) and (b) have been delivered to Exelon or destroyed, as requested by Exelon. Contractor’s destruction or erasure of Personally Identifiable Information pursuant to this Section shall be in compliance with best industry practices (e.g., Department of Defense 5220-22-M Standard).

1.5 Security

(i) In General. Contractor will maintain and enforce physical and logical security procedures with respect to its access and maintenance of Personally Identifiable Information that (a) are at least equal to industry standards for such types of locations, and  (b) provide reasonably appropriate technical and organizational safeguards against accidental or unlawful destruction, loss, alteration, or unauthorized disclosure, access, or acquisition of Personally Identifiable Information accessible by Contractor under the Agreement. Contractor will use commercially reasonable efforts to secure and defend its location and equipment against “hackers” and others who may seek, without authorization, to modify or access Contractor systems or the information found therein. Contractor will periodically test its systems for potential areas where security could be breached.

(ii) Security Breach Notification. Contractor shall immediately notify Exelon after becoming aware of any unauthorized access to, acquisition,disclosure, loss, use of, or any other potential corruption, compromise, or destruction of any Personally Identifiable Information (“Security Breach”).  Contractor will assist and cooperate with Exelon with respect to any investigation, disclosures to affected parties, and other remedial measures as requested by Exelon or required under any applicable Privacy/Consumer Laws.  If a Security Breach is caused by Contractor’s failure to comply with this Addendum, Contractor shall promptly reimburse Exelon for its costs and expenses, including any claims, internal administrative costs, third-party fees and expenses (including attorneys and consultants), and any other costs, damages, and losses incurred by Exelon as a result of such Security Breach. In the event of any Security Breach by Contractor that requires notification to any person or entity, including any customer, shareholder, or current or former employee of Exelon Parties under any Privacy/Consumer Laws, such notification shall be provided by Exelon, unless otherwise approved by Exelon in writing.  Exelon shall have sole control over the timing and method of providing such notification. Contractor will use best efforts to promptly remedy any breach of security or unauthorized access or acquisition of Personally Identifiable Information and deliver to Exelon within sixty (60) days of such breach or unauthorized access or acquisition a root cause assessment and future incident mitigation plan with regard to any breach of security or unauthorized access or acquisition affecting Personally Identifiable Information.

(iii) Communications and Operational Management. To the extent used to store, transmit, process or otherwise handle Personally Identifiable Information, Contractor shall (a) deploy industry standard anti-virus software and all appropriate back-up protocols to ensure essential business information can be promptly recovered in the event of a disaster or media failure, (b) ensure its operating procedures are appropriately documented and designed to protect information, computer media, and data from theft, misuse, and unauthorized access, and (c) utilize industry standard encryption to protect Personally Identifiable Information while it is at rest, in transit, or residing on backup tapes.

(iv) On-Going Independent Monitoring of Security Controls.  Contractor commits to execute on-going, independent monitoring of its control environment at its own cost and expense through Service Organization Control (SOC) 1 evaluations conducted in accordance with the Statement on Standards for Attestation Engagements (SSAE) No. 16, or SOC 2 audits (a/k/a SSAE Type 2) of the Trust Services Principles (TSPs).  Contractor will provide copies of its SOC 1 or SOC 2 reports to Buyer annually with respect to its primary operations.  Contractor will ensure any data center, software as a service (SaaS)

ComEd-SSN Amendment #3 (20160201) Page 4 of 5 Confidential

or cloud-computing subcontractors complete and forward SOC reports to Buyer on an annual basis as well.  Contractor will report to Buyer its plans to cure any control deficiencies identified through on-going, independent monitoring examinations.

1.6 Termination for Regulatory Non-Compliance. If Contractor’s relationship with Exelon pursuant to this Agreement is identified in writing by any regulatory agency, with jurisdiction over Exelon Parties, to present a risk to any customers, current or former employees, agents, contractors, or subcontractors of Exelon Parties, that requires correction, Exelon shall notify Contractor of such assessment and the need for Contractor to cure, at its sole expense, the risks identified. Notwithstanding anything to the contrary contained in the Agreement, if Contractor fails to cure, or is incapable of curing, the identified risks within the shorter of a) forty-five (45) calendar days after receiving such notice from Exelon, or b) the deadline given by such regulatory agency, Exelon shall be entitled to immediately terminate the Agreement for its convenience and without the obligation to pay any termination fees or other costs to Contractor.

1.7Regulatory Examinations. Contractor agrees that any regulator or other governmental entity with jurisdiction over Exelon Parties may examine Contractor’s activities relating to the performance of the Agreement and this Addendum, to the extent such authority is granted to such entities under the law. Contractor shall promptly cooperate with and provide all information reasonably requested by the regulator or other governmental entity in connection with any such examination and provide reasonable assistance and access to all equipment, records, networks, and systems reasonably requested by the regulator or other governmental entity. Contractor agrees to comply with all reasonable recommendations that result from such regulatory examinations within reasonable timeframes at Contractor’s sole cost and expense. The foregoing cooperation and assistance will be rendered at Contractor’s then-current time and materials rates, subject to Exelon’s prior written authorization.

1.8 Insurance. Within 90 days of executing this addendum, contractor shall obtain, pay for, and maintain in full force and effect during the term of the Agreement and any renewals thereof additional insurance as follows: Cyber/Network Security Insurance with a limit of not less than *** dollars (***) per occurrence.  The full limit of coverage shall be available to pay for Contractor’s credit monitoring obligations.

ComEd-SSN Amendment #3 (20160201) Page 5 of 5 Confidential

	Amendment #4
	Amended And RestatedServicesAndMaterial Agreement

This Amendment Number 4 (“Amendment #4”), effective as of the last date of execution below (“Amendment #4 Effective Date”), between Silver Spring Networks, Inc. (“Silver Spring”) and Commonwealth Edison Company (“ComEd”) amends the Amended and Restated Services and Material Agreement, dated January 25, 2012, between Silver Spring and ComEd (the “Agreement”). Silver Spring and ComEd are referred to herein as the “Parties” or a “Party,” as applicable. Capitalized terms not defined in this Amendment #4 will have the same meaning as in the Agreement.

The Parties agree to amend the Agreement as follows:

1. Section 1.8 Insurance of Exhibit O, The Special Terms and Conditions for Personally Identifiable Information (SF) is hereby deleted and replaced by the following in its stead:

1.8 Insurance. Within 30 days of executing this addendum, contractor shall obtain, pay for, and maintain in full force and effect during the term of the Agreement and any renewals thereof additional insurance as follows: Cyber/Network Security Insurance with a limit of not less than *** dollars (***) per occurrence. The full limit of coverage shall be available to pay for Contractor’s credit monitoring obligations.

2. Integration; Conflict. The foregoing provisions shall govern notwithstanding any contrary provision in the Agreement or any previously executed agreement between the Parties. Except as otherwise expressly provided or modified herein, the (i) terms and conditions of the Agreement remain in full force and effect, and (ii) this Amendment #1 and the Agreement constitute the entire and exclusive agreement between the Parties regarding the subject matter hereof, and supersede all proposals and prior agreements, oral or written, and all other communications. In the event of a conflict between this Amendment #4 and the Agreement, this Amendment #4 shall govern.

IN WITNESS WHEREOF, the Parties have caused this Amendment #4 to be executed by their duly authorized representatives.

Commonwealth Edison Company		Silver Spring Networks, Inc.
By:	/s/ ***	By:	/s/ Scott R. Blackburn
Name:	***	Name:	Scott R. Blackburn
Title:	Commodity Manager	Title:	VP – Client Delivery
Date:	6/29/2016	Date:	6/29/2016

Approved by Legal:

***

***

ComEd‐SSN Amendment #4 (20160422) Page 1 of 1 Confidential

*** Certain omitted portions of this exhibit have been filed with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Bell, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Silver Spring Networks, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2016	By:	/s/ Michael Bell
		Michael Bell
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kenneth P. Gianella, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Silver Spring Networks, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2016	By:	/s/ Kenneth P. Gianella
		Kenneth P. Gianella
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Bell, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

· the Quarterly Report of Silver Spring Networks, Inc. on Form 10-Q for the quarter ended June 30, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

· the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Silver Spring Networks, Inc.

Date: August 9, 2016	By:	/s/ Michael Bell
		Michael Bell
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERPURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Kenneth P. Gianella, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

· the Quarterly Report of Silver Spring Networks, Inc. on Form 10-Q for the quarter ended June 30, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

· the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Silver Spring Networks, Inc.

Date: August 9, 2016	By:	/s/ Kenneth P. Gianella
		Kenneth P. Gianella
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 03, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Trading Symbol	ssni
Entity Registrant Name	SILVER SPRING NETWORKS INC
Entity Central Index Key	0001180079
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		51,590,417

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 67,979	$ 65,264
Short-term investments	45,085	59,181
Accounts receivable	46,998	47,813
Inventory	2,486	4,545
Deferred cost of revenue	201,654	196,868
Prepaid expenses and other current assets	14,195	10,835
Total current assets	378,397	384,506
Property and equipment, net	28,072	14,106
Goodwill and intangible assets	13,590	14,390
Deferred cost of revenue, non-current	25,905	38,882
Deferred tax assets, non-current	976	1,069
Other long-term assets	2,466	4,772
Total assets	449,406	457,725
Current liabilities:
Accounts payable	31,983	30,623
Deferred revenue	294,883	305,471
Accrued and other liabilities	36,319	42,751
Total current liabilities	363,185	378,845
Deferred revenue, non-current	77,051	96,342
Other liabilities, non-current	21,444	16,403
Total liabilities	461,680	491,590
Commitments and contingencies (Note 12)
Stockholders’ deficit:
Common stock, $0.001 par value; 1,000,000 shares authorized; 51,589 and 50,621 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively	608,290	594,352
Accumulated other comprehensive loss	(1,726)	(1,772)
Accumulated deficit	(618,838)	(626,445)
Total stockholders’ deficit	(12,274)	(33,865)
Total liabilities and stockholders’ deficit	$ 449,406	$ 457,725

