Silver Spring Networks (SSNI) kept up its post-IPO growth in the third quarter of 2013, reporting continued increases in revenue, shrinking losses, and record operating margins and cash flow as it kept adding new contracts through the quarter -- including several outside its core smart meter business.
The Redwood City, Calif.-based company on Wednesday reported third-quarter revenue of $72.5 million, compared to $39.6 million in the same quarter last year, and a loss of $12.3 million, compared to $26.9 million in the same quarter last year, on a GAAP basis.
On a non-GAAP basis, Silver Spring reported third-quarter billings of $94.2 million up 11 percent from Q3 2012, and net income of $9.7 billion, up from breakeven a year ago. Silver Spring uses non-GAAP financials, known as “acceptance accounting,” to represent product and service revenues from utility customers that aren’t yet accountable under GAAP rules.
Silver Spring, which held its IPO in March, reiterated its guidance of 18 percent annual growth projections for 2013. CEO Scott Lang said in Wednesday’s conference call that the company set a record in the third quarter with non-GAAP gross profit margins of 42 percent, up from 31.4 percent in the same quarter last year, and $21.1 million in operating cash flow. UPDATE: Silver Spring share had leapt to around $21.50 in Thursday morning trading on the New York Stock Exchange, up $3.29, or 18 percent, from Wednesday's close.
Lang also said that Silver Spring is working on pilot projects and phased deployments with about twenty utilities and cities that represent a combined 30 million homes and businesses as potential “endpoints” for the company’s networking platform. That’s compared to 17.5 million endpoints networked at the end of the third quarter, up 17 percent from the same period last year.
Those potential future endpoints include customers of CPFL Energia, the Brazilian utility with which Silver Spring expanded its work with last month, with an eye toward bringing smart meters to its larger commercial and industrial customers over the course of the next few years.
CPFL is Silver Spring’s biggest customer outside the United States, though it’s also working in New Zealand, Australia, Malaysia and Singapore. The company’s expansion in Brazil represents a third-quarter prize that helps offset the fact that it lost its bid for a piece of the U.K.’s smart meter deployment plans announced this summer.
“While we’re disappointed that our joint proposal with Vodafone was not selected by DECC,” the U.K. government agency that awarded this summer’s contracts, “this was not a near-term opportunity,” Lang said. Silver Spring did announce a pilot deployment with Portuguese utility EDP last month, and is working on more opportunities in the U.K. and Europe, Lang said.
Silver Spring’s future pipeline also includes some 20,000 street lights that it will be networking in the Danish capital city of Copenhagen starting next year -- one of its first large-scale deployments that’s connecting devices beyond smart meters.
“I think that the customer wins per year are going to constantly go up,” Lang said. “We’re touching parts of the world that we’ve never touched before.” Silver Spring is also “focused on the applicability of our technology to adjacent markets,” he said. “The streetlight business, the pipeline there, and the deals we’re tracking -- it’s a lot of deals.”
Beyond streetlights, “We’re talking to customers that did a low-tech metering deployment many years ago, [who are now saying], 'We need an update,'” he said. That could include a lot of municipal utilities that have deployed tens of millions of so-called 'drive-by,' one-way communicating meters, and now want to explore “putting a canopy in place, to help start building a smarter city,” he said.
One of Silver Spring’s biggest challenges -- and one faced by the rest of its smart meter competitors as well -- is how to grow beyond simply adding new smart meters to its list of projects and start offering expanded services based on those networks. That can include outage detection and fault location, demand response and customer engagement, and distribution automation networking, all of which are part of Silver Spring’s portfolio.
It can also include more advanced data analytics -- and Lang said Wednesday that Silver Spring “will be coming into the market with a very strong statement on how we play in this space,” though he wouldn't provide guidance on when and how that might happen.
“Our networking platform has massive amounts of data,” he said. “Some utilities are saying, '70 percent of the information flowing through our company is coming from the network you deployed for me.'” And, with multi-million-smart-meter deployments with customers like Florida Power & Light, Pacific Gas & Electric, Pepco, Oklahoma Gas & Electric, Baltimore Gas & Electric, Commonwealth Edison and Progress Energy, “We have a lot of great access, talking to the decision-makers that are seeing the challenges in this over the next ten years,” he said.
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