Energy Focus (NASDAQ: EFOI) released full year 2022 results, reporting another big year-over-year decline in revenue and substantial losses. Net sales for FY2022 were $6.0M, a drop of 39% over FY2021 total net sales of $9.9M. For the full year 2022 Energy Focus suffered an operating loss of $9.3M compared to an operating loss of $8.7M in 2021. Looking back to FY2020, total net sales were $16.8M, with peak revenue to date coming in FY2016 at $63.4M. Energy Focus’ current share price is hovering around $0.55 (in 2016 the share price was over $7.00). The company is now considered a nano-cap stock (company market value < $50M).
In 2007 fiber-optic lighting systems company Fiberstars Inc. was renamed Energy Focus and began trading on NASDAQ as EFOI. Fiberstars was at one time a division of ADLT – another Solon, Ohio-based company that includes Venture Lighting. As LED technology overtook fiber-optic lighting in the race for energy-savings, the newly-named Energy Focus won a $23M US military contract (DARPA) to retrofit Navy ships with LED tubes. The company’s annual revenue is still tracked under two separate market segments: commercial and military/marine. Just three years ago in 2020, military/marine market (MMM) was an $11.4M piece of business for Energy Focus, representing 68% of the total revenue. The MMM proportion of annual revenue has continued to decline in past years, and in this latest full year 2022 release MMM is only a $2.2M business for Energy Focus, representing just 27% of total revenue.
Following her first full quarter as CEO of Energy Focus, Lesley Matt gave frank opening comments on the earnings call, referencing the “dismal” results for the past year as “essentially a story of survival from which it’s my job to lead us to rebuild.” The company is moving away from its previous 2020-2022 strategy to develop and market UV-C light disinfection (UVCD) products direct-to-consumers. The revised business strategy since mid- 2022, is to return focus to LED lighting and control products for MMM, commercial and industrial lighting markets. A dramatic restructure has already been completed, eliminating nearly two-thirds of positions, streamlining expenses, overhauling existing inventory and reducing operating space.
A strategic investment by Sander Electronics, a manufacturer of high-brightness LEDs and electronic components, helped fund the balance sheet improvements in early 2023 through debt restructuring. Jay Huang, President of Sander Electronics joined the Energy Focus Board of Directors as Chairman at the time of the investment. Focus Energy CEO Matt noted in her earning comments that “in addition to the financial improvement, Jay and the Sander Electronics team has been instrumental in addressing the supply chain problems that hobbled Energy Focus in 2022.”
Energy Focus announced in early 2023 an expansion into gallium nitride (GaN) power supplies, noting that the GaN power supplies “well align with our core business and Sander’s expertise. GaN power supplies are being touted as “the future”, requiring fewer components than silicon (Si) power supplies, keeping devices more compact. GaN also allows for higher power density and higher efficiency. The LED lamp market has seen the innovation of GaN-based drivers into LED traditional glasswork to allow for higher-power LED replacements lamps without an external power supply.
Looking ahead to 2023, CEO Matt noted that the company needs quarterly sales of at least $3.5M to achieve gross margins in the mid-20% range (sales for the most recent quarter, Q4 FY2022 were just $2.4M.) She noted that getting to a $3.5M+ type of run rate would allow Energy Focus “to introduce new products and implement more aggressive value-added and value engineering initiatives” but also cautioned that quarter-to-quarter fluctuations will continue. With the very difficult work of severe cost-cutting and workforce reduction done, CEO Matt and her team have their work cut out for them as she looks for “calmer seas and redemption ahead.”
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Energy Focus Reports Q4 and Full Year 2022: https://investors.energyfocus.com/#:~:text=FOURTH%20QUARTER%20AND-,FISCAL,-YEAR%202022%20FINANCIAL
Energy Focus SEC 10-K Filing for Full Year 2022: https://app.quotemedia.com/data/downloadFiling?webmasterId=102213&ref=117354947&type=PDF&symbol=EFOI&companyName=Energy+Focus+Inc.&formType=10-K&formDescription=Annual+report+pursuant+to+Section+13+or+15%28d%29&dateFiled=2023-03-23
Investor Presentation Sep 2022: https://investors.energyfocus.com/assets/uploads/2022/05/Microsoft-PowerPoint-Energy-Focus-Presentation-220523_FINAL.pdf