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
Statement Of Financial Position [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	1,000,000,000	1,000,000,000
Common stock, shares issued	51,589,000	50,621,000
Common stock, shares outstanding	51,589,000	50,621,000

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Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue:
Product revenue	$ 69,917	$ 54,711	$ 102,769	$ 159,746
Services revenue	52,035	22,456	67,803	61,061
Total revenue, net	121,952	77,167	170,572	220,807
Cost of revenue:
Product cost of revenue	41,439	40,533	57,419	97,150
Services cost of revenue	15,970	16,678	31,613	32,246
Total cost of revenue	57,409	57,211	89,032	129,396
Gross profit	64,543	19,956	81,540	91,411
Operating expenses:
Research and development	17,933	16,050	33,418	31,744
Sales and marketing	8,622	8,912	18,172	18,209
General and administrative	11,239	10,455	22,085	22,584
Restructuring		1,078	39	1,272
Total operating expenses	37,794	36,495	73,714	73,809
Operating income (loss)	26,749	(16,539)	7,826	17,602
Other income, net	333	74	774	362
Income (loss) before income taxes	27,082	(16,465)	8,600	17,964
Provision (benefit) for income taxes	961	(290)	993	(766)
Net income (loss)	$ 26,121	$ (16,175)	$ 7,607	$ 18,730
Net income (loss) per share
Basic	$ 0.51	$ (0.32)	$ 0.15	$ 0.38
Diluted	$ 0.50	$ (0.32)	$ 0.14	$ 0.37
Weighted average shares used to compute net income (loss) per share
Basic	51,224	49,862	50,992	49,586
Diluted	52,766	49,862	52,492	51,095

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Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement Of Income And Comprehensive Income [Abstract]
Net income (loss)	$ 26,121	$ (16,175)	$ 7,607	$ 18,730
Other comprehensive (loss) income:
Change in foreign currency translation - net of adjustment	(114)	174	(199)	(774)
Net unrealized gain on available for sale investments (net of tax effect of $0 and $0)	19	(89)	245	89
Other comprehensive (loss) income	(95)	85	46	(685)
Comprehensive income (loss)	$ 26,026	$ (16,090)	$ 7,653	$ 18,045

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Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement Of Income And Comprehensive Income [Abstract]
Net unrealized gain (loss) on available for sale investments, tax effect	$ 0	$ 0	$ 0	$ 0

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Condensed Consolidated Statements of Cash Flow - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows provided by operating activities:
Net income	$ 7,607	$ 18,730
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes	111	(1,107)
Depreciation and amortization	4,236	3,902
Stock-based compensation	13,941	15,684
Other non-cash adjustments	113	124
Changes in operating assets and liabilities:
Accounts receivable	859	13,641
Inventory	2,061	2,233
Prepaid expenses and other current assets	1,944	(2,796)
Leasehold improvements funded by lease incentives	2,275
Contingent payments related to Detectent acquisition, held in escrow		(4,000)
Deferred cost of revenue	8,236	46,994
Accounts payable	1,174	(2,370)
Customer deposits	(6)	1,458
Deferred revenue	(29,988)	(89,031)
Accrued and other liabilities	(5,031)	5,696
Net cash provided by operating activities	7,532	9,158
Cash flows used in investing activities:
Business acquisition, net of cash acquired		(7,098)
Proceeds from sales of available-for-sale investments	22,944	7,400
Proceeds from maturities of available-for-sale investments	2,250	7,750
Purchases of available-for-sale investments	(10,954)	(11,623)
Purchases of property and equipment	(17,244)	(1,912)
Net cash used in investing activities	(3,004)	(5,483)
Cash flows used in financing activities:
Payments on capital lease obligations	(285)	(756)
Proceeds from issuance of common stock, net of repurchases	2,228	2,036
Taxes paid related to net share settlement of equity awards	(3,620)	(3,512)
Net cash used in financing activities	(1,677)	(2,232)
Effect of exchange rate changes on cash and cash equivalents	(136)	(140)
Net increase in cash and cash equivalents	2,715	1,303
Cash and cash equivalents—beginning of period	65,264	60,457
Cash and cash equivalents—end of period	67,979	61,760
Supplemental cash flow information—cash paid for income taxes	3,896	1,860
Supplemental cash flow information—cash paid for interest	7	34
Non-cash investing activities:
Unpaid purchases of property and equipment	$ 3,032	$ 1,049

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Basis of Presentation

6 Months Ended

Jun. 30, 2016

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

SILVER SPRING NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Silver Spring Networks, Inc. (the “Company”, “we”, “us” and “our”) have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, for interim financial information as well as the instructions to Form 10-Q and applicable rules and regulations of the U.S. Securities and Exchange Commission, or SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. The results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of the results that may be expected for the year ending December 31, 2016, or any future period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” “Quantitative and Qualitative Disclosures About Market Risk,” and the Consolidated Financial Statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015. The preparation of unaudited condensed consolidated financial statements necessarily requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the condensed consolidated balance sheet dates and the reported amounts of revenues and expenses for the periods presented. Actual results could differ materially from those estimates under different assumptions or conditions. As a result, the quarterly results may not be indicative of the full year results.

The condensed consolidated financial statements include the accounts of Silver Spring Networks, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Prior Period Adjustments

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 Form 10-Q for the quarter ended March 31, 2016. We performed the analysis required by Staff Accounting Bulletin 99, Materiality, to evaluate the materiality of the error, quantitatively and qualitatively, and concluded it was not material to our condensed consolidated financial statements for the three months ended March 31, 2016. The error is corrected in the statement of cash flows for the six months ended June 30, 2016.

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Significant Accounting Policies and Estimates

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Significant Accounting Policies and Estimates

2. Significant Accounting Policies and Estimates

There have been no material changes to our significant accounting policies described in Note 1, Description of Business, Basis of Presentation and Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2015 that have had a material impact on our condensed consolidated financial statements and related notes.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This standard is effective for annual reporting periods beginning after December 15, 2016. We are currently evaluating the effect that this new guidance will have on our financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current lease accounting. The guidance also eliminates current real estate-specific provisions for all entities. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. All entities will classify leases to determine how to recognize lease-related revenue and expense. The guidance becomes effective for fiscal years and interim reporting periods beginning after December 15, 2018. We are currently evaluating the effect that this new guidance will have on our financial statements and related disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. Under this new guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The updated standard will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective and permits the use of either the full retrospective or cumulative effect transition method. In July 2015, the FASB decided to delay the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. As such, the updated standard will be effective for us in the first quarter of 2018, with the option to early adopt it in the first quarter of 2017. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

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Net Income (Loss) Per Share

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Net Income (Loss) Per Share

3. Net income (loss) per share

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding plus dilutive potential shares of common stock outstanding during the period. Dilutive potential shares of common stock consist of common shares issuable upon exercise of stock options, issuances of shares pursuant to the Employee Stock Purchase Plan, or ESPP, vesting of restricted stock units, or RSUs, and contingently issuable performance stock units, or PSUs, to the extent dilutive. We include the common shares underlying PSUs in the calculation of diluted net income (loss) per share when they become contingently issuable and exclude such shares when they are not contingently issuable. Certain potential shares of common stock were excluded from the computation of diluted net income (loss) per share because their effect would be anti-dilutive.

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share data):

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
Net income (loss)	$	26,121	$	(16,175	)	$	7,607	$	18,730
Net income (loss) per share
Basic	$	0.51	$	(0.32	)	$	0.15	$	0.38
Diluted	$	0.50	$	(0.32	)	$	0.14	$	0.37
Weighted average shares used to compute net income (loss)    per share
Basic		51,224		49,862			50,992		49,586
Diluted		52,766		49,862			52,492		51,095

The following potential common shares outstanding were excluded from the computation of diluted net income (loss) per share because including them would have been anti-dilutive (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Employee equity awards		5,407		7,709		5,263		4,260

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Cash, Cash Equivalents, and Short-Term Investments

6 Months Ended

Jun. 30, 2016

Cash Cash Equivalents And Short Term Investments [Abstract]

Cash, Cash Equivalents, and Short-Term Investments

4. Cash, Cash Equivalents and Short-Term Investments

Cash, cash equivalents, and short-term investments consisted of the following as of June 30, 2016 (in thousands):

	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
Current assets:
Cash	$	57,979	$	—	$	—		$	57,979
Cash equivalents:
Money market mutual funds		10,000		—		—			10,000
Total cash and cash equivalents		67,979		—		—			67,979
Short-term fixed income securities:
U.S. government and agency obligations		24,106		49		—			24,155
U.S. and foreign corporate debt securities		16,697		36		(1	)		16,732
Foreign governments and multi-national agency    obligations		2,000		—		—			2,000
Commercial Paper		2,198		—		—			2,198
Total short-term investments		45,001		85		(1	)		45,085
Total cash, cash equivalents and short-term investments	$	112,980	$	85	$	(1	)	$	113,064

Cash, cash equivalents, and short-term investments consisted of the following as of December 31, 2015 (in thousands):

	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
Current assets:
Cash	$	59,263	$	—	$	—		$	59,263
Cash equivalents:
Money market mutual funds		6,001		—		—			6,001
Total cash and cash equivalents		65,264		—		—			65,264
Short-term fixed income securities:
U.S. government and agency obligations		38,396		4		(110	)		38,290
U.S. and foreign corporate debt securities		18,945		2		(52	)		18,895
Foreign governments and multi-national agency    obligations		2,000		—		(4	)		1,996
Total short-term investments		59,341		6		(166	)		59,181
Total cash, cash equivalents and short-term investments	$	124,605	$	6	$	(166	)	$	124,445

As of June 30, 2016, approximately 84% and 9% of our cash, cash equivalents, and short-term investments were held with two financial institutions, respectively. As of December 31, 2015, approximately 84% and 11% of our cash, cash equivalents, and short-term investments were held with two financial institutions, respectively.

