OREANDA-NEWS. Energy Focus, Inc. (NASDAQ:EFOI), a leader in LED lighting technologies, today announced financial results for the first quarter ended March 31, 2016.

First Quarter 2016 Financial Highlights:

  • Net sales of $8.4 million were near the higher end of the Company’s first quarter guidance
  • Net sales declined 33% compared to the prior year’s first quarter due to the previously announced U.S. Defense budget impasse that has been causing a temporary slowdown in orders for military products
  • Commercial sales of $4.6 million represented growth of 160% compared to the prior year’s first quarter
  • Gross margin was 37.3% compared with 40.9% in the prior year’s quarter, due to lower overall revenue volume and product mix that was more heavily weighted in commercial products sales
  • Net loss of $2.0 million, or $(0.17) per share, compared to net income of $1.1 million, or $0.11 per diluted share in the first quarter last year
  • Cash balance of $30.1 million at the end of the quarter with no debt

First Quarter 2016 Operational Milestones:

  • Completed tubular LED (“TLED”) conversion of eight Military Sealift Command (“MSC”) ships
  • 2-foot LED fixture family passed First Article Testing requirements to qualify for bidding on new ship construction for the U.S. Navy, U.S. Coast Guard and MSC
  • Announced the first order for one of the largest department store chains in the U.S.
  • Received follow-on orders from one of the largest global healthcare institutions located in Northeast Ohio for continued retrofit of its main campus with TLEDs
  • Shipped products to retrofit six mall properties for an S&P 500 company focused on owning, managing, leasing and redeveloping high quality retail throughout the U.S.
  • Retrofitted an additional six school districts, five municipalities and a Coast Guard military base

       
“As expected, military maritime product sales were slow in the first quarter. That said, we are pleased to report that due to our grass roots, ship-to-ship business development efforts with the U.S. Navy, sales of our military maritime product resumed through our distribution channel later in the quarter,” said James Tu, Executive Chairman, President and Chief Executive Officer. “We continue to anticipate gradual recovery in our military maritime sales in the second quarter and beyond. In addition, with the qualification of our 2-foot LED fixture products, which usually comprise a majority of addressable lighting opportunities in a military ship, we are excited about the opportunities now open to us in the new ship construction market within the Navy ecosystem.”

“Also during the quarter, our commercial products sales again exhibited strong year-over-year growth, and we continued to make exciting progress in establishing the Energy Focus brand in the marketplace by offering highly reliable, technologically advanced products with an exceptional value and return on investment for our customers,” continued Mr. Tu. “We recently announced the Energy Focus Promise, our 10-year end-to-end warranty for our commercial LED products. Our warranty doubles the LED industry’s standard 5-year warranty and helps support the estimated cash flows for customers using pay-through-savings mechanisms to finance their retrofit projects. We have also received strong interest from our customers and partners for our new line of network-ready, dimmable TLEDs, panel light products and T8 emergency battery backup TLEDs, which we introduced at LIGHTFAIR International in late April. We expect to start taking orders and shipping these new products during the second half of 2016.”

“Over the past three years since our restructuring that started in May 2013, Energy Focus has grown our penetration of the U.S. Navy fleet from close to zero to over 30%, obtained numerous globally preeminent companies as customers, built a solid network of installation partners, significantly expanded our product lines with industry-leading performance, quality and total value, and established engineering and supply chain operations in Asia,” added Mr. Tu. “To attain the next level of dynamic, multi-year growth, we have recently started implementing significant leadership changes to strengthen our teamwork, deepen our vertical focus and expedite our execution. With our current leadership and continuing addition of high-level leaders planned in the coming months, we are extremely excited about the prospect for Energy Focus to not only grow from the recent slowdown, but also become a trusted, premier brand in the rapidly emerging, business-to-business LED lighting market,” concluded Mr. Tu.

A further breakdown of net sales is shown below (in thousands):

  Three months ended
March 31,		  
  2016   2015  
Military maritime products $ 3,822     $ 10,802    
Commercial products 4,603     1,768    
R&D services -     17    
Total net sales $ 8,425     $ 12,587    

Financial Results:

Net sales of $8.4 million for the first quarter of 2016 declined 33% compared to the first quarter of 2015. The decrease resulted from $7.0 million in lower sales to the U.S. military, due to previously disclosed slowdowns in this market, partially offset by a 160% increase in commercial product sales to $4.6 million.

Gross profit was $3.1 million, or 37.3% of net sales, for the first quarter of 2016 compared to $5.2 million, or 40.9% of net sales, for the first quarter of 2015. The decline was a result of lower total sales with a revenue mix more heavily weighted towards commercial products, which generally carry lower margins than military maritime products.

