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Silver Spring Networks closes its first quarter as a public company

Katie Fehrenbacher — Wed, 01 May 2013 21:16:22 +0000

Smart grid company Silver Spring Networks just finished its first quarter as a public company after it held an IPO on the New York Stock Exchange in March. The company’s earnings were basically flat for the quarter, reflecting the inherently slow pace of rolling out smart grid networks for utilities, and signing up new cautious, risk-averse utilities.

Silver Spring has decided to focus on its non-GAAP (general accepted accounting principles) numbers, because it said non-GAAP numbers more closely reflect its cash flow. The company takes many months to do pilot projects with utilities and then many more months, if not years, to deliver a broader commercial rollout of its network. It recognizes GAAP revenue for those customers significantly after the deal is closed and the tech is deployed.

For the first quarter of 2013, Silver Spring said its non-GAAP revenue was $73.78 million, which was up from its non-GAAP revenue of the first quarter of 2012 of $59.50 million. On a GAAP basis, revenue for the first quarter was $53.70 million, which was flat from the same quarter a year earlier of $55.45 million.

When it comes to the quarter’s net loss, the GAAP vs non-GAAP numbers actually made a much larger difference. The company’s GAAP net loss for the first quarter of 2013 was $64.37 million, which was a far greater loss than its GAAP loss of the first quarter of 2012 of $18.43 million. Silver Spring Networks execs said that the greater GAAP net loss was due to one time charges related to its IPO. However, its non-GAAP net loss was more reasonable for the first quarter of 2013 at $8.39 million, a slightly larger loss from its $5.27 million net loss from the first quarter of 2012.

In the earnings call, Silver Spring Network execs touted new customer wins including CPS Energy, the largest municipal utility in San Antonio with 700,000 homes and businesses, and Singapower Power, which was its first utility deal in Asia. In addition, Silver Spring also said that it has been working with Masers Energy in Malaysia and moved its partnership with Dominion Virginia Power from a pilot project to a deployment for 195,000 homes and businesses.

Silver Spring Networks sees growth in beefing up its services, beyond its networking hardware, and also in international markets. The company has already contracted with many of the early adopter U.S. utilities, and is looking to gain marketshare in Asia, and South America.

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Mascoma finally realizes going public is not a good idea

Katie Fehrenbacher — Thu, 28 Mar 2013 01:07:58 +0000

A little over a year and a half ago, Mascoma, which is a startup with aims to make next-generation cellulosic ethanol, filed to go public in a potentially $100 million IPO. In an article entitled “Some red flags and numbers in Mascoma’s IPO filing,” back then I detailed why that seemed like a strange choice given its weak financials, such as the fact that at the time government grants made up 86 percent of Mascoma’s total revenue.

So whatever happened to that IPO? Last week, Mascoma quietly withdrew its IPO plans. The company cited “market conditions,” for the move, though the macro IPO market conditions seem a little better in 2013 than 2012. Already this year smart grid company Silver Spring Networks went public, and late last year solar installer SolarCity made it out.

Mascoma currently makes a next-generation yeast that it sells to corn ethanol makers to help them cut the costs of making corn ethanol. That’s what made up the other 14 percent of its revenues (the part that wasn’t grants) at the time of its IPO-filing. But Mascoma’s real aim is to use its technology to make cellulosic ethanol — a next-gen type of ethanol that uses plant waste (not corn) — and the company wanted to do that using wood waste in a factory in Michigan. Many companies have tried to make cellulosic ethanol at scale in recent years and failed.

Before pulling its IPO, Mascoma raised two rounds of a few millions of dollars in debt over the past six months. That’s not the typical behavior of a company on the upswing getting ready to go public.

And over the past year and a half, as Mascoma amended its S-1 every once in awhile, its finances didn’t improve. The latest revenue numbers from March 2012 — a year ago — said that government grants and awards then constituted 93 percent of its revenue while sales of its equipment and services made up 6 percent of revenue. So the percentage of grants disturbingly actually rose over the 6 months from its first filing, rather than dropped, and its percentage of sales from real products fell.

Mascoma over the years has raised a lot of money from both venture capitalists, strategic corporations and public funds. At least over $100 million in private capital from companies like Khosla Ventures, SunOpta, GM, Marathon Oil, Khosla Ventures, Flagship Ventures, Atlas Venture, General Catalyst Partners, Kleiner Perkins Caufield & Byers, Vantage Point Venture Partners, and Pinnacle Ventures. The company was founded in 2005 from research from a Dartmouth Professor, Lee Rybeck Lynd.

