Echelon Corporation's Second Quarter 2001 Financial Results Meet Analysts' Expectations

7/17/2002 - Echelon Corporation (NASDAQ: ELON) today announced financial results for the second quarter ended June 30, 2002.

"Clearly this was a tremendous quarter for Echelon," said M. Kenneth Oshman, Echelon's chairman and chief executive officer. "Our revenues came in slightly higher than our guidance, our operating expenses came in at the low end of our expectations, and our gross margins exceeded our expectations. We saw good performance in our core business from all regions of the world with particular strength in Japan, and our business with Enel continued to grow as expected. We introduced several new and exciting products and we created a dedicated utility and service provider group to focus on winning business in this important market area. Even though our results exceeded our expectations this quarter and while we maintain our outlook for this year, we still see softness in the worldwide economy that will continue to put pressure on our core business in the coming quarters."

Revenues for the quarter ended June 30, 2002 were $31.3 million, an increase of 125% over revenues of $13.9 million for the same period in 2001. Net income for the quarter ended June 30, 2002 was $5,100,000, or $0.12 per share on a fully diluted basis, based on a weighted average of 40,818,000 common shares outstanding, compared to a net income of $38,000, or $0.00 per share, based on a weighted average of 41,458,000 common shares outstanding for the second quarter of 2001.

Revenues for the six-month period ended June 30, 2002 were $58.9 million, an increase of 122% over revenues of $26.5 million for the same period one year ago. Net income for the six-month period ended June 30, 2002 was $7,787,000, or $0.19 per share on a fully diluted basis, based on a weighted average of 40,812,000 common shares outstanding, compared to a net income of $60,000, or $0.00 per share, based on a weighted average of 41,154,000 common shares outstanding for the same period in 2001.

Gross margin for the quarter ended June 30, 2002 was 52.5%, compared with 54.8% for the same period in 2001. Gross margin for the six-month period ended June 30, 2002 was 51.8%, compared with 58.2% for the same period in 2001. Total operating expenses for the quarter ended June 30, 2002 were $11.9 million, compared to $9.4 million for the same period in 2001.

Echelon made a number of significant announcements during the second quarter, some of which are highlighted below:

In April, Samsung Heavy Industries announced that their LonWorks® based VDR, Voyage Data Recorder, had received standards clearance for European Keymark certification. Samsung already holds 20% of the world market for shipboard controls. Samsung stated that its Integrated Control & Monitoring System and Integrated Navigation System products would be migrated to LonWorks networking and combined into a unified system concept called the Integrated System. Samsung will support the Integrated System with a worldwide sales team, support alliances and service network.

In May, Echelon released its LonWorks Bundle Deployment Kit, a set of software tools based on the Open Services Gateway Initiative (OSGi) specifications that is expected to allow companies to create value-added service applications that connect service providers to LonWorks devices such as electricity meters, refrigerators, ovens, furnaces, and other everyday household electrical appliances or devices. Examples of such services could be energy savings using time of day pricing, home monitoring, and predictive warranty for appliances.

Additionally, in May, Echelon announced the formation of a new, worldwide group focused on the use of the company's products by electric utilities and other service providers such as telecommunications companies, cable operators, and Internet Service Providers (ISPs) headed by Frits Bruggink, Echelon's former senior vice president of sales and marketing. In May, Echelon also reported that the project with Enel, the Italian utility, had surpassed 1 million installed LonWorks based electricity meters. Enel plans to have over 27 million Italian homes and businesses networked with LonWorks based electricity meters by 2004.

In June, Echelon announced that it had received a Digital Innovation Award for Most Innovative Technology in the Building Infrastructure category at the third annual "Digie Awards" at Realcomm 2002 in Las Vegas, a leading trade event for the commercial real estate industry. The Digies are presented to individuals and corporations demonstrating vision, drive, passion, consistency and determination to move the commercial real estate industry into a digital model for the 21st century.

Echelon began shipping the i.LON™ 10 Ethernet Adapter at the end of the quarter. The i.LON 10 Adapter is well suited for use by ISPs, telephone and cable companies, planned communities, government institutions, and military facilities and is designed to be a cost-effective way to monitor and control small networks of everyday devices in homes, apartments, and buildings over the Internet. When used in conjunction with cable or DSL modems, set-top boxes, or local area networks, the i.LON 10 Adapter permits a service provider to expand the functionality of a data network to include such added-value services as appliance monitoring, alarm supervision, metering, and energy load control.

For those interested in further discussion regarding this release, Echelon's management will participate in a conference call today at 2:00 pm PDT. Interested parties may listen in on the conference call via live Webcast. Alternatively, the live call can be accessed by dialing 1-800-388-8975 (callers outside the US please use +1-973-694-2225); however, due to a limited number of available phone lines, the company asks that only those persons without Web access call this number.

Web playback of the call will be available on the Investor Relations section of Echelon's web site from July 17th through July 26th, 2002. As usual, telephone replay will not be provided.

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 more than 18 million LonWorks based devices into homes, buildings, factories, trains, and other systems worldwide.

The protocol underlying LonWorks networks and the signaling used by Echelon's power line and free topology transceivers have been adopted as standards by the American National Standards Institute (ANSI). Echelon is 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 about LonMark interoperability is available at Further information regarding Echelon can be found at

Echelon, LonWorks, LonMark, and the Echelon logo are trademarks of Echelon Corporation registered in the United States and other countries. i.LON is a trademark of Echelon Corporation in the United States and other countries. 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 risks that the R&D activities or subsequent product deployment activities with Enel are not successful, do not meet their target dates, do not expand or gain momentum, 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, risks that softness in the worldwide economy could harm Echelon's core business, 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 and with our 2001 annual report on Form 10-K which was filed with the Securities and Exchange Commission in March 2002.

Contact Information
Press Contact:
Steve Nguyen
Echelon Corporation
Tel: (408) 938-5272

Investor Relations Contact:
Chris Stanfield
Echelon Corporation
Tel: (408) 938-5243

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