Loss from operations was $2.0 million for the quarter compared to income from operations of $1.3 million in last year’s same period.  Loss from continuing operations was $2.0 million for the first quarter of 2016, or $(0.17) per share, compared to income from continuing operations of $1.2 million, or $0.12 per diluted share, for the same period last year.  Net loss was $2.0 million, or $(0.17) per share, compared to net income of $1.1 million, or $0.11 per diluted share in last year’s same period.  Discontinued operations in the current period includes legal fees incurred for the arbitration associated with our pool products business we sold in November 2013.  Discontinued operations in the prior period includes the results of our former United Kingdom subsidiary, Crescent Lighting Limited; our former turnkey solutions business, Energy Focus LED Solutions, LLC; and legal fees incurred in relation to the pool products business. 

At March 31, 2016, our cash and cash equivalents balance was $30.1 million, compared to $34.6 million at December 31, 2015.  Net cash used by operating activities of $4.2 million in the quarter resulted from the net loss, adjusted for non-cash items, including: depreciation and stock-based compensation; and working capital changes, most notably an increase in inventories and a decrease in trade accounts receivable.  Days sales outstanding was 29 at March 31, 2016 compared to 23 at December 31, 2015.

About Energy Focus, Inc.:

Energy Focus, Inc. is a leading provider of energy efficient LED lighting products and a developer of energy efficient lighting technology.  Our LED lighting products provide energy savings, aesthetics, safety and maintenance cost benefits over conventional lighting.  Our long-standing relationship with the U.S. Government continues to enable us to provide energy efficient LED lighting products to the U.S. Navy and the Military Sealift Command fleets.  Customers include national, state and local U.S. government agencies as well as Fortune 500 companies and many other commercial and industrial clients.  World headquarters are located in Solon, Ohio with additional offices in Washington, D.C., New York City and Taiwan. 

ENERGY FOCUS, INC.  
CONDENSED CONSOLIDATED BALANCE SHEET  
(in thousands, except per share amounts)  
(Unaudited)  
   
  March 31,   December 31,  
    2016       2015    
ASSETS        
Current assets:        
Cash and cash equivalents $   30,140     $   34,640    
Trade accounts receivable less allowances of $101 and $155, respectively    6,034        10,110    
Inventories, net    11,536        7,732    
Prepaid and other current assets    1,011        740    
Total current assets    48,721        53,222    
         
Property and equipment, net    2,590        2,429    
Other assets    63        51    
Total assets $   51,374     $   55,702    
         
LIABILITIES        
Current liabilities:        
Accounts payable $   5,929     $   7,295    
Accrued liabilities    512        355    
Accrued payroll and related benefits    645        1,243    
Accrued sales and bonus incentives    218        1,005    
Accrued warranty reserve    327        314    
Deferred revenue    67        93    
Total current liabilities    7,698        10,305    
         
Other liabilities    74        77    
Total liabilities    7,772        10,382    
         
STOCKHOLDERS' EQUITY        
Preferred stock, par value $0.0001 per share:        
Authorized: 2,000,000 shares in 2016 and 2015        
Issued and outstanding: no shares in 2016 and 2015  —    —  
Common stock, par value $0.0001 per share:        
Authorized: 30,000,000 shares in 2016 and 2015        
Issued and outstanding: 11,652,739 at March 31, 2016
and 11,648,978 at December 31, 2015		    1        1    
Additional paid-in capital    125,639        125,369    
Accumulated other comprehensive income    1      —  
Accumulated deficit    (82,039 )      (80,050 )  
Total stockholders' equity    43,602        45,320    
Total liabilities and stockholders' equity $   51,374     $   55,702    
         
ENERGY FOCUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
  Three months ended
March 31,
    2016       2015  
Net sales $   8,425     $   12,587  
Cost of sales    5,280        7,436  
Gross profit    3,145        5,151  
       
Operating expenses:      
Product development    804        542  
Selling, general, and administrative    4,310        3,340  
Total operating expenses    5,114        3,882  
(Loss) income from operations    (1,969 )      1,269  
       
Other expenses (income):      
Interest expense  —      23  
Other (income) expenses    (3 )      22  
       
(Loss) income from continuing operations before income taxes    (1,966 )      1,224  
Provision for income taxes    11      —
(Loss) income from continuing operations    (1,977 )      1,224  
       
Discontinued operations:      
Loss from discontinued operations  —      (69 )
Loss on disposal of discontinued operations    (12 )      (36 )
       
Loss from discontinued operations before income taxes    (12 )      (105 )
Provision for (benefit from) income taxes  —      (10 )
Loss from discontinued operations    (12 )      (95 )
       
Net (loss) income    (1,989 )      1,129  
       
       
Net (loss) income per share - basic:      
From continuing operations $   (0.17 )   $   0.13  
From discontinued operations  —      (0.01 )
Net (loss) income per share - basic $   (0.17 )   $   0.12  
       
Net (loss) income per share - diluted:      
From continuing operations $   (0.17 )   $   0.12  
From discontinued operations  —      (0.01 )
Net (loss) income per share - diluted $   (0.17 )   $   0.11  
       
Weighted average shares used in computing net (loss) income per share:  
Basic    11,650        9,671  
Diluted    11,650        9,993