Contractual Maturities

The contractual maturities of cash equivalents and short-term investments consisted of the following (in thousands):  

	As of June 30, 2016				As of December 31, 2015
	Amortized		Aggregate		Amortized		Aggregate
	Cost Basis		Fair Value		Cost Basis		Fair Value
Due within one year	$	39,189	$	39,217	$	25,183	$	25,163
Due from 1 year through 3 years		15,812		15,868		40,159		40,019
Total cash equivalents and short-term investments	$	55,001	$	55,085	$	65,342	$	65,182

The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of June 30, 2016 and December 31, 2015, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):  

	As of June 30, 2016					As of December 31, 2015
	Total (Less Than 12 Months)					Total (Less Than 12 Months)
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. and foreign corporate debt securities	$	1,773	$	(1	)	$	15,894	$	(52	)
Foreign governments and multi-national agency obligations		—		—			1,996		(4	)
U.S. government and agency obligations		—		—			31,792		(110	)
Total	$	1,773	$	(1	)	$	49,682	$	(166	)

As of June 30, 2016 and December 31, 2015, there were no investments with unrealized losses for a period in excess of 12 months.

We periodically review our marketable debt securities for other-than-temporary impairment. We consider factors such as the duration, severity and the reason for the decline in value, the potential recovery period and our intent to sell. We also consider whether it is more likely than not that we will be required to (i) sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses. As of June 30, 2016, we anticipate that we will recover the entire amortized cost basis of such available-for-sale debt securities and have determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the three and six months ended June 30, 2016 and 2015. There were insignificant gross realized gains or losses from available-for-sale securities during the three and six months ended June 30, 2016 and 2015.  

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Fair Value Measurements

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

5. Fair Value Measurements

We determine the fair values of our financial instruments based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. Under ASC Topic 820, Fair Value Measurement and Disclosures, the fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3—Unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions.

Level 1 measurements are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 measurements are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. We did not have any transfers of financial instruments between valuation levels during the six months ended June 30, 2016 and year ended December 31, 2015.

Assets Measured at Fair Value on a Recurring Basis

As of June 30, 2016, financial assets recorded at fair value on a recurring basis were determined using the following inputs (in thousands):

	Fair Value Measurement Using
	Quoted Prices in		Significant
	Active Markets for		Other		Significant
	Identical		Observable		Unobservable
	Instruments		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Cash equivalents:
Money-market funds	$	10,000	$	—	$	—	$	10,000
Total cash equivalents		10,000		—		—		10,000
Short-term investments:
U.S. Government and agency obligations		—		24,155		—		24,155
U.S. and foreign corporate debt securities		—		16,732		—		16,732
Foreign governments and multi-national agency    obligations		—		2,000		—		2,000
Commercial paper		—		2,198		—		2,198
Total short-term investments		—		45,085		—		45,085
Total assets measured at fair value	$	10,000	$	45,085	$	—	$	55,085

As of December 31, 2015, financial assets recorded at fair value on a recurring basis were determined using the following inputs (in thousands):

	Fair Value Measurement Using
	Quoted Prices in		Significant
	Active Markets for		Other		Significant
	Identical		Observable		Unobservable
	Instruments		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Cash equivalents:
Money-market funds	$	6,001	$	—	$	—	$	6,001
Total cash equivalents		6,001		—		—		6,001
Short-term investments:
U.S. Government and agency obligations		—		38,290		—		38,290
U.S. and foreign corporate debt securities		—		18,895		—		18,895
Foreign governments and multi-national agency    obligations		—		1,996		—		1,996
Total short-term investments		—		59,181		—		59,181
Total assets measured at fair value	$	6,001	$	59,181	$	—	$	65,182

As of June 30, 2016 and December 31, 2015, there were no liabilities that are measured and recorded at fair value on a recurring basis.

As of June 30, 2016 and December 31, 2015, there were no assets and liabilities that are measured and recorded at fair value on a nonrecurring basis except for assets and liabilities valued on the date of acquisition for business acquired during 2015.

Assets and Liabilities Not Measured at Fair Value

The carrying amounts of our accounts receivable, accounts payable, and other accrued liabilities approximate fair value due to their short maturities.

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Business Acquisitions

6 Months Ended

Jun. 30, 2016

Business Combinations [Abstract]

Business Acquisitions

6. Business Acquisition

On January 16, 2015, we completed the acquisition of Detectent, Inc., or Detectent, a privately held corporation that provides customer intelligence solutions for utilities leveraging its data analytics platform, and paid $7.6 million in cash consideration. The acquisition of Detectent was accounted for under the acquisition method of accounting. Detectent’s SaaS, subscription, and software solutions help improve advanced metering infrastructure and utility grid operations, ensure revenue protection, and deliver enhanced customer engagement programs. We recorded goodwill of $4.5 million and intangible assets of $3.8 million, consisted primarily of developed technology, customer relationships, non-compete agreements and order backlog, at the time of acquisition. The goodwill arising from the Detectent acquisition was largely attributable to the synergies expected to be realized and was not deductible for U.S. federal income tax purposes.

In addition, we paid and held $4.0 million of deferred cash consideration, or contingent payments, in an escrow account, to be released over a two-year period subject to the retention of key employees of Detectent, or retention period. Contingent payments associated with future employment conditions are being recorded as compensation expense over the retention period. During the six months ended June 30, 2016, we released $1.0 million from the escrow account in connection with the satisfaction of the retention terms of the acquisition agreement.

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

7. Goodwill and Intangible Assets

Goodwill:

As of June 30, 2016 and December 31, 2015, the gross amount of goodwill was $8.8 million.

Intangible Assets:

The following table summarizes the gross carrying amount and accumulated amortization for the intangible assets resulting from acquisitions (in thousands):

		As of June 30, 2016						As of December 31, 2015
	Useful Lives (in years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Purchased technology	4-6 years	$	4,865	$	2,544	$	2,321	$	4,865	$	2,180	$	2,685
Customer relationships	4-7 years		3,640		1,367		2,273		3,640		973		2,667
Trade name	6 years		369		142		227		369		103		266
Total		$	8,874	$	4,053	$	4,821	$	8,874	$	3,256	$	5,618

Intangible assets subject to amortization are amortized over their useful lives as shown in the table above.

The following table illustrates the amortization expense included in the consolidated statements of operations for the three and six months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Amortization of purchased intangible assets:	2016		2015		2016		2015
Cost of revenue	$	195	$	260	$	364	$	522
Sales and marketing		172		154		415		294
General and administrative		8		8		17		15
Total	$	375	$	422	$	796	$	831

The estimated future amortization expense of purchased intangible assets with definite lives for the next five years is as follows (in thousands):

Year Ending December 31,	Amount
Remainder of 2016	$	750
2017		1,501
2018		1,195
2019		1,005
2020		259
2021 and thereafter		111
	$	4,821

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

8. Stock-Based Compensation

Equity Incentive Plan and Employee Stock Purchase Plan

Our Board of Directors adopted the 2012 Equity Incentive Plan, or 2012 Plan, which became effective on March 12, 2013 and serves as the successor to our 2003 Stock Option Plan, or 2003 Plan. Pursuant to the 2012 Plan, 3,400,000 shares of our common stock were initially reserved for grant, plus (1) any shares that were reserved and available for issuance under the 2003 Plan at the time the 2012 Plan became effective, and (2) any shares that become available upon forfeiture or repurchase by us under the 2003 Plan and a stock option plan assumed in connection with a previous acquisition, will be reserved for issuance. In addition, the number of shares of our common stock available for grant and issuance shall be increased on January 1 of each calendar year during the term of the Plan by the lesser of (i) four percent (4%) of the number of shares of our common stock issued and outstanding on each December 31 immediately prior to the date of increase, or (ii) such number of shares determined by the Board of Directors. Under the 2012 Plan, we may grant both incentive and non-statutory stock options, restricted stock, restricted stock units, and performance stock units to employees, directors and service providers. We may grant options to purchase shares of common stock to employees, directors and service providers at prices not less than the fair market value on the date of grant for both Incentive Stock Options, or ISOs, and Nonqualified Stock Options. ISOs granted to a person who, at the time of the grant, owns more than 10% of the voting power of all classes of stock must be at no less than 110% of the fair market value and expire five years from the date of grant. All other options generally have a contractual term of 10 years. Options generally vest over four years. RSUs generally vest between two to four years. PSUs generally vest over three years.

Our Board of Directors adopted the 2012 Employee Stock Purchase Plan, or ESPP, which became effective on March 12, 2013, pursuant to which 400,000 shares of our common stock have been reserved for future issuance. In addition, on each January 1 for the first ten calendar years after the first Offering Date, the aggregate number of shares of our common stock reserved for issuance under the ESPP shall be increased automatically by the number of shares equal to 1% of the total number of outstanding shares of our common stock on the immediately preceding December 31 subject to restrictions defined in the ESPP. Eligible employees can enroll and elect to contribute up to 15% of their compensation through payroll withholdings in each offering period, subject to certain limitations. Each offering period is six months in duration. The purchase price of the stock is the lower of 85% of the fair market value on (a) the first day of the offering period or (b) the purchase date.

As of June 30, 2016 and December 31, 2015, there were 6.3 million and 4.9 million shares, respectively, of common stock reserved for future grants under our ESPP and 2012 Plan.

Stock Option Activities

The following table summarizes our stock option activity and related information for the six months ended June 30, 2016 as follows (in thousands, except per share data):

	Options Outstanding
				Weighted		Weighted
				Average		Average
				Exercise		Remaining		Aggregate
	Number of			Price per		Contractual		Intrinsic
	Shares			Share		Term (years)		Value
Balance at December 31, 2015		4,432		$	11.99		5.36	$	17,290
Options granted		420			13.33
Options exercised		(211	)		2.39
Options cancelled or expired		(527	)		15.71
Balance at June 30, 2016		4,114		$	12.14		5.58	$	11,325
As of June 30, 2016:
Options vested and expected to vest		4,062		$	12.12		5.54	$	11,306
Options exercisable		2,961		$	11.67		4.32	$	10,420

The aggregate intrinsic value disclosed above represents the total intrinsic value (the difference between the fair value of our common stock as of June 30, 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2016. This amount is subject to change based on changes to the fair value of our common stock.