Public funds have also been awarded and sometimes allocated for its projects. The Department of Energy awarded it $80 million to help it build Kinross, though its unclear if Mascoma actually drew down on those funds. The state of Michigan also offered Mascoma a $20 million grant to build the factory in Michigan.

At some point in 2012, Mascoma had been hoping to start construction on its factory in Kinross, Michigan that could eventually produce 20 million gallons per year of cellulosic ethanol. The company had wanted that to happen before the end of 2012, with operations starting in 2014.

An article in Michigan Capital Confidential from the summer of 2012 quotes a financing partner of Mascoma’s, Frontier’s VP of Operations, Ken Nielsen, who said that the company expects to ”start construction by the end of the year [2012].” Mascoma managed to secure (in December 2011) an agreement with Valero to help it build that factory, but it’s unclear how much Valero was willing to put up to finance this project.

According to the Michigan Capital Confidential the Kinross project had as of the summer of 2012 only created three jobs (it was originally supposed to create 70) and “received strong criticism from environmental and fiscal groups across the political spectrum.”

As of March 2013, it’s unclear if Mascoma ever broke ground on that facility, or if it hasn’t when it will. I’ve reached out to the company and am waiting to hear back. You can bet if they did start construction, they’d have sent out a press release on it across the internets. Instead, vaguely, Mascoma’s website still says the Kinross facility is “planned” and anticipated to go under construction in 3 to 6 months (the same time line it used a year ago).

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Silver Spring targets Asia’s smart grids with Singapore deal

Katie Fehrenbacher — Wed, 27 Mar 2013 12:30:14 +0000

Recently public smart grid player Silver Spring Networks has started working on a deal with Singapore utility Singapore Power to build a wireless smart grid network including smart meters. The deal is Silver Spring’s first in Asia and Silver Spring Executive Vice President, Global Development Eric Dresselhuys tells me he hopes it will be the “anchor customer in the region.”

Asian markets are growing at a fast pace and Silver Spring is trying to get a toe hold into the region. Dresselhuys says utilities in countries like Malaysia, Indonesia, Thailand, Laos and even India, look to Singapore Power as a leader. The utility has 2 million customers, and the deal is actually with the company’s division that owns the electricity transmission and distribution, SP PowerAssets.

The pace of the growth of smart meters in the U.S. has been expected to slow down in 2013 and 2014, and then pick back up, according to Pike Research. That’s partly because the early adopter utilities in states like California have already adopted smart meters. The temporary drop is also because the Department of Energy stimulus funds gave smart meters a temporary pop a couple years ago. Networks in some states, like ComEd’s, have faced other types of logistics hurdles.

Outside of the U.S. there’s a lot of growth going on, and particularly in developing countries where economies are booming. Silver Spring has already built networks in Australia, but is looking hard at Latin America. According to Pike Research, while less than 4 percent of the world’s 1.5 billion electricity meters were smart in 2008, that figure grew to over 18 percent by 2012, and is expected to jump to 55 percent by 2020.

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5 reasons why a successful Silver Spring IPO is important

Katie Fehrenbacher — Wed, 13 Mar 2013 20:03:05 +0000

After almost two years, Silver Spring Networks has finally held its long-awaited IPO. And with a couple hours left until the market closes on its debut, the IPO could be considered a modest success. Silver Spring priced at the middle of its expected range ($17 per share), and then saw its shares soar almost 30 percent on its debut.

While the $81 million that the company raised in the IPO wasn’t as much as the maximum value of the $150 million that Silver Spring originally filed for back in the summer of 2011, the sale was “oversubscribed,” said Silver Spring Networks CEO Scott Lang, and the company opened up a million more shares to sell on Tuesday night. We’ll still have to see how the company’s stock fares over the following weeks and months, but the overall debut day has been positive.

Here are five reasons why it’s important that Silver Spring Networks had a relatively successful IPO:

1). Priming the smart grid IPO market (Opower?): At the Distributech show earlier this year, smart grid execs told me that all eyes were on Silver Spring’s planned IPO to see how the market would react. If the IPO was successful that would mean that a company that has been growing, like Opower, could potentially follow in its footsteps. Opower, like Silver Spring, has been considering an IPO since late 2011. 2012 was clearly a difficult year for IPOs from energy-focused companies, but it looks like 2013 could be better. Opower and Silver Spring also share an investor: Kleiner Perkins.

