Conference Call to be Held Today at 11AM ET
SOLON, Ohio, March 19, 2020 (GLOBE NEWSWIRE) — Energy Focus, Inc. (EFOI), a leader in sustainable LED lighting technologies, today announced financial results for its fourth quarter and fiscal year ended December 31, 2019.
Fourth Quarter 2019 and Subsequent Business Highlights
- Net sales of $3.5 million, up 21.1% from third quarter 2019 and up 13.2% from fourth quarter 2018
- Net loss of $1.3 million, a year-over-year improvement of $1.7 million
- Awarded a $2.5 million contract to supply LED globe lights and a $3.4 million contract to supply tubular LED (TLED) lighting products to the U.S. Navy, as well as a $1.7 million contract to supply LED lighting products for four new ship for a U.S. allied Navy
- Filed patents and trademarks regarding EnFocusTM, our breakthrough lighting control platform
- Strengthened leadership teams in business development, marketing and production
- During November 2019 completed a debt financing of approximately $1.3 million on a gross basis
- During January 2020 completed a registered direct equity offering and concurrent private placement for $2.75 million in aggregate gross proceeds
“Fourth quarter revenue represents our first quarter of sequential and year-over-year growth since 2015,” stated James Tu, Chairman and CEO of Energy Focus, Inc. “This sales growth is a direct result of our dedicated efforts to enhance engineering designs, reduce production costs and rebuild a highly-motivated, talented sales organization focused on winning business by actively engaging with and educating customers on our high-quality and innovative LED lighting technologies and solutions. Since fourth quarter of 2019, we have been awarded over $7.6 million in new contracts from the U.S. and allied Navies, demonstrating our strengthening competitiveness and leadership as a leading LED lighting provider for the U.S. Navy ecosystem. We also added several new customers in education, healthcare and commercial and industrial sectors. Overall, the business transformation initiatives we began in the first half of 2019 are gaining momentum, generating new orders and customers, and creating a runway for continuing growth in 2020 and beyond.”
Mr. Tu continued, “The LED lighting industry is entering a rapid adoption phase after nearly a decade of building awareness. We are especially encouraged by the continuing support from our existing customers and from large new customers that value our proven and sustainable product portfolio that optimizes financial, environmental and human impacts for their facilities. More and more, LED lighting is incorporating advanced electronics and software technologies to emerge as a central and integrated part of building IoT infrastructure. With a whole new family of patented controlled lighting products being launched this month and delivered starting in the second quarter of this year, we believe we are in a strong position to expand the benefits of LED lighting beyond delivering environmental sustainability with our new EnFocus™ lighting platform and into elevating human well-being and performance, thereby addressing and penetrating the broader lighting retrofit market in a significant and meaningful way.”
Fourth Quarter 2019 Financial Results:
Net sales were $3.5 million for the fourth quarter of 2019. This compares with net sales of $2.9 million in the third quarter of 2019 and $3.1 million in the fourth quarter of 2018. Net sales from commercial products were $2.0 million, or 57.5% of total net sales, for the fourth quarter of 2019, up from $1.7 million, or 59.5% of total net sales, in the third quarter of 2019 and $1.2 million, or 38.3% of total net sales, in the fourth quarter of 2018. The increase was mainly due to new sales to several school districts and colleges, as well as increases in sales of our RedCap™ products. Net sales from military and maritime products were $1.5 million, or 42.5% of total net sales, for the fourth quarter of 2019, up from $1.2 million, or 40.5% of total net sales, in the third quarter of 2019 and down from $1.9 million, or 61.7% of total net sales, in the fourth quarter of 2018. The quarter-over-quarter improvement was due to sales that shifted to the fourth quarter of 2019 due to the budgetary constraints at the Defense Logistics Agency during the third quarter of 2019, and the year-over-year reduction was driven primarily by reduced sales to one large distributor to the Navy.
Gross profit was $1.0 million, or 27.1% of net sales, for the fourth quarter of 2019, including excess and obsolete, and related reserves that reduced gross profit by 214 basis points of net sales. This compares with gross profit of $1.0 million, or 35.3% of net sales in the third quarter of 2019, and $19 thousand or 0.6%, of net sales in the fourth quarter of 2018.