Restricted Stock Units Activities

The following table summarizes our restricted stock units activity and related information for the six months ended June 30, 2016 as follows (in thousands, except per share data):  

	Restricted Stock Units Outstanding
						Weighted
				Weighted		Average
				Average Grant		Remaining		Aggregate
	Number of			Date Fair Value		Contractual		Intrinsic
	Shares			per Share		Term(years)		Value
Balance at December 31, 2015		3,086		$	11.11		1.73	$	44,473
Restricted stock units granted		1,614			12.99
Restricted stock units vested		(850	)		13.31
Restricted stock units cancelled		(158	)		14.11
Performance stock units cancelled		(100	)		7.42
Balance at June 30, 2016		3,592		$	10.90		1.63	$	43,649

Stock-based Compensation

We recorded stock-based compensation expense as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Cost of revenue	$	1,389	$	2,209	$	2,717	$	3,932
Research and development		2,241		2,832		4,266		5,013
Sales and marketing		726		1,287		1,557		2,525
General and administrative		2,685		2,333		5,401		4,214
Stock-based compensation expense	$	7,041	$	8,661	$	13,941	$	15,684

Stock-based compensation related to our corporate bonus incentive plan was $1.9 million and $3.7 million for the three months ended June 30, 2016 and 2015, respectively. Stock-based compensation related to our corporate bonus incentive plan was $4.0 million and $5.2 million for the six months ended June 30, 2016 and 2015, respectively. We recorded these amounts under accrued liabilities in our consolidated balance sheets.

The following table presents unrecognized compensation cost, adjusted for estimated forfeitures, recognized over a weighted-average period related to unvested stock options, ESPP, RSUs, and PSUs as of June 30, 2016:

			Weighted
	Unrecognized		Average
	Compensation		Period
	Cost		(Years)
Stock options	$	7,044	2.7
ESPP		179	0.1
RSUs and PSUs	$	28,653	2.6

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Income Taxes

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

Our income tax provision and benefit for income taxes for the three months ended June 30, 2016 and 2015 reflects an effective tax rate of 3.5% and 1.8%, respectively. Our income tax provision and benefit for income taxes for the six months ended June 30, 2016 and 2015 reflects an effective tax rate of 11.5% and (4.3%), respectively. Our income tax expense for the three and six months ended June 30, 2016 consists primarily of an income tax from foreign jurisdictions and state, respectively. Our benefit for income taxes for the three and six months ended June 30, 2015 consists primarily of a net benefit of $0.9 million, which was due to the deferred income tax benefits related to the Detectent acquisition.

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Segment Information

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Segment Information

10. Segment Information

We operate in one reportable segment. Our chief operating decision makers are our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, who review consolidated operating results to make decisions about allocating resources and assessing performance for the entire company. Revenue by geography is based on the billing address of the customer. The following table presents revenue by geographic region (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Revenue:
United States	$	118,539	$	72,367	$	163,761	$	194,950
Australia		1,834		3,526		3,969		22,702
All Other		1,579		1,274		2,842		3,155
Total	$	121,952	$	77,167	$	170,572	$	220,807

Substantially all of our long-lived assets are located in the United States.

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Balance Sheet Details

6 Months Ended

Jun. 30, 2016

Disclosure Text Block Supplement [Abstract]

Balance Sheet Details

11.Balance Sheet Details

Inventory

Inventory consisted of the following (in thousands):

	June 30,		December 31,
	2016		2015
Component parts	$	411		1,201
Finished goods		2,075		3,344
Inventory	$	2,486		4,545

Accrued and Other Liabilities

Accrued and other liabilities consisted of the following (in thousands):  

	June 30,		December 31,
	2016		2015
Accrued payroll and related expenses	$	14,098	$	14,249
Accrued operating expenses		2,943		5,937
Warranty obligations, current		5,984		8,601
Sales, property and income taxes		1,358		4,850
Current portion of capital lease obligation		—		285
Other deferred revenue		11,541		8,326
Other		395		503
Accrued and other liabilities	$	36,319	$	42,751

Other Liabilities, non-current

Other liabilities, non-current consisted of the following (in thousands):  

	June 30,		December 31,
	2016		2015
Warranty obligations, non-current	$	2,062	$	2,898
Other deferred revenue		10,801		11,099
Deferred rent, non-current		8,079		944
Other		502		1,462
Other liabilities, non-current	$	21,444	$	16,403

          Product Warranty

Product warranty activity is as follows (in thousands):

	SixMonths Ended
	June 30,
	2016
Warranty obligation—beginning of period	$	11,499
Warranty expense for new warranties issued		159
Utilization of warranty obligation		(2,798	)
Changes in estimates for pre-existing warranties		(814	)
Warranty obligation—end of period	$	8,046

Accumulated Other Comprehensive (Loss) Income (AOCI), Net of Tax

The components of accumulated other comprehensive (loss) income, net of tax, for the six months ended June 30, 2016 are as follows (in thousands):

				Unrealized Gains
	Foreign Currency			(Losses) on Available
	Adjustment			for Sale Securities			Total
Balance as of December 31, 2015	$	(1,561	)	$	(211	)	$	(1,772	)
Other comprehensive (loss) income before    reclassification		(199	)		272			73
Amounts reclassified from AOCI		—			(27	)		(27	)
Other comprehensive (loss) income		(199	)		245			46
Balance as of June 30, 2016	$	(1,760	)	$	34		$	(1,726	)

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

12. Commitments and contingencies

Operating and Capital Leases

Our primary operating lease commitment as of June 30, 2016, related to our headquarters in San Jose, California, requires monthly lease payments through September 2026.

We recognize rent expense on a straight-line basis over the lease period. Where leases contain escalation clauses, rent abatements, or concessions, such as rent holidays and landlord or tenant incentives or allowances, we apply them in the determination of straight-line rent expense over the lease term. Rent expense for all facility leases was $2.0 million and $1.3 million for the three months ended June 30, 2016 and 2015, respectively, $4.3 million and $2.5 million for the six months ended June 30, 2016 and 2015, respectively.

As of June 30, 2016, the future minimum commitments under our operating leases were as follows (in thousands):  

	Operating
	Leases
Remainder of 2016	$	2,325
2017		5,976
2018		7,047
2019		7,211
2020		6,949
2021 and thereafter		40,454
Net minimum lease payments	$	69,962

Legal Contingencies

EON Patent Litigation.  In June 2011, EON Corp. IP Holdings, LLC, a non-producing entity, or EON, filed suit in United States District Court for the Eastern District of Texas, Tyler Division against us and a number of smart grid providers.  The lawsuit alleges infringement of United States Patent Nos. 5,388,101, 5,481,546, and 5,592,491, or the EON Patents, by certain networking technology and services that we and the other defendants provide.  Other defendants included Landis+Gyr AG (which was acquired by Toshiba Corporation), Aclara Power-Line Systems Inc., Elster Solutions, LLC, Itron, Inc. and Trilliant Networks Inc., all of which settled with EON prior to trial. We filed answers, affirmative defenses and counterclaims denying the plaintiff’s allegations and asserting that the plaintiff’s patents are invalid. A trial was held in June 2014. After the trial, the jury determined that we had infringed certain, but not all, of the claims under the EON Patents, and returned a verdict against us in the amount of $18.8 million.  Following post-trial motions by both parties, the court reduced the damage award to approximately $13.0 million, and in December 2014, entered a final judgment in that amount plus approximately $1.5 million in pre-judgment interest.  The court subsequently revised the final judgment to include additional costs of about $0.2 million and entered an amended final judgment in December 2014.  All of the EON Patents have expired and therefore EON is not seeking, and EON may not recover, any additional sums as royalties for our sales of products going forward.

In December 2014, we filed a notice of appeal with the U.S. Court of Appeals for the Federal Circuit in Washington, D.C.  In order to stay the execution of the final judgment pending the appeal, in December 2014 we filed a surety bond in the amount of $17.6 million, which includes an additional 20% of the final judgment for post-judgment interest and expenses expected to be incurred during the appeal process, in accordance with court rules.  The bond was issued by Zurich Insurance and is collateralized with a standby letter of credit in the amount of $13.0 million, the amount of the damage award, as described below in “Customer Performance and Other Commitments.” Upon completion of the appeal process, both the surety bond and standby letter of credit will be released.  In January 2015, the District Court accepted the bond and entered the stay of execution of the judgment.  The appellate hearing took place in November 2015, and in February 2016 the appellate court issued a ruling reversing the District Court’s prior decision and judgment against us, and holding that no reasonable jury could find we infringed the EON patents. In April 2016, EON filed a petition for a rehearing en banc, which the appellate court denied in May 2016.  In June 2016, the appellate court notified the District Court that the prior judgment in favor of EON was vacated and that judgment was in our favor, and the District Court released our appellate bond obligation.  We filed a renewed motion to recover certain costs of the trial and appeal from EON in June 2016, and in July 2016 the District Court awarded us $0.6 million. We intend to continue vigorously pursuing this motion and collection of the award, and defending the action as necessary.

Linex Patent Litigation.  In March 2013, Linex Technologies, Inc., a non-producing entity, or Linex, filed suit against us in United States District Court for the Southern District of Florida. Linex alleged that certain of our networking technology infringes United States Patent Nos. 6,493,377 and 7,167,503. We filed an answer in May 2013. In January 2014, the court granted the plaintiff’s request for a stay of the matter, pending reexamination of the patents at issue by the USPTO. In September 2014, Linex amended certain patent claims and canceled certain other patent claims based upon the USPTO’s completed reexaminations, and in October 2014, the court lifted the stay of the matter.  In January 2015, Linex filed an amended complaint to incorporate facts related to the completed reexaminations, and we filed an answer responding to the complaint and raising additional defenses.  In June 2015, the court stayed the action pending the USPTO’s completion of further ex parte reexaminations of the patents at issue.  We believe that we have meritorious defenses to Linex’s allegations and intend to continue vigorously defending against the action.

