Echelon Corporation's Second Quarter 2001 Financial Results Meet Analysts' ExpectationsCompany Reports Fourth Consecutive Profitable Quarter(Sunnyvale, CA - July 12, 2001 ) - Echelon Corporation (NASDAQ: ELON) today announced financial results for the second quarter ended June 30, 2001. "We are very pleased to announce that our financial results for the second quarter of 2001 are in line with analysts' expectations and with our guidance; in fact we had a small profit," said M. Kenneth Oshman, Echelon's chairman, president and chief executive officer. "The North American market performed slightly better than expected and Asia/Pacific performed to our expectations. In Europe, our core business experienced a slow-down, as we anticipated, while our Enel-related activities were better than our expectations. Further, we achieved a significant milestone this quarter in our Enel energy management project by delivering our first shipments of data concentrators, as well as significant shipments of metering kits. These products are essential components in the Enel end-to-end infrastructure and their on-schedule delivery sets the stage for Enel's first large-scale deployments later this year." Revenues for the quarter ended June 30, 2001 were $13.9 million, an increase of 10% over revenues of $12.7 million for the same period in 2000. Net earnings for the quarter ended June 30, 2001 were $38,000, or $0.00 per share on a fully diluted basis, based on a weighted average of 41,458,000 common shares outstanding, compared to a net loss of $508,000, or $0.01 per share, based on a weighted average of 34,507,000 common shares outstanding for the second quarter of 2000. Revenues for the six-month period ended June 30, 2001 were $26.5 million, an increase of 10% over revenues of $24.1 million for the same period one year ago. Net earnings for the six-month period ended June 30, 2000 were $60,000, or $0.00 per share on a fully diluted basis, based on a weighted average of 41,154,000 common shares outstanding, compared to a net loss of $1.2 million, or $0.03 per share, based on a weighted average of 34,079,000 common shares outstanding for the same period in 2000. Gross margin for the quarter ended June 30, 2001 was 54.8%, compared with 61.1% for the same period in 2000. Gross margin for the six-month period ended June 30, 2001 was 58.2%, compared with 59.8% for the same period in 2000. Total operating expenses for the quarter ended June 30, 2001 were $9.4 million, compared to $8.5 million for the same period in 2000. Echelon announced several key products, partnerships, and installations during the second quarter. The following are some highlights from this quarter's significant events from previously issued press releases: Echelon's Open Systems Alliance continues to gain momentum worldwide. Circon Systems Corporation joined the program in April, potentially qualifying over 120 integrators for Alliance membership. Circon offers a comprehensive family of LonWorks® products that integrates control of security, access, lighting, heating, ventilation, air conditioning, energy management, and other major building functions. In May, the Alliance added its first industrial-focused Authorized Network Integrator, Tectrol GmbH of Germany. Tectrol recently completed an energy management system for the Cologne Exhibition Center, whose facilities span 3.4 million square meters in 14 exhibition halls. Also in April, Echelon announced its ShortStack™ software that enables any product that contains a microcontroller to quickly and inexpensively become a networked, Internet-accessible device. The software is royalty-free for developers when used with select Echelon transceiver products. With the ShortStack software, devices can communicate with other smart devices over the Internet and across LonWorks networks. Once on the network, devices can become part of integrated home, industrial, building, and transportation systems, and manufacturers can add remote diagnostics, maintenance, monitoring, and control services to their products. In May, Echelon announced the availability of its LonWorks Bundle Deployment Kit. The kit furthers Echelon's commitment to the Open Services Gateway Initiative (OSGi) platform and eases the way for development of OSGi-enabled LonWorks applications. The new software kit is designed to allow companies that are building OSGi-compliant residential gateways to quickly and easily add LonWorks support to their products, thereby making available services and applications that can improve convenience, enhance comfort, and provide cost savings to consumers. In June, Echelon met with President Bush and his top energy advisors at a special event held at the Department of Energy. At the session, Echelon CEO Ken Oshman demonstrated to the President how the LonWorks platform provides the necessary infrastructure to allow both consumer-based conservation and supply-side management of energy. The President was shown how consumers could easily set preferences that would enable smart, LonWorks devices in their homes to respond to real-time pricing signals from an energy provider to change energy consumption as energy costs fluctuate. In this way, market forces can work to automatically shift low-priority loads into off-peak hours, saving consumers money and allowing utilities to meet peak demands while reducing the cost of energy delivery. For those interested in further discussion regarding this release, Echelon's management will participate in a conference call today at 2:00 pm PDT today. To access the conference call, dial 1-800-633-8413 any time after 1:50 P.M. PDT. The call will be available live today, and for playback on the Investor Relations section of Echelon's web site (www.echelon.com) through July 29, 2001. About Echelon Corporation Echelon Corporation is the world leader in networking everyday devices. The company offers a comprehensive line of hardware and software products for automating building, home, industrial, transportation, and utility applications using LonWorks networks, an international, cross-industry standard for device networks. Echelon is also a founding member of the LonMark® Interoperability Association, an open industry forum of hundreds of leading manufacturers, integrators, and users of "smart" devices dedicated to standardizing and promoting the use of interoperable LonWorks devices. Echelon is based in Sunnyvale, California, with international offices in China, France, Germany, Japan, Korea, The Netherlands, and the United Kingdom. Further information can be found at http://www.echelon.com. From October 23-24, Echelon and Messe Frankfurt GmbH are holding LonWorld™ 2001, the world's premier conference and tradeshow devoted solely to the LonWorks industry, in Frankfurt, Germany. Further information can be found online at http://www.LonWorldexpo.com. # # # Echelon, LonWorks, and the Echelon logo are trademarks of Echelon Corporation registered in the United States and other countries. LonWorld, Bringing the Internet to Life, and ShortStack are trademarks of Echelon Corporation. Other marks belong to their respective holders. This press release may contain statements relating to future plans, events or performance. Such statements may involve risks and uncertainties, including risks associated with uncertainties pertaining to the timing and level of customer orders, demand for products and services, risks that the R&D activities or subsequent product deployment activities with Enel are not successful, do not meet their target dates, or are terminated, or that the contemplated transactions are challenged by third parties, risks that our development projects with other parties are not successful, risks relating to the development of markets for Echelon's products and services and the ability of those products and services to meet customer and consumer expectations, and other risks identified in Echelon's SEC filings. Actual results, events and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Echelon undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The financial statements that follow should be read in conjunction with the notes set forth in Echelon's Form 10-Q when filed with the Securities and Exchange Commission. ECHELON CORPORATION
ECHELON CORPORATION
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