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Why Silver Spring Networks, Inc. Stock Plunged Today

By Steve Symington - Feb 22, 2017 at 12:50PM

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The smart-grid products company fell after a disappointing quarterly report. Here's what investors need to know.

What happened

Shares of Silver Spring Networks Inc. (NYSE: SSNI) were down 14.3% as of 11:30 a.m. Wednesday after the smart-grid products specialist announced strong fourth-quarter 2016 results, but followed with underwhelming guidance.

So what

Quarterly revenue fell 66.7% year over year, to $66.3 million, including a 71.8% decline in product revenue, to $40.4 million, and a 53.9% drop in services revenue, to $25.9 million. Billings for the quarter climbed 4%, to $77.7 million. And on the bottom line, that translated to a GAAP net loss of just under $14 million, or $0.27 per diluted share, compared to net income of $61.9 million, or $1.19 per diluted share in the same year-ago period. On a non-GAAP basis, which adjusts for one-time gains and expenses, Silver Spring Networks generated earnings of $0.05 per share.

By comparison, analysts' consensus estimates called for lower adjusted earnings of $0.02 per share, and lower billings of $76 million.

Silver Spring Networks Logo

IMAGE SOURCE: Silver Spring Networks, Inc.

Silver Spring Networks CEO Mike Bell elaborated:
We enter 2017 in a strong position, with solid fourth quarter results and several new international awards. In 2016, we achieved record bookings, with major awards from Con Edison, Entergy and Pacific Power, generated over $20.7 million in operating cash flow for the year, and finished the year with more than 25.5 million cumulative network endpoints delivered. We are focused on ramping production of our Gen5 platform for our major upcoming deployments, driving international growth, and expanding our platform to additional smart utility applications and new vertical markets within the broader Internet of Important Things opportunity.

Now what

For the current quarter, Silver Spring expects revenue of $45 million to $50 million, with billings of $67 million to $71 million. The latter range, however, was well below the $75.3 million in billings Wall Street was anticipating.

For the full year of 2017, Silver Spring expects revenue in the range of $400 million to $420 million, as the company continues focusing on reducing its deferred revenue. Full-year 2017 billings are expected to be in the range of $300 million to $320 million, again below analysts' consensus estimates for $375.5 million.

In short, while Silver Spring is rightly pleased with its fourth-quarter performance and momentum headed into 2017, it's obvious the market was even more optimistic regarding billings going forward. So with the caveat that Silver Spring might well be under-promising with the intention of over-delivering, it's no surprise to see shares trading lower today.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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