Atlas/ComEd, Atlas/PG&E, and Atlas/FP&L Patent Litigation. In November 2015, Atlas IP, LLC filed separate suits against our customers Commonwealth Edison Company, or ComEd, and Pacific Gas and Electric Co., or PG&E, alleging infringement of United States Patent No. 5,371,734 by communications between smart meters and access points over a neighborhood area network using wireless communication modules and networking equipment supplied by us. In May 2016, Atlas filed a similar suit against our customer Florida Power & Light Company, or FP&L. We have agreed to assume the defense in each of these suits.

ComEd.  The suit against ComEd was filed in the Northern District of Illinois in November 2015, and also named Exelon Corp., or Exelon, as a defendant. In January 2016, we filed a motion to dismiss the ComEd complaint and to remove Exelon as a defendant. In February 2016, the court granted our motion to dismiss the complaint, and dismissed Exelon from the case with prejudice. In March 2016, Atlas IP filed an amended complaint against ComEd, which the court dismissed in May 2016, finding the complaint to be legally insufficient. The court awarded us reasonable attorneys’ fees and costs in July 2016. Atlas IP filed a notice of appeal in June 2016, seeking to appeal the dismissal to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C.

PG&E.  The suit against PG&E was filed in the Northern District of California. We filed a motion to dismiss the PG&E complaint in January 2016, which the court granted in March 2016.  Atlas IP filed an amended complaint against PG&E, which the court dismissed in June 2016, determining that Atlas IP is collaterally estopped from re-litigating the sufficiency of its complaint as the sufficiency of Atlas IP’s complaint was already decided against Atlas IP by the court in the ComEd suit.

FP&L.  The suit against FP&L was filed in the Southern District of Florida in May 2016.  In June 2016, the court stayed the action until the conclusion of Atlas IP’s appeal in the ComEd case, pursuant to an agreement between the parties that if the appellate court affirms the dismissal of the ComEd case, it will be dispositive of the FP&L action.

We believe that we have meritorious defenses to Atlas IP’s allegations in each of these matters, and intend to continue vigorously defending the actions.

Acoustic Technology Patent Litigation.  On July 29, 2016, Acoustic Technology, Inc., a non-producing entity, filed suit in United States District Court for the Eastern District of Texas, Marshall Division against us. The lawsuit alleges infringement of United States Patent Nos. 5,986,574, and 6,509,841 by certain meters and networking technology and services that we provide. The patents will expire in late 2017 and early 2018. We have not yet received service of process in this matter. We believe that we have meritorious defenses to Acoustic’s allegations and intend to vigorously defend ourselves.

In addition to the matters described above, from time to time we may be subject to other legal proceedings and claims in the ordinary course of business. We have received, and may in the future continue to receive, claims from third parties asserting infringement of their intellectual property rights. We may, from time to time, also be subject to various legal or government claims, disputes, or investigations. Such matters may include, but not be limited to, claims, disputes, or investigations related to warranty, refund, breach of contract, employment, intellectual property, government regulation, compliance or other matters. Future litigation may be necessary to defend ourselves and our customers by determining the scope, enforceability and validity of third-party rights or to establish our rights. There can be no assurance with respect to the outcome of any current or future litigation brought against us or pursuant to which we have indemnification obligations and the outcome could have a material adverse impact on our business, operating results and financial condition.

We have not recorded any amounts for contingent losses associated with the matters described above based on our belief that losses, while reasonably possible, are not probable. Unless otherwise stated, we are currently unable to predict the final outcome of these lawsuits and therefore cannot determine the likelihood of loss nor estimate a range of possible loss.

We are directly involved with various unresolved legal actions and claims, and are indirectly involved with proceedings by administrative bodies such as public utility commissions, arising in the ordinary course of business. We do not believe that any liability from any reasonably foreseeable disposition of such legal actions and claims, individually or in the aggregate, would have a material effect on our consolidated financial statements. There are many uncertainties associated with any litigation or claim, and we cannot be certain that these actions or other third-party claims will be resolved without costly litigation, fines and/or substantial settlement payments. If that occurs, our business, financial condition and results of operations could be materially and adversely affected. If information becomes available that causes us to determine that a loss in any of our pending litigation matters, claims or settlements is probable, and a reasonable estimate of the loss associated with such events can be made, we will record the estimated loss at that time.

Customer Performance and Other Commitments

Certain customer agreements require us to obtain letters of credit or surety bonds in support of our obligations under such arrangements. These letters of credit or surety bonds typically provide a guarantee to the customer for future performance, which usually covers the deployment phase of a contract and may on occasion cover the operations and maintenance phase of service contracts.

As of June 30, 2016 and December 31, 2015, we had a total of $27.8 million and $22.7 million, respectively, including $13.0 million related to the EON Patent Litigation mentioned above, of standby letters of credit issued under the Credit Facility with a financial institution. As of June 30, 2016 and December 31, 2015, $4.5 million (AUD$6.2 million) and $4.4 million (AUD$6.2 million) of these standby letters of credit were denominated in Australian dollars, respectively. In accordance with the terms of our Credit Facility, increases or decreases in the exchange rate between the Australian dollar and the U.S. dollar will increase or decrease the amount available to us under the Credit Facility. See Liquidity and Capital Resources under Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operationsfor more information on the Credit Facility.

As of June 30, 2016, we had a $20.3 million unsecured surety bond. The surety bond provides a financial guarantee to support performance obligations under certain customer agreements. In the event any such letters of credit or surety bonds are called, we would be obligated to reimburse the issuer of the letters of credit or surety bond. We do not believe there will be any claims against currently outstanding letters of credit or surety bonds.

Indemnification Commitments

Directors, Officers and Employees. In accordance with our bylaws and/or pursuant to indemnification agreements we have entered into with directors, officers and certain employees, we have indemnification obligations to our directors, officers and employees for claims brought against these persons arising out of certain events or occurrences while they are serving at our request in such a capacity. We maintain a director and officer liability insurance coverage to reduce our exposure to such obligations, and payments made under these agreements. To date, there have been no indemnification claims by these directors, officers and employees.

Customers and Third Party Device Manufacturers. Refer to the discussion above under the heading Legal Contingencies for a description of our indemnification obligations.

Our contracts with customers and third party device manufacturers typically provide indemnification for claims filed by third parties alleging that our products and services sold to the customer or manufacturer infringe or misappropriate any patent, copyright, trademark or other intellectual property right.

In our customer contracts, we also typically provide an indemnification for third-party claims resulting from death, personal injury or property damage caused by the negligence or willful misconduct of our employees and agents in connection with the performance of certain contracts.

Under our customer and third party device manufacturer indemnities, we typically agree to defend the utility customer or third party device manufacturer, as the case may be, from such claims, and pay any resulting costs, damages and attorneys’ fees awarded against the indemnified party with respect to such claims, provided that (a) the indemnified party promptly notifies us in writing of the claim, (b) the indemnified party provides reasonable assistance to us at our expense, and (c) we have sole control of the defense and all related settlement negotiations.

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Significant Accounting Policies and Estimates (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This standard is effective for annual reporting periods beginning after December 15, 2016. We are currently evaluating the effect that this new guidance will have on our financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current lease accounting. The guidance also eliminates current real estate-specific provisions for all entities. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. All entities will classify leases to determine how to recognize lease-related revenue and expense. The guidance becomes effective for fiscal years and interim reporting periods beginning after December 15, 2018. We are currently evaluating the effect that this new guidance will have on our financial statements and related disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. Under this new guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The updated standard will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective and permits the use of either the full retrospective or cumulative effect transition method. In July 2015, the FASB decided to delay the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. As such, the updated standard will be effective for us in the first quarter of 2018, with the option to early adopt it in the first quarter of 2017. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

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Net Income (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Computation of Historical Basic and Diluted Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share data):

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
Net income (loss)	$	26,121	$	(16,175	)	$	7,607	$	18,730
Net income (loss) per share
Basic	$	0.51	$	(0.32	)	$	0.15	$	0.38
Diluted	$	0.50	$	(0.32	)	$	0.14	$	0.37
Weighted average shares used to compute net income (loss)    per share
Basic		51,224		49,862			50,992		49,586
Diluted		52,766		49,862			52,492		51,095

Common Shares Outstanding were Excluded from Computation of Diluted Net Income (Loss) Per Share

The following potential common shares outstanding were excluded from the computation of diluted net income (loss) per share because including them would have been anti-dilutive (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Employee equity awards		5,407		7,709		5,263		4,260

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Cash, Cash Equivalents, and Short-Term Investments (Tables)

6 Months Ended

Jun. 30, 2016

Cash Cash Equivalents And Short Term Investments [Abstract]

Cash, Cash Equivalents, and Short-Term Investments

Cash, cash equivalents, and short-term investments consisted of the following as of June 30, 2016 (in thousands):

	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
Current assets:
Cash	$	57,979	$	—	$	—		$	57,979
Cash equivalents:
Money market mutual funds		10,000		—		—			10,000
Total cash and cash equivalents		67,979		—		—			67,979
Short-term fixed income securities:
U.S. government and agency obligations		24,106		49		—			24,155
U.S. and foreign corporate debt securities		16,697		36		(1	)		16,732
Foreign governments and multi-national agency    obligations		2,000		—		—			2,000
Commercial Paper		2,198		—		—			2,198
Total short-term investments		45,001		85		(1	)		45,085
Total cash, cash equivalents and short-term investments	$	112,980	$	85	$	(1	)	$	113,064

Cash, cash equivalents, and short-term investments consisted of the following as of December 31, 2015 (in thousands):

	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
Current assets:
Cash	$	59,263	$	—	$	—		$	59,263
Cash equivalents:
Money market mutual funds		6,001		—		—			6,001
Total cash and cash equivalents		65,264		—		—			65,264
Short-term fixed income securities:
U.S. government and agency obligations		38,396		4		(110	)		38,290
U.S. and foreign corporate debt securities		18,945		2		(52	)		18,895
Foreign governments and multi-national agency    obligations		2,000		—		(4	)		1,996
Total short-term investments		59,341		6		(166	)		59,181
Total cash, cash equivalents and short-term investments	$	124,605	$	6	$	(166	)	$	124,445

