SOLON, Ohio, Feb. 22, 2018 (GLOBE NEWSWIRE) — Energy Focus, Inc. (EFOI), a leader in LED lighting technologies, today announced financial results for the fourth quarter and full year ended December 31, 2017.
Fourth Quarter Highlights:
- Net sales for the fourth quarter of $4.7 million compared to $7.2 million in the fourth quarter of 2016.
- Gross profit was $1.6 million, or 34.3 percent of net sales, for the fourth quarter of 2017 compared to negative gross profit of $1.1 million in the fourth quarter of 2016.
- Fourth quarter 2017 operating expenses of $3.5 million compared to $6.7 million in the fourth quarter of 2016.
- Fourth quarter net loss of $1.9 million, or a loss of $0.16 per diluted share, compared to $7.8 million, or a loss of $0.67 per share, from the fourth quarter of 2016.
- Successful market introduction of the industry’s first fully-integrated, UL Approved, emergency backup TLED.
- Achieved national sales penetration with the signing of 30 Sales Agents and the hiring of five experienced Regional Sales Managers to manage our Agency network.
Full Year Highlights:
- Full year net sales of $19.8 million compared to $31.0 million in 2016, driven by a 71 percent decline in military maritime sales.
- Full year commercial net sales of $15.2 million represents record-level commercial LED net sales in the Company’s history and a 2.8 percent increase over 2016 levels.
- Operating efficiency and cost improvements resulted in full year 2017 gross profit as a percent of sales of 24.3 percent, comparable to 2016, despite a 36.0 percent decline in year-over-year year net sales.
- Achieved an $8.4 million, or 34.3 percent, reduction in full year operating expenses, including restructuring charges and impairment losses. Excluding restructuring charges and impairment losses of $1.8 million, year-over-year operating expenses decreased by $9.4 million, or 39.7 percent, from 2016 levels.
- Full year net loss of $11.3 million, or loss of $0.95 per diluted share, compared to $16.9 million, or a loss of $1.45 per share, compared to 2016.
- Reduced year-over-year cash burn by $10 million to $5.9 million in 2017 compared to $16.6 million in 2016.
- Ended the year with $10.8 million in cash and no debt.
Dr. Ted Tewksbury, Chairman, Chief Executive Officer and President, commented, “When I started as CEO last February, I announced a turnaround plan consisting of three basic elements – First, reduce operating expenses by approximately $10 million year-over-year. Second, put in place a nationwide sales force to drive top line growth and third, build a new product engine that will continuously generate innovative products to grow revenue and profits over the long term. We made outstanding progress on each of these three of these objectives in 2017. We successfully reduced operating expenses by $9.4 million excluding restructuring charges, reducing our net loss by 65 percent year-over-year, despite declining revenue. We built an agency-based sales network consisting of 30 agencies, which is already generating increases in our sales pipeline, quoting activity and backlog. Finally, we launched RedCap, the industry’s first emergency battery backup tubular LED and defined an innovative roadmap of next generation LED products to drive longer term growth.”
A further breakdown of net sales is shown below (in thousands):
| Three months ended December 31, |
Year ended December 31, |
|||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||
| Commercial products | $ | 3,013 | $ | 3,299 | $ | 15,217 | $ | 14,809 | ||
| Military maritime products | 1,714 | 3,887 | 4,629 | 16,189 | ||||||
| Total net sales | $ | 4,727 | $ | 7,186 | $ | 19,846 | $ | 30,998 | ||
Financial Results:
Net sales of $4.7 million for the fourth quarter of 2017 decreased 34.2 percent compared to the fourth quarter of 2016, principally due to lower military maritime product sales, which experienced a quarter-over-quarter decline of 55.9 percent due to our distributor’s ability to satisfy U.S. Navy demand for our products out of their existing inventory balances. Net sales of our commercial products decreased 8.7 percent compared to the fourth quarter of 2016, reflecting the timing of our customers’ projects and installation schedules.
