Echelon Corporation Reports Third Quarter Earnings Per Share of $0.13Results Exceed Analyst Expectations of $0.09(San Jose, CA - October 10, 2002 ) - Echelon Corporation (NASDAQ: ELON) today announced financial results for the third quarter ended September 30, 2002, exceeding analysts' expectations. Revenues for the quarter ended September 30, 2002 were $33.4 million, an increase of 85% over revenues of $18.0 million for the same period in 2001. Net income for the quarter ended September 30, 2002 was $5,327,000 or $0.13 per share on a fully diluted basis, based on a weighted average of 40,619,000 common shares outstanding, compared to net income of $757,000, or $0.02 per share, based on a weighted average of 41,526,000 common shares outstanding for the third quarter of 2001. "We are very pleased with our results this quarter," said M. Kenneth Oshman, Echelon's chairman and chief executive officer. "However, we remain concerned about the effects the ongoing economic slowdown is having on our core business customers. While revenues from the Enel program came in slightly higher than we expected, revenues from our core business, while in line with our previous guidance, continued to experience great pressure from the protracted worldwide economic slump. This quarter we saw a slight improvement in the Americas but unexpected weakness in Europe and Asia." Revenues for the nine-month period ended September 30, 2002 were $92.3 million, an increase of 107% over revenues of $44.5 million for the same period one year ago. Net income for the nine-month period ended September 30, 2002 was $13,114,000, or $0.32 per share on a fully diluted basis, based on a weighted average of 40,769,000 common shares outstanding, compared to net income of $817,000, or $0.02 per share, based on a weighted average of 41,273,000 common shares outstanding for the same period in 2001. Gross margin for the quarter ended September 30, 2002 was 51.0%, compared with 48.8% for the same period in 2001. Gross margin for the nine-month period ended September 30, 2002 was 51.5%, compared with 54.4% for the same period in 2001. Total operating expenses for the quarter ended September 30, 2002 were $12.2 million, compared to $9.5 million for the same period in 2001. As previously announced during the third quarter, Echelon added to its i.LON™ family of Internet connectivity products with the introduction of the i.LON 10 Adapter, which the company markets as a cost-effective way to monitor and control small networks of everyday devices in homes, apartments, and small buildings over the Internet. The i.LON 10 Adapter works in conjunction with Echelon's LNS® network management system to give remote facility managers, home owners and service providers access to everyday LonWorks® devices to expand the functionality of a data network to include such added-value services as appliance monitoring, alarm supervision, metering, sprinkler control, and energy load control. Echelon's Open System Alliance (OSA) program made significant advances in the Asia/Pacific region. NTT Data, Japan's largest IT integrator, increased its existing commitment to the LonWorks networking platform as a LonWorks Training partner and LonMark® Certification Center by entering into an Open Systems Alliance Master Logo agreement with Echelon. Under the agreement, companies within NTT Data's integration channel can qualify to become LonWorks Integrators. Echelon believes that this increased level of commitment from NTT Data will accelerate the growth of the LonWorks industry in Japan Schneider Electric (Australia) Pty Limited also signed an Echelon OSA Master Logo agreement, making it the first Australian-based company to do so. With over 20 integrator companies and revenues of close to AUD $500 million throughout the Australia and Asia Pacific zone, Echelon believes that Schneider Electric's strong regional presence should increase the penetration of the LonWorks platform into the Australian commercial and residential automation markets. Later in the third quarter, the LonMark Interoperability Association announced that Schneider Electric's line of control devices based on Echelon's FTT-10A free-topology twisted pair transceiver received LonMark certification. At the close of the quarter, Echelon announced that it participated in the launch event of IBM's e-business to smart machine initiative, which is designed to connect smart devices to enterprise applications to help lower operating costs and increase revenues. Echelon believes that IBM's efforts in this area will help increase market awareness and acceptance of the benefits that smart devices can bring to businesses and should help expand the market for LonWorks technology and Echelon's products. For those interested in further discussion regarding this release, Echelon's
management will participate in a conference call today at 2:00 pm PDT.
To access the conference call, dial 1-800-388-8975 any time after 1:50
pm 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 October 18, 2002. About Echelon Corporation Echelon Corporation is the creator of the LonWorks platform, the world's most widely used standard for connecting everyday devices such as appliances, thermostats, air conditioners, electric meters, and lighting systems to each other and to the Internet. Echelon's hardware and software products enable manufacturers and integrators to create smart devices and systems that lower cost, increase convenience, improve service, and enhance productivity, quality, and safety. Thousands of companies have developed and installed LonWorks products and more than 24 million LonWorks enabled processors have been shipped for use in homes, buildings, factories, trains, and other systems worldwide. The protocol underlying LonWorks networks and the signaling technology used by Echelon's power line and free topology transceivers have been adopted as standards by the American National Standards Institute (ANSI). Echelon is also a founding member of the LonMark Interoperability Association, an open industry forum of hundreds of leading manufacturers, integrators, and users dedicated to promoting the use of interoperable LonWorks devices. More information is available at http://www.lonmark.org. Further information regarding Echelon can be found at http://www.echelon.com. Echelon and Messe Frankfurt GmbH are partnering to produce the LonWorld™ Conference and Exhibit – the world's largest event solely devoted to users, developers, integrators, and others supporting the LonWorks networking platform. This year's event will be held in Toronto, Canada on October 31st-November 1st. For information or to registration for the event, visit http://www.lonworldexpo.com. # # # Echelon, LonWorks, LNS, and the Echelon logo are trademarks of Echelon Corporation registered in the United States and other countries. LonWorld and i.LON 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 and growth 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
ECHELON CORPORATION
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