Contractual Maturities of Cash Equivalents and Short-Term Investments

The contractual maturities of cash equivalents and short-term investments consisted of the following (in thousands):  

	As of June 30, 2016				As of December 31, 2015
	Amortized		Aggregate		Amortized		Aggregate
	Cost Basis		Fair Value		Cost Basis		Fair Value
Due within one year	$	39,189	$	39,217	$	25,183	$	25,163
Due from 1 year through 3 years		15,812		15,868		40,159		40,019
Total cash equivalents and short-term investments	$	55,001	$	55,085	$	65,342	$	65,182

Schedule of Gross Unrealized Losses and Fair Values of Investments

The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of June 30, 2016 and December 31, 2015, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):  

	As of June 30, 2016					As of December 31, 2015
	Total (Less Than 12 Months)					Total (Less Than 12 Months)
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. and foreign corporate debt securities	$	1,773	$	(1	)	$	15,894	$	(52	)
Foreign governments and multi-national agency obligations		—		—			1,996		(4	)
U.S. government and agency obligations		—		—			31,792		(110	)
Total	$	1,773	$	(1	)	$	49,682	$	(166	)

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets Recorded on Recurring Basis

As of June 30, 2016, financial assets recorded at fair value on a recurring basis were determined using the following inputs (in thousands):

	Fair Value Measurement Using
	Quoted Prices in		Significant
	Active Markets for		Other		Significant
	Identical		Observable		Unobservable
	Instruments		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Cash equivalents:
Money-market funds	$	10,000	$	—	$	—	$	10,000
Total cash equivalents		10,000		—		—		10,000
Short-term investments:
U.S. Government and agency obligations		—		24,155		—		24,155
U.S. and foreign corporate debt securities		—		16,732		—		16,732
Foreign governments and multi-national agency    obligations		—		2,000		—		2,000
Commercial paper		—		2,198		—		2,198
Total short-term investments		—		45,085		—		45,085
Total assets measured at fair value	$	10,000	$	45,085	$	—	$	55,085

As of December 31, 2015, financial assets recorded at fair value on a recurring basis were determined using the following inputs (in thousands):

	Fair Value Measurement Using
	Quoted Prices in		Significant
	Active Markets for		Other		Significant
	Identical		Observable		Unobservable
	Instruments		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Cash equivalents:
Money-market funds	$	6,001	$	—	$	—	$	6,001
Total cash equivalents		6,001		—		—		6,001
Short-term investments:
U.S. Government and agency obligations		—		38,290		—		38,290
U.S. and foreign corporate debt securities		—		18,895		—		18,895
Foreign governments and multi-national agency    obligations		—		1,996		—		1,996
Total short-term investments		—		59,181		—		59,181
Total assets measured at fair value	$	6,001	$	59,181	$	—	$	65,182

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

The following table summarizes the gross carrying amount and accumulated amortization for the intangible assets resulting from acquisitions (in thousands):

		As of June 30, 2016						As of December 31, 2015
	Useful Lives (in years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Purchased technology	4-6 years	$	4,865	$	2,544	$	2,321	$	4,865	$	2,180	$	2,685
Customer relationships	4-7 years		3,640		1,367		2,273		3,640		973		2,667
Trade name	6 years		369		142		227		369		103		266
Total		$	8,874	$	4,053	$	4,821	$	8,874	$	3,256	$	5,618

Schedule of Amortization Expense

The following table illustrates the amortization expense included in the consolidated statements of operations for the three and six months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Amortization of purchased intangible assets:	2016		2015		2016		2015
Cost of revenue	$	195	$	260	$	364	$	522
Sales and marketing		172		154		415		294
General and administrative		8		8		17		15
Total	$	375	$	422	$	796	$	831

Schedule of Estimated Future Amortization Expense

The estimated future amortization expense of purchased intangible assets with definite lives for the next five years is as follows (in thousands):

Year Ending December 31,	Amount
Remainder of 2016	$	750
2017		1,501
2018		1,195
2019		1,005
2020		259
2021 and thereafter		111
	$	4,821

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Option Activity

The following table summarizes our stock option activity and related information for the six months ended June 30, 2016 as follows (in thousands, except per share data):

	Options Outstanding
				Weighted		Weighted
				Average		Average
				Exercise		Remaining		Aggregate
	Number of			Price per		Contractual		Intrinsic
	Shares			Share		Term (years)		Value
Balance at December 31, 2015		4,432		$	11.99		5.36	$	17,290
Options granted		420			13.33
Options exercised		(211	)		2.39
Options cancelled or expired		(527	)		15.71
Balance at June 30, 2016		4,114		$	12.14		5.58	$	11,325
As of June 30, 2016:
Options vested and expected to vest		4,062		$	12.12		5.54	$	11,306
Options exercisable		2,961		$	11.67		4.32	$	10,420

Summary of Restricted Stock Units Activity

The following table summarizes our restricted stock units activity and related information for the six months ended June 30, 2016 as follows (in thousands, except per share data):  

	Restricted Stock Units Outstanding
						Weighted
				Weighted		Average
				Average Grant		Remaining		Aggregate
	Number of			Date Fair Value		Contractual		Intrinsic
	Shares			per Share		Term(years)		Value
Balance at December 31, 2015		3,086		$	11.11		1.73	$	44,473
Restricted stock units granted		1,614			12.99
Restricted stock units vested		(850	)		13.31
Restricted stock units cancelled		(158	)		14.11
Performance stock units cancelled		(100	)		7.42
Balance at June 30, 2016		3,592		$	10.90		1.63	$	43,649

Stock-Based Compensation Expense

We recorded stock-based compensation expense as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Cost of revenue	$	1,389	$	2,209	$	2,717	$	3,932
Research and development		2,241		2,832		4,266		5,013
Sales and marketing		726		1,287		1,557		2,525
General and administrative		2,685		2,333		5,401		4,214
Stock-based compensation expense	$	7,041	$	8,661	$	13,941	$	15,684

Schedule of Unrecognized Compensation Cost recognized over Weighted Average Period

			Weighted
	Unrecognized		Average
	Compensation		Period
	Cost		(Years)
Stock options	$	7,044	2.7
ESPP		179	0.1
RSUs and PSUs	$	28,653	2.6

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Schedule of Revenue by Geographic Region

The following table presents revenue by geographic region (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Revenue:
United States	$	118,539	$	72,367	$	163,761	$	194,950
Australia		1,834		3,526		3,969		22,702
All Other		1,579		1,274		2,842		3,155
Total	$	121,952	$	77,167	$	170,572	$	220,807

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Balance Sheet Details (Tables)

6 Months Ended

Jun. 30, 2016

Balance Sheet Component Details [Abstract]

Components of Inventory

Inventory consisted of the following (in thousands):

	June 30,		December 31,
	2016		2015
Component parts	$	411		1,201
Finished goods		2,075		3,344
Inventory	$	2,486		4,545

Schedule of Accrued and Other Liabilities

Accrued and other liabilities consisted of the following (in thousands):  

	June 30,		December 31,
	2016		2015
Accrued payroll and related expenses	$	14,098	$	14,249
Accrued operating expenses		2,943		5,937
Warranty obligations, current		5,984		8,601
Sales, property and income taxes		1,358		4,850
Current portion of capital lease obligation		—		285
Other deferred revenue		11,541		8,326
Other		395		503
Accrued and other liabilities	$	36,319	$	42,751

Schedule of Other Liabilities Non-current

Other liabilities, non-current consisted of the following (in thousands):  

	June 30,		December 31,
	2016		2015
Warranty obligations, non-current	$	2,062	$	2,898
Other deferred revenue		10,801		11,099
Deferred rent, non-current		8,079		944
Other		502		1,462
Other liabilities, non-current	$	21,444	$	16,403

Schedule of Product Warranty Activity

Product warranty activity is as follows (in thousands):

	SixMonths Ended
	June 30,
	2016
Warranty obligation—beginning of period	$	11,499
Warranty expense for new warranties issued		159
Utilization of warranty obligation		(2,798	)
Changes in estimates for pre-existing warranties		(814	)
Warranty obligation—end of period	$	8,046

Accumulated Other Comprehensive (Loss) Income

The components of accumulated other comprehensive (loss) income, net of tax, for the six months ended June 30, 2016 are as follows (in thousands):

				Unrealized Gains
	Foreign Currency			(Losses) on Available
	Adjustment			for Sale Securities			Total
Balance as of December 31, 2015	$	(1,561	)	$	(211	)	$	(1,772	)
Other comprehensive (loss) income before    reclassification		(199	)		272			73
Amounts reclassified from AOCI		—			(27	)		(27	)
Other comprehensive (loss) income		(199	)		245			46
Balance as of June 30, 2016	$	(1,760	)	$	34		$	(1,726	)

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2016

Commitments And Contingencies Disclosure [Abstract]

Future Minimum Commitments Under Operating Leases

As of June 30, 2016, the future minimum commitments under our operating leases were as follows (in thousands):  

	Operating
	Leases
Remainder of 2016	$	2,325
2017		5,976
2018		7,047
2019		7,211
2020		6,949
2021 and thereafter		40,454
Net minimum lease payments	$	69,962

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Basis of Presentation (Narrative) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Basis Of Presentation [Line Items]
Cash provided from operating activities understated	$ 7,532	$ 9,158
Cash provided by investing activities overstated	(3,004)	$ (5,483)
Restatement Adjustment [Member]
Basis Of Presentation [Line Items]
Cash provided from operating activities understated	2,300
Cash provided by investing activities overstated	$ (2,300)

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Net Income (Loss) Per Share (Computation of Basic and Diluted Net Income (Loss) Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Net income (loss)	$ 26,121	$ (16,175)	$ 7,607	$ 18,730
Net income (loss) per share
Basic	$ 0.51	$ (0.32)	$ 0.15	$ 0.38
Diluted	$ 0.50	$ (0.32)	$ 0.14	$ 0.37
Weighted average shares used to compute net income (loss) per share
Basic	51,224	49,862	50,992	49,586
Diluted	52,766	49,862	52,492	51,095