2). A modest win for cleantech investors: While it wasn’t a huge return, the IPO represents one of the rare successful exits for venture capitalists that put money into cleantech companies. Foundation Capital owns 12.26 million shares after the IPO and its private placement (it agreed to buy $12 million more worth of shares at the IPO price). At, say, $21 per share, Foundation’s shares are worth $257.46 million. Kleiner owns 5.66 million worth of shares, and at $21 per share, that’s worth $118.86 million. So yep, not huge, but at least these are exits.

3). Silver Spring needs to be a big public company: The IPO is important for Silver Springs because the company is competing with large public companies for utility business. Utilities like to do deals with big, stable firms, that they feel will be around for awhile. It’s hard to break into the utility sector as a startup. To take business and sales to the next level, Silver Spring needed to bulk up. The funds, of course, will also be helpful to grow the smart grid business.

4). The smart grid is real and being built: The rollout of the smart grid has suffered from PR problems due to smart meter security fears, and an expected slow down of the installation of smart meters in the U.S. Successful moves by smart grid pioneer Silver Spring shows how the smart grid continues to be built out in the U.S. and internationally.

5). The importance of patient investors and entrepreneurs: Silver Spring was founded in 2002, and has been building its business for over a decade. Foundation Capital was an early investor in the company and has supported Silver Spring’s ups and downs over the years (including an early time when the tech hit some hurdles). Now a decade later, Foundation has gotten its exit and still owned a little over 30 percent just before the IPO. (Foundation owned over 40 percent when Silver Spring first filed for its IPO in 2011). Foundation’s Warren Weiss, sits on the board. The company was co-founded by Eric Dresselhuys who still remains at the company as Executive Vice President and Chief Marketing Officer.

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Silver Spring Networks’ stock jumps up close to 30% in debut

Katie Fehrenbacher — Wed, 13 Mar 2013 15:02:49 +0000

Smart grid company Silver Spring Networks saw its shares soar by close to 30 percent in early morning trading on the New York Stock Exchange Wednesday. Late last night the company priced its shares at $17 (the mid point of its range), and its stock reached a high of $22.49 in morning trading.

By 11:00 AM EST, the stock had dropped a bit and has been hovering around $21. As of 3:00 PM EST, the stock was at $21.68.

Silver Spring also last night decided to make 4.75 million shares available, which was 1 million shares more than the company had originally planned. Silver Spring raised $81 million in the process. In addition, longtime investor Foundation Capital also plans to purchase $12 million worth of stock at the IPO price in a private placement.

Silver Spring sells wireless networks and smart meters to utilities that can be used to run power grids more efficiently and offer new types of grid services. The company counts large utilities as customers like PG&E, Florida Power and Light, Oklahoma Gas & Electric, and Baltimore Gas & Electric.

The company filed to go public back in the summer of 2011, and waited out the entire year of 2012 before actually going public. The company’s lead investors include Foundation Capital and Kleiner Perkins.

Silver Spring Networks CEO Scott Lang told me in a phone call from the New York Stock Exchange this morning that the company “couldn’t be more pleased” with the IPO and that the process was “oversubscribed.” In response to my question of why it took so long to go public, Lang said that there were external market conditions and volatilities that were outside their control.

“We had a strong year in 2012 and we were patient,” said Lang. Lang owned 2.8 percent, or 1.04 million shares, before the IPO. At $21 per share, that percent is worth $21.84 million. Typically investors and executives have to hold their shares for at least six months before selling them.

Updated at 3:00 PM EST with the most recent stock price.

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Silver Spring Networks prices boosted IPO, raises $81M

Katie Fehrenbacher — Wed, 13 Mar 2013 13:24:32 +0000

Smart grid company Silver Spring Network’s long awaited IPO is finally here. On Tuesday night the company priced its IPO at the midpoint of its planned range, at $17 per share, and also made 4.75 million shares available, which is 1 million shares more than the company had originally planned. Silver Spring will raise $81 million in the process.

Selling more shares than expected is good news, as it means that the company had more interest than expected from investors. Silver Spring will start trading on Wednesday morning on the New York Stock Exchange under the symbol SSNI.

The IPO has been over a year and a half in the making, the company first filed to go public back in the Summer of 2011. Back then the maximum IPO was listed as $150 million. Along with the debut today, longtime investor Foundation Capital also plans to purchase $12 million worth of stock at the IPO price in a private placement.

Silver Spring sells wireless networks and smart meters to utilities that can be used to run power grids more efficiently and offer news types of grid services. The company is increasingly looking to sell software and services, and not just infrastructure, to help it boost its margins.

The IPO is one of just a few that has come from a smart grid startup backed by venture capitalists. Foundation Capital owned 32.7 percent before the IPO, while Kleiner Perkins owned 15.6 percent before the IPO.