Operating loss was $1.2 million for the fourth quarter of 2019. This compares with an operating loss of $0.8 million in the third quarter of 2019 and an operating loss of $3.0 million in the fourth quarter of 2018.
Net loss was $1.3 million for the fourth quarter of 2019, compared with a net loss of $0.9 million in the third quarter of 2019 and a net loss of $3.0 million in the fourth quarter of 2018. Net loss per share was $0.11 for the fourth quarter of 2019, compared with a net loss per share of $0.08 in the third quarter of 2019 and a net loss per share of $0.25 in the fourth quarter of 2018.
Adjusted EBITDA, as defined under “Non-GAAP Measures” below, was a loss of $1.1 million for the fourth quarter of 2019, compared with a of $0.8 million in the third quarter of 2019 and a loss of $2.5 million in the fourth quarter of 2018.
Full-Year 2019 Financial Results
Net sales were $12.7 million for 2019 compared with $18.1 million for 2018. Net sales from commercial products were $7.9 million, or 62.0% of total net sales, for 2019 compared with $8.7 million, or 47.8% of total net sales, for 2018. Net sales from military and maritime products were $4.8 million, or 38.0% of total net sales, for 2019, compared with $9.4 million, or 52.2% of total net sales, for 2018.
Gross profit was $2.0 million, or 15.5% of net sales, for 2019, including excess and obsolete, and related reserves of $48 thousand that decreased gross profit by 38 basis points of net sales. This compares with gross profit of $3.4 million, or 18.8% of net sales for 2018, including excess and obsolete, and related reserves of $16 thousand that decreased gross profit by 9 basis points of net sales.
Operating loss was $7.0 million for 2019. This compares with an operating loss of $9.1 million for 2018.
Net loss was $7.4 million for 2019, compared with a net loss of $9.1 million for 2018. Net loss per share was $0.60 for 2019, compared with a net loss per share of $0.76 for 2018.
Adjusted EBITDA, as defined under “Non-GAAP Measures” below, was a loss of $5.9 million for 2019, compared with a loss of $7.2 million for 2018.
Cash and restricted cash held in other assets were $0.7 million as of December 31, 2019. This compares with $0.6 million at the end of the third quarter of 2019 and $6.3 million for fourth quarter 2018.
On November 25, 2019, the company sold and issued a $1.257 million promissory note bearing interest at an annual rate of 8% (excluding original issue discount) with a maturity date of 24 months from the date of purchase in a private placement transaction.
Subsequent to year-end, in January 2020, the company completed the issuance and sale of 3,441,803 shares of its common stock to certain institutional investors, at a purchase price of $0.674 per share, in a registered direct offering. The company also sold the same institutional investors unregistered warrants to purchase up to 3,441,803 shares of its common stock at an exercise price of $0.674 per share in a concurrent private placement for a purchase price of $0.125 per warrant. Gross proceeds to the company were $2.75 million. The company intends to use the net proceeds for general corporate purposes.
COVID-19 Impact and First Quarter 2020 Outlook
We are actively monitoring and dynamically assessing and responding to the impact from the ongoing coronavirus (COVID-19) outbreak. To minimize infection risks of our employees and their social and professional contacts, we have activated our COVID-19 Contingency Plan (CPP) that allows employees that could work remotely to do so while implementing strict sanitary and disinfection measures and procedures for our production facility in Solon, Ohio. At this point, we have not seen opportunities lost due to COVID-19 but have started to see some customer lighting retrofit projects being put on hold or postponed. Our near-term sales, mainly those from commercial sectors, could be adversely affected if the current, dramatic slowdown of economic activities continues over an extended period. In addition, potential government regulation mandates could temporarily cause logistics bottlenecks or cease our production operation, and increase the cost of or prevent us from making or shipping products to customers. We aim to update with investors if and when material developments on our business or significant organizational changes transpire due to COVID-19.
At this point, the Company projects first quarter 2020 sales in the range of $3.5 million to $3.6 million, representing sequential growth of 0%-6% compared with the fourth quarter of 2019, and a 13%-16% growth over the first quarter 2019.
