SOLON, Ohio – Energy Focus, Inc. (NASDAQ:EFOI), a leader in sustainable, energy-efficient lighting and control systems products for the commercial, military maritime and consumer markets, today announced financial results for its first quarter ended March 31, 2023.
First Quarter 2023 Financial Highlights:
- Net sales of $0.9 million, decreased 54.9% compared to the first quarter of 2022, reflecting a $0.3 million, or 34.3%decrease in military sales, and a $0.8 million, or 71.7% decrease in commercial sales, year-over-year. As compared to the fourth quarter of 2022, net sales increased by 40.3%, primarily due to a $0.3 million increase in military sales, while commercial sales remained flat.
- Positive gross profit margin of 1.8%, up from negative gross profit margins of 1.3% in the first quarter of 2022 due primarily to significantly reduced fixed costs, offsetting the impact of lower sales volumes. Sequentially, gross profit was up significantly as compared to negative 35.9% in the fourth quarter of 2022, due to reduced variable costs.
- Loss from operations of $1.2 million, compared to a loss from operations of $2.7 million in the first quarter of 2022 and to a loss from operations of $2.0 million in the fourth quarter of 2022.
- Net loss of $1.3 million, or $(0.08) per basic and diluted share of common stock, compared to a net loss of $2.8 million, or $(0.44) per basic and diluted share of common stock, in the first quarter of 2022. Sequentially, the net loss decreased by $1.0 million compared to net loss of $2.3 million, or $(0.24) per basic and diluted share of common stock in the fourth quarter of 2022.
- Cash of $0.3 million, included in total availability (as defined under “Non-GAAP Measures” below) of $0.4 million, each as of March 31, 2023, as compared to cash of $0.1 million and total availability of $0.1 million as of December 31, 2022.
- Strategic investment completed in January 2023 resulting in net proceeds of $2.1 million and conversion of additional $1.5 million outstanding on promissory notes into common stock.
- Private placements of additional $955 thousand of common stock during the first quarter of 2023.
- Paid down $1.0 million on secured inventory lending facility and agreed to terminate accounts receivable lending facility, reducing borrowing costs during 2023.
- Restructured unsecured promissory note, paying down $500 thousand exchanging an additional $250 thousand for common stock and extending payments into 2024.
“First quarter has set the stage for growth in 2023 for Energy Focus,” said Lesley Matt, Chief Executive Officer. “The work we accomplished in the three months ended March 31, 2023 has started to transform Energy Focus to drive sales and new product development that we hope will show in our full year 2023 results and beyond. Although our first quarter profit margin was not where we wanted to be, turning to positive margin reflects our hard work on past inventory reserves. There is always room for improvement in sales numbers, and I am optimistic that we have our biggest hurdles behind us and are primed and ready to deliver in the quarters ahead. After the strategic investment from Sander Electronics was completed in January, the teams worked together to get our best-selling, higher margin products back into the production pipeline while collaborating on new market opportunities in LED and energy solutions products. During this time, we were also able to significantly reduce operating expenses and clean up our balance sheet to improve stockholder equity and deploy cash flows in operations. Although there is a tremendous amount of work still to be done, I believe that we are focusing back on sales, new product development and innovation.”
First Quarter 2023 Financial Results:
Net sales were $0.9 million for the first quarter of 2023, compared to $2.1 million in the first quarter of 2022, a decrease of $1.1 million, or 54.9%. Net sales from military maritime products were approximately $0.6 million, or 65.5% of total net sales, for the first quarter of 2023, compared to $0.9 million, or 45.0% of total net sales, in the first quarter of 2022, (including $0.3 million of deferred revenue recognized in that prior period). Sequentially, military maritime sales were up $0.3 million, or 48%, compared to fourth quarter of 2022, reflecting the building impact of our renewed focus on military sales commenced mid-year 2022 with the strategic hire of a head of MMM sales. Net sales from commercial products were approximately $0.3 million, or 34.5% of total net sales, for the first quarter of 2023, as compared to $1.1 million, or 55.0% of total net sales, in the first quarter of 2022, reflecting lower sales volumes and market adjusted pricing.