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Net Income (Loss) Per Share (Common Shares Outstanding were Excluded from Computation of Diluted Net Income (Loss) Per Share) (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Employee equity awards [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total common stock equivalents	5,407	7,709	5,263	4,260

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Cash, Cash Equivalents, and Short-Term Investments (Cash, Cash Equivalents, and Short-Term Investments) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015	Dec. 31, 2014
Schedule Of Available For Sale Securities [Line Items]
Cash, amortized cost and estimated fair value	$ 57,979	$ 59,263
Cash and cash equivalents	67,979	65,264	$ 61,760	$ 60,457
Total short-term investments, unrealized gains	85	6
Total short-term investments, unrealized losses	(1)	(166)
Total cash, cash equivalents and short-term investments, amortized cost	112,980	124,605
Total cash, cash equivalents and short-term investments, estimated fair value	113,064	124,445
U.S. Government And Agency Obligations [Member]
Schedule Of Available For Sale Securities [Line Items]
Total short-term investments, estimated fair value	24,155	38,290
U.S. And Foreign Corporate Debt Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Total short-term investments, estimated fair value	16,732	18,895
Foreign Governments And Multi-National Agency Obligations [Member]
Schedule Of Available For Sale Securities [Line Items]
Total short-term investments, estimated fair value	2,000	1,996
Short-Term Fixed Income Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Total short-term investments, amortized cost	45,001	59,341
Total short-term investments, unrealized gains	85	6
Total short-term investments, unrealized losses	(1)	(166)
Total short-term investments, estimated fair value	45,085	59,181
Short-Term Fixed Income Securities [Member] | U.S. Government And Agency Obligations [Member]
Schedule Of Available For Sale Securities [Line Items]
Total short-term investments, amortized cost	24,106	38,396
Total short-term investments, unrealized gains	49	4
Total short-term investments, unrealized losses		(110)
Total short-term investments, estimated fair value	24,155	38,290
Short-Term Fixed Income Securities [Member] | U.S. And Foreign Corporate Debt Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Total short-term investments, amortized cost	16,697	18,945
Total short-term investments, unrealized gains	36	2
Total short-term investments, unrealized losses	(1)	(52)
Total short-term investments, estimated fair value	16,732	18,895
Short-Term Fixed Income Securities [Member] | Foreign Governments And Multi-National Agency Obligations [Member]
Schedule Of Available For Sale Securities [Line Items]
Total short-term investments, amortized cost	2,000	2,000
Total short-term investments, unrealized losses		(4)
Total short-term investments, estimated fair value	2,000	1,996
Money market mutual funds [Member]
Schedule Of Available For Sale Securities [Line Items]
Cash and cash equivalents	10,000	$ 6,001
Commercial Paper [Member]
Schedule Of Available For Sale Securities [Line Items]
Total short-term investments, amortized cost	2,198
Total short-term investments, estimated fair value	$ 2,198

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Cash, Cash Equivalents, and Short-Term Investments (Narrative) (Details)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) FinancialInstitution	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($) FinancialInstitution
Cash and Cash Equivalents [Line Items]
Number of financial institutions | FinancialInstitution			2		2
Investments with unrealized losses for a period in excess of 12 months	$ 0		$ 0		$ 0
Other-than-temporary impairments	$ 0	$ 0	$ 0	$ 0
Financial Institution One [Member]
Cash and Cash Equivalents [Line Items]
Percentage of cash, cash equivalents, and short-term investments held in financial institutions	84.00%		84.00%		84.00%
Financial Institution Two [Member]
Cash and Cash Equivalents [Line Items]
Percentage of cash, cash equivalents, and short-term investments held in financial institutions	9.00%		9.00%		11.00%

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Cash, Cash Equivalents, and Short-Term Investments (Contractual Maturities of Cash Equivalents and Short-Term Investments) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Cash, Cash Equivalents, and Short-term Investments [Abstract]
Due within one year, Amortized Cost Basis	$ 39,189	$ 25,183
Due from 1 year through 3 years, Amortized Cost Basis	15,812	40,159
Total cash equivalents and short-term investments, Amortized Cost Basis	55,001	65,342
Due within one year, Aggregate Fair Value	39,217	25,163
Due from 1 year through 3 years, Aggregate Fair Value	15,868	40,019
Total cash equivalents and short-term investments, Aggregate Fair Value	$ 55,085	$ 65,182

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Cash, Cash Equivalents, and Short-Term Investments (Schedule of Gross Unrealized Losses and Fair Values of Investments) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Schedule Of Available For Sale Securities [Line Items]
Fair Value Total (Less Than 12 Months)	$ 1,773	$ 49,682
Unrealized Loss Total (Less Than 12 Months)	(1)	(166)
U.S. And Foreign Corporate Debt Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Fair Value Total (Less Than 12 Months)	1,773	15,894
Unrealized Loss Total (Less Than 12 Months)	$ (1)	(52)
Foreign Governments And Multi-National Agency Obligations [Member]
Schedule Of Available For Sale Securities [Line Items]
Fair Value Total (Less Than 12 Months)		1,996
Unrealized Loss Total (Less Than 12 Months)		(4)
U.S. Government And Agency Obligations [Member]
Schedule Of Available For Sale Securities [Line Items]
Fair Value Total (Less Than 12 Months)		31,792
Unrealized Loss Total (Less Than 12 Months)		$ (110)

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Fair Value Measurements (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets measured at fair value	$ 55,085	$ 65,182
Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	2,198
Quoted Prices In Active Markets For Identical Instruments (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets measured at fair value	10,000	6,001
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets measured at fair value	45,085	59,181
Significant Other Observable Inputs (Level 2) [Member] | Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	2,198
U.S. Government And Agency Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	24,155	38,290
U.S. Government And Agency Obligations [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	24,155	38,290
U.S. And Foreign Corporate Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	16,732	18,895
U.S. And Foreign Corporate Debt Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	16,732	18,895
Foreign Governments And Multi-National Agency Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	2,000	1,996
Foreign Governments And Multi-National Agency Obligations [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	2,000	1,996
Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total cash equivalents	10,000	6,001
Cash Equivalents [Member] | Money market mutual funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total cash equivalents	10,000	6,001
Cash Equivalents [Member] | Quoted Prices In Active Markets For Identical Instruments (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total cash equivalents	10,000	6,001
Cash Equivalents [Member] | Quoted Prices In Active Markets For Identical Instruments (Level 1) [Member] | Money market mutual funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total cash equivalents	10,000	6,001
Short-Term Fixed Income Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	45,085	59,181
Short-Term Fixed Income Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	45,085	59,181
Short-Term Fixed Income Securities [Member] | U.S. Government And Agency Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	24,155	38,290
Short-Term Fixed Income Securities [Member] | U.S. And Foreign Corporate Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	16,732	18,895
Short-Term Fixed Income Securities [Member] | Foreign Governments And Multi-National Agency Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total short-term investments, estimated fair value	$ 2,000	$ 1,996

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Fair Value Measurements (Fair Value of Financial Assets Recorded on Recurring Basis) (Narrative) (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Fair Value Disclosures [Abstract]
Financial liabilities recorded at fair value on recurring basis	$ 0	$ 0
Financial assets recorded at fair value on nonrecurring basis	0	0
Financial liabilities recorded at fair value on nonrecurring basis	$ 0	$ 0

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Business Acquisitions (Narrative) (Details) - Detectent Inc. [Member] - USD ($) $ in Millions			6 Months Ended
	Jun. 30, 2016	Jan. 16, 2015	Jun. 30, 2016
Business Acquisition [Line Items]
Cash consideration		$ 7.6
Goodwill		4.5
Intangible assets		$ 3.8
Contingent payments	$ 4.0		$ 4.0
Retention period	2 years
Escrow account in connection with the satisfaction of retention terms of the agreement			$ 1.0

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Goodwill and Intangible Assets (Narrative) (Details) - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Goodwill And Intangible Assets Disclosure [Abstract]
Goodwill acquired during the period	$ 8.8	$ 8.8

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Goodwill And Intangible Assets (Schedule Of Intangible Assets) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Schedule Of Intangible Assets [Line Items]
Purchased intangible assets with finite lives, Gross Carrying Amount	$ 8,874	$ 8,874
Purchased intangible assets with finite lives, Accumulated Amortization	4,053	3,256
Purchased intangible assets with finite lives, Net Book Value	4,821	5,618
Purchased Technology [Member]
Schedule Of Intangible Assets [Line Items]
Purchased intangible assets with finite lives, Gross Carrying Amount	4,865	4,865
Purchased intangible assets with finite lives, Accumulated Amortization	2,544	2,180
Purchased intangible assets with finite lives, Net Book Value	$ 2,321	2,685
Purchased Technology [Member] | Minimum [Member]
Schedule Of Intangible Assets [Line Items]
Useful Lives (in years)	4 years
Purchased Technology [Member] | Maximum [Member]
Schedule Of Intangible Assets [Line Items]
Useful Lives (in years)	6 years
Customer Relationships [Member]
Schedule Of Intangible Assets [Line Items]
Purchased intangible assets with finite lives, Gross Carrying Amount	$ 3,640	3,640
Purchased intangible assets with finite lives, Accumulated Amortization	1,367	973
Purchased intangible assets with finite lives, Net Book Value	$ 2,273	2,667
Customer Relationships [Member] | Minimum [Member]
Schedule Of Intangible Assets [Line Items]
Useful Lives (in years)	4 years
Customer Relationships [Member] | Maximum [Member]
Schedule Of Intangible Assets [Line Items]
Useful Lives (in years)	7 years
Trade Name [Member]
Schedule Of Intangible Assets [Line Items]
Useful Lives (in years)	6 years
Purchased intangible assets with finite lives, Gross Carrying Amount	$ 369	369
Purchased intangible assets with finite lives, Accumulated Amortization	142	103
Purchased intangible assets with finite lives, Net Book Value	$ 227	$ 266