Earnings Conference Call
The Company will host a conference call and webcast today, March 19, 2020 at 11 am ET to review the 2019 results, followed by a Q&A session. To participate in the call, please dial toll-free 1-877-451-6152 or international 1-201-389-0879, and referencing the conference ID# 13699827.
The conference call will be simultaneously webcast. To listen to the webcast, log on to it at: http://public.viavid.com/index.php?id=138339. The webcast will be available at this link through April 2, 2020. Financial information presented on the call, including the earnings press release, will be available on the investors section of Energy Focus’ website at investors.energyfocus.com.
Forward Looking Statements:
Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Generally, these statements can be identified by the use of words such as “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could,” “would” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not historical facts and include statements regarding our current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, capital expenditures and the industry in which we operate. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this release. We believe that important factors that could cause our actual results to differ materially from forward-looking statements include, but are not limited to: (i) our need for additional financing in the near term to continue our operations; (ii) our liquidity and refinancing demands; (iii) our ability to obtain refinancing or extend maturing debt; (iv) our ability to continue as a going concern for a reasonable period of time; (v) our ability to implement plans to increase sales and control expenses; (vi) our reliance on a limited number of customers for a significant portion of our revenue, and our ability to maintain or grow such sales levels; (vii) our ability to increase sales by adding new customers to reduce the reliance of our sales on a smaller group of customers, and the long sales-cycle that our product requires; (viii) our ability to increase demand in our targeted markets and to manage sales cycles that are difficult to predict and may span several quarters; (ix) the timing of large customer orders, significant expenses and fluctuations between demand and capacity as we invest in growth opportunities; (x) our ability to compete effectively against companies with lower cost structures or greater resources, or more rapid development efforts, and new competitors in our target markets; (xi) our ability to successfully scale our network of sales representatives, agents, and distributors to match the sales reach of larger, established competitors; (xii) market acceptance of our high-quality LED lighting technologies and products; (xiii) our ability to attract and retain qualified personnel, and to do so in a timely manner; (xiv) the impact of any type of legal inquiry, claim or dispute; (xv) general economic conditions in the United States and in other markets in which we operate or secure products; (xvi) our dependence on military customers and on the levels and timing of government funding available to such customers, as well as the funding resources of our other customers in the public sector and commercial markets; (xvii) business interruptions resulting from health epidemics or pandemics or other contagious outbreaks, such as the recent coronavirus or geopolitical actions, including war and terrorism, natural disasters, including earthquakes, typhoons, floods and fires; (xviii) our reliance on a limited number of third-party suppliers, our ability to obtain critical components and finished products from such suppliers on acceptable terms, and the impact of our fluctuating demand on the stability of such suppliers; (xix) our ability to timely and efficiently transport products from our third-party suppliers to our facility by ocean marine channels; (xx) our ability to respond to new lighting technologies and market trends, and fulfill our warranty obligations with safe and reliable products; (xxi) any delays we may encounter in making new products available or fulfilling customer specifications; (xxii) any flaws or defects in our products or in the manner in which they are used or installed; (xxiii) our ability to protect our intellectual property rights and other confidential information, and manage infringement claims by others; (xxiv) our compliance with government contracting laws and regulations, through both direct and indirect sale channels, as well as other laws, such as those relating to the environment and health and safety; (xxv) risks inherent in international markets, such as economic and political uncertainty, changing regulatory and tax requirements and currency fluctuations, including tariffs and other potential barriers to international trade; and (xxvi) our ability to remediate a significant deficiency, maintain effective internal controls and otherwise comply with our obligations as a public company and under Nasdaq listing standards.
About Energy Focus
Energy Focus is an industry-leading innovator of energy-efficient LED lighting technology. As the creator of the first UL-verified flicker-free LED products, Energy Focus’ products provide extensive energy and maintenance savings, as well as safety, health and productivity benefits over conventional lighting. Our customers serve the commercial, industrial, healthcare, education and military markets.
Energy Focus is headquartered in Solon, Ohio. For more information, visit our website at www.energyfocus.com.