Gross profit margin was $17 thousand, or 1.8% of net sales, for the first quarter of 2023. This compares with negative gross profit margin of $26 thousand, or (1.3)% of net sales, in the first quarter of 2022. Sequentially, this compares with negative gross profit of $238 thousand, or (35.9)% of net sales, in the fourth quarter of 2022. The year-over-year increase in gross margin rate was driven by a $488 thousand decrease in fixed costs, partially offset by the $288 thousand impact from lower volume. In the first quarter of 2022, we also included a $129 thousand adjustment to the inventory reserve to impair slow moving inventory in the first quarter of 2022. The quarter-over-quarter increase in gross margin rate was driven primarily by better product mix from additional military sales, which provided a $442 thousand impact to gross margin.
Adjusted gross margin, as defined under “Non-GAAP Measures” below, was negative 0.3% for the first quarter of 2023, compared to 5.0% in the first quarter of 2022, primarily driven by low sales volume in the first quarter of 2023. The decline in revenue was significantly offset by lower fixed costs, which were 23% of sales in the first quarter of 2023 and 27% of sales in the first quarter of 2022. Variable costs remained constant at 25% of sales for both quarters.
Sequentially, the negative 0.3% adjusted gross margin in the first quarter of 2023 is a marked improvement compared to adjusted gross margin of negative 55.8% in the fourth quarter of 2022. The increase from the fourth quarter of 2022 was primarily driven by lower variable costs as well as increased sales during the first quarter of 2023.
Operating loss was $1.2 million for the first quarter of 2023, compared to an operating loss of $2.7 million in the first quarter of 2022. Sequentially, this compares to an operating loss of $2.0 million in the fourth quarter of 2022. Net loss was $1.3 million, or $(0.08) per basic and diluted share of common stock, for the first quarter of 2023, compared with a net loss of $2.8 million, or $(0.44) per basic and diluted share of common stock, in the first quarter of 2022. Sequentially, this compares with a net loss of $2.3 million, or $(0.24) per basic and diluted share of common stock, in the fourth quarter of 2022.
Adjusted EBITDA, as defined under “Non-GAAP Measures” below, was a loss of $1.2 million for the first quarter of 2023, compared with a loss of $2.6 million in the first quarter of 2022 and a loss of $1.8 million in the fourth quarter of 2022. The improved adjusted EBITDA loss in the first quarter of 2023, as compared to the adjusted EBITDA loss for the first quarter of 2022, was due to the lower costs, primarily salaries and related payroll costs.
Cash was $0.3 million as of March 31, 2023. This compares with cash of $0.1 million as of December 31, 2022. As of March 31, 2023, the Company had total availability, as defined under “Non-GAAP Measures” below, of $0.4 million, which consisted of $0.3 million of cash and $0.1 million of additional borrowing availability under its credit facilities. This compares to total availability of $1.1 million as of March 31, 2022 and total availability of $0.1 million as of December 31, 2022. During the quarter ended March 31, 2023, we reduced the maximum capacity on our inventory facility to $500 thousand and agreed to pay it down over 2023, as well as agreed with our receivables lender to terminate our accounts receivable lending facility. Our net inventory balance of $4.9 million as of March 31, 2023, decreased $0.5 million from our net inventory balance as of December 31, 2022.
Earnings Conference Call:
The Company will host a conference call and webcast today, May 11, 2023, at 11 a.m. ET to discuss the first quarter 2023 results, followed by a Q & A session.
You can access the live conference call by dialing the following phone numbers:
• Toll Free: 1-877-451-6152 or
• International: 1-201-389-0879
• Conference ID#: 13738656
The conference call will be simultaneously webcast. To listen to the webcast, log onto it at:https://viavid.webcasts.com/starthere.jsp?ei=1614200&tp_key=fdff475ce4 . The webcast will be available at this link through May 26, 2023. Financial information presented on the call, including this earnings press release, will be available on the investors section of Energy Focus’ website: investors.energyfocus.com.
About Energy Focus
Energy Focus is an industry-leading innovator of sustainable light-emitting diode (“LED”) lighting and lighting control technologies and solutions. As the creator of the first flicker-free LED lamps, Energy Focus develops high quality LED lighting products and controls that provide extensive energy and maintenance savings, as well as aesthetics, safety, health and sustainability benefits over conventional lighting. In 2023, EFOI announced plans to add high efficiency GaN (gallium nitride) power supply products to its product portfolio. Energy Focus is headquartered in Solon, Ohio. For more information, visit our website at energyfocus.com.
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