Gross profit was $1.6 million, or 34.3 percent of net sales, for the fourth quarter of 2017, compared to negative gross profit of $1.1 million for the fourth quarter of 2016. The fourth quarter 2017 gross margin was favorably impacted by a net $0.8 million adjustment to the excess inventory reserve due to the Company’s strategic efforts to liquidate inventory previously identified as excess. The 2016 gross margin was negatively impacted due to a $3.3 million, net write-off of excess inventory at December 31, 2016.
Operating loss, loss from continuing operations and net loss was $1.9 million for the quarter, or a loss of $0.16 per share, compared to operating loss, loss from continuing operations and net loss of $7.8 million, or a loss of $0.67 per share, in last year’s same period.
Net sales of $19.8 million for the full year decreased 36.0 percent compared to 2016, principally due to lower military maritime product sales, which experienced a year-over-year decline of 71.4 percent due to our distributor’s ability to satisfy U.S. Navy demand for our products out of their existing inventory balances. Net sales of our commercial products increased 2.8 percent, due to our ability to further penetrate our commercial and industrial markets.
Gross profit for 2017 was $4.8 million compared to $7.7 million in 2016. The year-over-year decline in gross profit was principally driven by lower sales volumes and changes in mix between our commercial and military maritime products. Our 2017 gross profit as a percent of net sales of 24.3 percent was comparable with our 2016 gross profit as a percent of net sales of 24.8 percent. As a result of our 2017 restructuring initiative and our efforts to improve operating efficiencies, we were successful in maintaining our manufacturing overhead as a percentage of net sales to 2016 levels, in spite of lower sales volumes. Additionally, the 2017 gross margin was favorably impacted by a $1.4 million net inventory adjustment to the excess inventory reserves due to the Company’s strategic efforts to liquidate inventory, previously identified as excess. The 2016 gross margin was negatively impacted due to a $3.3 million write-off of excess inventory during the year.
Operating loss, loss from continuing operations and net loss was $11.3 million for the year, or a loss of $0.95 per share, compared to operating loss of $16.8 million and a loss from continuing operations and net loss of $16.9 million, or a loss of $1.45 per share, in last year’s same period.
At December 31, 2017, our cash and cash equivalents balance was $10.8 million, compared to $16.6 million at December 31, 2016. Net cash used in operating activities of $5.9 million in 2017 compared to $16.6 million in 2016. Net cash used in operating activities results from the net losses incurred, adjusted for non-cash items, including: depreciation and amortization, stock based compensation, the adjustment to the excess inventory reserve, and changes in working capital.
Dr. Tewksbury concluded, “2017 was a transitional year as we built the engine to drive growth and profitability. Revenue is a lagging indicator due to the characteristic 6 to 12 month sales cycle times in the lighting industry. While I had not expected to see revenue from the agency channel in 2017, I was very pleased to see the first agency contributions of $1.6 million in Q4. We are also seeing enthusiastic customer adoption of RedCap and shipped our first units in Q4. As a result of these successes, we entered the first quarter of 2018 with the highest sales backlog since the fourth quarter of 2016. While visibility remains limited, we expect our 2017 foundational achievements to deliver increasing revenue, profitability and value for our shareholders throughout 2018.”
Earnings Conference Call:
Energy Focus, Inc. will host a conference call and webcast on February 22, 2018 at 11:00 a.m. ET to review the fourth quarter and full year 2017 financial results, followed by a Q & A session. To participate in the call, please dial 800-239-9838 if calling within the United States, or 323-794-2551 if calling internationally. A replay will be available until March 1, 2018, which can be accessed by dialing 844-512-2921 if calling within the United States, or 412-317-6671 if calling internationally. Please use passcode 3012693 to access the replay. The call will additionally be broadcast live and archived for 90 days over the internet accessible in the Company section of the Energy Focus corporate website, under “Investors” at https://investors.energyfocus.com/.