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Goodwill and Intangible Assets (Schedule of Amortization Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 375	$ 422	$ 796	$ 831
Total Cost Of Revenue [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization expense	195	260	364	522
Sales And Marketing [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization expense	172	154	415	294
General and Administrative [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 8	$ 8	$ 17	$ 15

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Goodwill and Intangible Assets (Schedule of Estimated Future Amortization Expense) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Goodwill And Intangible Assets Disclosure [Abstract]
Remainder of 2016	$ 750
2017	1,501
2018	1,195
2019	1,005
2020	259
2021 and thereafter	111
Purchased intangible assets with finite lives, Net Book Value	$ 4,821	$ 5,618

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Stock-Based Compensation (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015	Mar. 12, 2013
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	$ 7,041	$ 8,661	$ 13,941	$ 15,684
2012 Equity Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock shares reserved for issuance						3,400,000
Shares available for grant increase percent			4.00%
2012 Employee Stock Purchase Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock shares reserved for issuance	6,300,000		6,300,000		4,900,000	400,000
Purchase price of the stock as a percent of price of common stock			85.00%
Expected term of options reserved			10 years
Number of shares to be increased as percent of total number of shares outstanding			1.00%
Maximum employees contribution	15.00%		15.00%
Offering period			6 months
Corporate Bonus Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	$ 1,900	$ 3,700	$ 4,000	$ 5,200
Stock Options [Member] | 2012 Equity Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Contractual term			10 years
Vesting period			4 years
Restricted stock units [Member] | 2012 Equity Incentive Plan [Member] | Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period			2 years
Restricted stock units [Member] | 2012 Equity Incentive Plan [Member] | Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period			4 years
Performance Stock Units [Member] | 2012 Equity Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period			3 years
Principal Owner [Member] | Stock Options [Member] | 2012 Equity Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percent of voting power			10.00%
Purchase price of the stock as a percent of price of common stock			110.00%
Contractual term			5 years

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Stock-Based Compensation (Summary of Stock Option Activity) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Number of Shares, Beginning balance	4,432
Number of Shares, Options granted	420
Number of Shares, Options exercised	(211)
Number of Shares, Options cancelled or expired	(527)
Number of Shares, Ending balance	4,114	4,432
Number of Shares, Options vested and expected to vest	4,062
Number of Shares, Options exercisable	2,961
Weighted Average Exercise Price per Share, Beginning balance	$ 11.99
Weighted Average Exercise Price per Share, Options granted	13.33
Weighted Average Exercise Price per Share, Options exercised	2.39
Weighted Average Exercise Price per Share, Options cancelled or expired	15.71
Weighted Average Exercise Price per Share, Ending balance	12.14	$ 11.99
Weighted Average Exercise Price per Share, Options vested and expected to vest	12.12
Weighted Average Exercise Price per Share, Options exercisable	$ 11.67
Weighted Average Remaining Contractual Term (years), Ending balance	5 years 6 months 29 days	5 years 4 months 10 days
Weighted Average Remaining Contractual Term (years), Options vested and expected to vest	5 years 6 months 15 days
Weighted Average Remaining Contractual Term (years), Options exercisable	4 years 3 months 26 days
Aggregate Intrinsic Value, Ending balance	$ 11,325	$ 17,290
Aggregate Intrinsic Value, Options vested and expected to vest	11,306
Aggregate Intrinsic Value, Option exercisable	$ 10,420

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Stock-Based Compensation (Summary of Restricted Stock Units Activity) (Details) - Restricted stock units [Member] - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Shares, Beginning balance	3,086
Number of Shares, Restricted stock units granted	1,614
Number of Shares, Restricted stock units vested	(850)
Number of Shares, Restricted stock units cancelled	(158)
Number of Shares, Performance stock units cancelled	(100)
Number of Shares, Ending balance	3,592	3,086
Weighted Average Grant Date Fair Value per Share, Beginning balance	$ 11.11
Weighted Average Grant Date Fair Value per Share, Restricted stock units granted	12.99
Weighted Average Grant Date Fair Value per Share, Restricted stock units vested	13.31
Weighted Average Grant Date Fair Value per Share, Restricted stock units cancelled	14.11
Weighted Average Grant Date Fair Value per Share, Performance stock units cancelled	7.42
Weighted Average Grant Date Fair Value per Share, Ending balance	$ 10.90	$ 11.11
Weighted Average Remaining Contractual Term (years), Ending balance	1 year 7 months 17 days	1 year 8 months 23 days
Aggregate Intrinsic Value, Ending balance	$ 43,649	$ 44,473

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Stock-Based Compensation (Stock-Based Compensation Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 7,041	$ 8,661	$ 13,941	$ 15,684
Total cost of revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	1,389	2,209	2,717	3,932
Research And Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	2,241	2,832	4,266	5,013
Sales And Marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	726	1,287	1,557	2,525
General And Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 2,685	$ 2,333	$ 5,401	$ 4,214

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Stock-Based Compensation - Unrecognized Compensation Cost, Recognized over a Weighted Average Period (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($)
Stock Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation costs	$ 7,044
Weighted Average Period	2 years 8 months 12 days
ESPP [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation costs	$ 179
Weighted Average Period	1 month 6 days
RSUs, and PSUs [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation costs	$ 28,653
Weighted Average Period	2 years 7 months 6 days

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Income Taxes (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Taxes [Line Items]
Effective tax rate	3.50%	1.80%	11.50%	(4.30%)
Detectent Inc. [Member]
Income Taxes [Line Items]
Deferred income tax benefits		$ 0.9		$ 0.9

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Segment Information (Narrative) (Details)	6 Months Ended
	Jun. 30, 2016 segment
Segment Reporting [Abstract]
Number of reportable segments	1

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Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue:
Total revenue, net	$ 121,952	$ 77,167	$ 170,572	$ 220,807
United States [Member]
Revenue:
Total revenue, net	118,539	72,367	163,761	194,950
Australia [Member]
Revenue:
Total revenue, net	1,834	3,526	3,969	22,702
All Other [Member]
Revenue:
Total revenue, net	$ 1,579	$ 1,274	$ 2,842	$ 3,155

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Balance Sheet Details (Schedule of Inventories) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Component parts	$ 411	$ 1,201
Finished goods	2,075	3,344
Inventory	$ 2,486	$ 4,545

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Balance Sheet Details (Schedule of Accrued and Other Liabilities) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Payables And Accruals [Abstract]
Accrued payroll and related expenses	$ 14,098	$ 14,249
Accrued operating expenses	2,943	5,937
Warranty obligations, current	5,984	8,601
Sales, property and income taxes	1,358	4,850
Current portion of capital lease obligation		285
Other deferred revenue	11,541	8,326
Other	395	503
Accrued and other liabilities	$ 36,319	$ 42,751

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Balance Sheet Details (Schedule Of Other Liabilities Non-current) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Other Liabilities Noncurrent [Abstract]
Warranty obligations, non-current	$ 2,062	$ 2,898
Other deferred revenue	10,801	11,099
Deferred rent, non-current	8,079	944
Other	502	1,462
Other liabilities, non-current	$ 21,444	$ 16,403

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Balance Sheet Details (Schedule of Product Warranty Activity) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($)
Product Warranties Disclosures [Abstract]
Warranty obligation—beginning of period	$ 11,499
Warranty expense for new warranties issued	159
Utilization of warranty obligation	(2,798)
Changes in estimates for pre-existing warranties	(814)
Warranty obligation—end of period	$ 8,046

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Balance Sheet Details (Accumulated Other Comprehensive (Loss) Income) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($)
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	$ (1,772)
Other comprehensive (loss) income before reclassification	73
Amounts reclassified from AOCI	(27)
Other comprehensive (loss) income	46
Ending balance	(1,726)
Foreign Currency Adjustment [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	(1,561)
Other comprehensive (loss) income before reclassification	(199)
Other comprehensive (loss) income	(199)
Ending balance	(1,760)
Unrealized Gains (Losses) On Available For Sale Securities [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	(211)
Other comprehensive (loss) income before reclassification	272
Amounts reclassified from AOCI	(27)
Other comprehensive (loss) income	245
Ending balance	$ 34

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Commitments and Contingencies (Narrative) (Details) AUD in Millions, $ in Millions	1 Months Ended			3 Months Ended		6 Months Ended
	Jul. 31, 2016 USD ($)	Dec. 31, 2014 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 AUD	Dec. 31, 2015 USD ($)	Dec. 31, 2015 AUD
Commitments And Contingencies [Line Items]
Rent expense facility leases				$ 2.0	$ 1.3	$ 4.3	$ 2.5
Standby letters of credit				27.8		27.8			$ 22.7
Surety Bond [Member]
Commitments And Contingencies [Line Items]
Financial guarantee				20.3		20.3
Australian Dollars [Member]
Commitments And Contingencies [Line Items]
Standby letters of credit				4.5		$ 4.5		AUD 6.2	$ 4.4	AUD 6.2
Minimum [Member]
Commitments And Contingencies [Line Items]
Estimated years of patent expiration						2017
Maximum [Member]
Commitments And Contingencies [Line Items]
Estimated years of patent expiration						2018
EON Patent Litigation [Member]
Commitments And Contingencies [Line Items]
Litigation settlement amount		$ 13.0	$ 18.8
Pre-judgment interest		1.5
Additional costs		0.2
Surety bond		$ 17.6
Surety bond percent of final judgment		20.00%
Standby letters of credit				$ 13.0		$ 13.0
EON Patent Litigation [Member] | Standby Letter of Credit [Member]
Commitments And Contingencies [Line Items]
Standby letters of credit		$ 13.0
EON Patent Litigation [Member] | Subsequent Event [Member]
Commitments And Contingencies [Line Items]
Litigation settlement amount	$ 0.6

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Commitments and Contingencies (Future Minimum Commitments Under Operating Leases) (Details) $ in Thousands	Jun. 30, 2016 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Operating Leases, Reminder of 2016	$ 2,325
Operating Leases, 2017	5,976
Operating Leases, 2018	7,047
Operating Leases, 2019	7,211
Operating Leases, 2020	6,949
Operating Leases, 2021 and thereafter	40,454
Net minimum operating lease payments	$ 69,962