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Silver Spring Networks IPO expected on Wednesday

Katie Fehrenbacher — Tue, 12 Mar 2013 19:08:20 +0000

Smart grid networking company Silver Spring Networks is expected to start trading as soon as Wednesday of this week on the New York Stock Exchange under the symbol SSNI, according to the Wall Street Journal, and other media reports. After first filing for an IPO back in the summer of 2011, the smart grid company now plans to sell 3.7 million shares at a price of between $16 and $18 per share, which at the midpoint would raise $63 million for the company.

That’s a pretty modest IPO for the decade-old company, and is less than half of the maximum that Silver Spring originally planned to raise a year and a half ago. If Silver Spring does go public Wednesday morning, expect it to price its shares late in the day on Tuesday. Along with the IPO, longtime investor Foundation Capital also plans to purchase $12 million worth of stock at the IPO price in a private placement.

Silver Spring has a lot of business, and is one of the leaders when it comes to selling smart grid networks to utilities. However the business is inherently slow going (with long sales cycles), and pretty low margin. In 2012, Silver Spring generated $196.74 million in revenue, which was slightly down from its net revenue in 2011 of $237.05 million. The company generated a net loss in 2012 of $89.72 million, which was a smaller loss than its net loss in 2011 of $92.36 million.

Because its sales cycles are so long, its backlog of deals and billings (what it’s billed customers for but hasn’t converted to revenue yet) are more telling of how much momentum the company has. Silver Spring says it had $304.33 million worth of billings in 2012, which was a jump from its $236.13 million worth of billings in 2011. Silver Spring says it has $508.06 million worth of deferred revenue by the end of the 2012.

We’ll keep you updated on potential pricing and the debut of the IPO.

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Silver Spring finally sets terms for its long awaited IPO, raising $63M

Katie Fehrenbacher — Wed, 27 Feb 2013 01:04:54 +0000

As we reported last month, smart grid network company Silver Spring Networks is still moving forward with its IPO, and on Tuesday it set the terms for its IPO (hat tip Dana Hull and the San Jose Mercury News). Silver Spring plans to sell 3.7 million shares at a price of between $16 and $18 per share, which at the midpoint would raise $63 million for the company.

That amount is less than half of what Silver Spring originally planned to raise: a maximum of $150 million. The company first filed to go public in the summer of 2011. Longtime investor Foundation Capital also plans to purchase $12 million worth of stock at the IPO price, following the IPO, in a private placement.

We’ll see what price per share Silver Spring eventually lands on before it actually goes public, assuming it does make it out. If you only look at Silver Spring’s GAAP (generally accepted accounting principles) revenue and net income, as this analyst did, the company doesn’t look all that amazing. The company hasn’t ever had a positive net income, and it recorded revenue of $147 million for the nine months ended Sept 30, 2012, which was down from $176 million from the same period in 2011.

Silver Spring also had its highest gross margin to date on those billings of 34 percent. The company has a total of $473 million in deferred revenue as of the nine months ended September 30, 2012, and about $60 million in cash for the same period.

Will Silver Spring deliver a successful IPO in a difficult year for clean power and energy efficiency companies? SolarCity was able to go public in 2012 after its investors were able to negotiate the deal, but it was touch and go. We’ll just have to wait and see.

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It’s still on: Silver Spring Networks could finally go public within a month

Katie Fehrenbacher — Wed, 30 Jan 2013 01:16:06 +0000

In contrast to the findings of a research note on Tuesday that says Silver Spring Networks could soon shelve its IPO, I’ve been hearing that Silver Spring is actually getting ready to finally go public within the next four weeks, a year and a half after filing its S-1. A delay that long between filing and finally trading is not ideal, but it’s not unheard of for companies to wait through difficult market conditions, particularly as they negotiate pricing.

Beyond discussions I’ve had with sources, in Silver Spring’s latest S-1 Amendment the company notes that longtime investor Foundation Capital now says it plans to purchase $12 million worth of stock at the IPO price, following the IPO, in a private placement. If Silver Spring was planning to shelve its IPO it probably wouldn’t be negotiating this detail with its investor, and also wouldn’t continue to update its S-1 every quarter (it would just withdraw it).

Solar installer SolarCity’s investors used a similar tactic when the company went public last year to try to create interest from Wall Street. SolarCity investors Elon Musk, Draper Fisher Jurvetson and DBL Investors, agreed to buy up about a third of the Solar City float the day before trading, and that helped it get out and pop on its first day. Bankers could take it as a good sign that Foundation Capital is looking to buy up even more shares of Silver Spring.

Silver Spring has continued to grow over the years, despite the fact that selling smart grid networks to utilities is a pretty difficult low margin business. If you only look at Silver Spring’s GAAP revenue and net income it doesn’t look all that amazing, which is what this analyst did. The company hasn’t ever had a positive net income, and it recorded revenue of $147 million for the nine months ended Sept 30, 2012, which was down from $176 million from the same period in 2011.

But if you look at the deals that Silver Spring closed in 2012, and the amount it billed its utility customers for, it actually had a decent year last year. The company recorded billings of $219 million for the nine months ended Sept 30, 2012, up from $183 million for the same period of 2011. Billings are how much Silver Spring invoiced its customers, and they are considered deferred revenue until they can be officially counted as revenue. It had its highest gross margin yet on those billings of 34 percent. The company has a total of $473 million in deferred revenue as of the nine months ended September 30, 2012, and about $60 million in cash for the same period.

That’s the problem with selling gear to utilities. The deals and the sales cycles take a really long time to negotiate from a trial to a commercial deal, and then a long time to see through to the end. We’ll see how comfortable Wall Street is with looking at both its GAAP and non-GAAP financials when it comes to interest in the IPO.

Silver Spring Networks has networked 13 million smart grid devices, and has contracts to network more than 22 million total. The company has a total backlog of $745 million in product and service billings.

Now, we’ll see if over the next four weeks, Silver Spring is able to negotiate and get enough interest to price its shares at the valuation it wants. But from what I’m hearing it’s starting to aggressively try to do just that.

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How to keep innovation alive in the smart grid

Katie Fehrenbacher — Tue, 29 Jan 2013 21:19:45 +0000

The harsh reality of the smart grid sector is that making an actual sale of networking technology, analytics tools or devices to utilities — not a pilot trial — is hard and takes a really long time. Companies that are lucky enough to test out their tech with utilities in trials aren’t guaranteed to get a commercial deal, despite the time and money invested.

That’s one of the reasons why some smart grid startups struggle and are sold off for smaller amounts than they or their investors had originally hoped, are forced to dramatically downsize, or eventually fold. There’s a chasm between when a startup launches and raises venture funding, and when a company reaches velocity with utility sales. That Valley of Death can take years of long utility sales cycles to cross, and many startups don’t make it through.

But as the smart grid industry matures, there’s players that have emerged on the other side of the Valley of Death that can help out the younger startups looking to develop innovation in the ecosystem. It’s one of the ways that real innovation can actually survive in a sector that is so conservative and slow moving.

Silver Spring Networks is one of these players. This week at Distributech, the massive power grid conference in San Diego, Silver Spring announced that it’s reselling startup AutoGrid System’s software, which helps utilities quickly deploy energy efficiency programs for its customers. To utilities that may not be familiar or comfortable with the two-year-old venture-backed startup, Silver Spring’s partnership gives AutoGrid some more weight.

Silver Spring, which itself was VC-backed and founded in 2002, works with a lot of startup and big company partners. It announced ten new partnerships at Distributech this week, and more than 30 of its partners are showing off tech at the conference this week.

For Silver Spring, working with the latest innovative startups is a good way to keep on the cutting edge and also see what is out there to either learn from or even acquire. Of course, this is a common practice in the internet ecosystem, where companies like Google, Facebook or Cisco, routinely keep an eye on the hot new VC-backed players. But the smart grid industry isn’t as mature and progressive, so this can be a relatively rare phenomenon.

The more traditional power grid firms are more commonly doing this now, too. Siemens, ABB, and GE all have various startup-focused initiatives. The older IT companies — like a Cisco or an Oracle — that are looking to get into the utility sector, naturally do this as well, as they’re used to doing it with their core IT divisions.

But more of these large key players are needed to take a more active role in shepherding and acquiring the most promising startups. It’ll be needed to keep innovation alive in the smart grid over the next few years.

If there aren’t success stories for these startups, they’ll be decidedly less innovation coming into the space. 2012 was a year that saw a smaller amount of venture capital deals for smart grid companies. According to a report from Mercom, there were 40 smart grid startup investment deals in 2012, compared to 50 deals in 2011. The overall funding by dollar amount was higher in 2012 than 2011, but that was skewed by a large fund raise from Alarm.com, which is more of a home automation and security company than a smart grid startup. There were only 66 investors that put money into smart grid startups in 2012, down from 92 investors in 2011.

If innovation doesn’t come from the younger startups, it’ll have to come from within the big power companies. But we all know how well most huge companies innovate.

Image courtesy of Shutterstock/Dusit.

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