Energy Focus, Inc. Reports Second Quarter 2017 Results
SOLON, Ohio, Aug. 09, 2017 (GLOBE NEWSWIRE) — Energy Focus, Inc. (NASDAQ:EFOI), a leader in LED lighting technologies, today announced financial results for the second quarter ended June 30, 2017.
Second Quarter 2017 Financial Summary
- Net sales for the second quarter of 2017 of $6.0 million, consisting of $5.2 million in commercial and $0.8 million in military maritime sales, compared to $7.1 million, consisting of $3.3 million in commercial and $3.8 million in military maritime sales in the second quarter of 2016.
- Gross profit was $1.5 million or 25.0 percent of net sales for the second quarter compared to $2.5 million or 35.4 percent for the second quarter of 2016.
- Second quarter 2017 operating expenses of $4.6 million compared to $6.4 million in the second quarter of 2016, or, excluding restructuring costs, of $3.5 million compared to $6.4 million.
- Recognized $1.1 million in restructuring costs, principally related to office lease obligations and severance and related costs.
- Second quarter net loss was $3.1 million, or a loss of $0.26 per diluted share, compared to a net loss of $3.9 million, or a loss of $0.34 per diluted share in the prior year’s quarter.
Ended the quarter with $13.5 million in cash and no debt on the balance sheet.
Second Quarter 2017 Corporate Highlights
- Net sales for the second quarter of 2017 were $6.0 million, a 46% quarter-over-quarter increase from first quarter 2017 net sales of $4.1 million.
- Net commercial sales for the second quarter of 2017 of $5.2 million, representing the highest quarterly commercial sales in six consecutive quarters.
- Gross profit percentage of 25.0 percent was an improvement of 11.3 percentage points from the first quarter of 2017.
- Second quarter 2017 operating expenses, excluding restructuring costs, of $3.5 million represents a $0.9 million reduction from the first quarter of 2017 and the lowest operating expense level since the fourth quarter of 2014.
- Cash used in operations for the second quarter of 2017 of $1.5 million, a $0.1 million improvement from the first quarter of 2017 and the lowest operational cash consumption for the previous five consecutive quarters.
- Reduced gross inventory values by $1.8 million from December 31, 2016.
- Signed nine sales agents, increasing sales channel penetration in the Northeastern,
Southern, Southwestern and Western regions of the United States.
As previously announced, the Company implemented a restructuring initiative during the first quarter of 2017 with a goal of reducing annual operating costs from the 2016 levels. As of June 30, 2017, the Company had substantially completed its restructuring initiatives, which included a workforce reduction of approximately 28 percent and the closure of its offices in New York, New York, Arlington, Virginia and Rochester, Minnesota. Through June 30, 2017 the Company recognized $1.7 million in restructuring expenses, principally related to facilities costs related to the remaining lease obligations for the former New York and Arlington offices and severance and related benefits. We expect to incur an additional $0.1 million in additional restructuring charges over the life of the remaining lease obligations which extend through June 2021.
Dr. Ted Tewksbury, Chairman, Chief Executive Officer and President, commented, “Q2 was a quarter of solid execution. All of our key financial metrics — revenue, gross margin, operating expenses, inventory levels and cash consumption — are moving in the right direction. We made significant strides in building out our nationwide network of sales agents and channel partners, greatly expanding our geographical coverage and customer reach. In addition, we overhauled our product pipeline to provide an engine for longer term growth. While this is only the first full quarter of a multi-quarter turnaround, I am confident that this level of consistent and disciplined execution, quarter after quarter, will enable us to return the company to sustained, profitable revenue growth.”
Net sales of $6.0 million for the second quarter of 2017 decreased 15.6 percent compared to the second quarter of 2016 principally due to lower military maritime product sales, partially offset by an increase in commercial product sales. Net sales of our commercial products increased 56.9 percent compared to the second quarter of 2016, reflecting strengthening sales in our targeted vertical markets. Net sales of our military maritime products decreased 78.2 percent, primarily due to our distributor’s ability to satisfy U.S. Navy demand for our products out of their existing inventory balances.
Gross profit was $1.5 million, or 25.0 percent of net sales, for the second quarter of 2017, compared to $2.5 million, or 35.4 percent of net sales for the second quarter of 2016. The decrease in gross profit was due primarily to lower sales and product mix. The decrease in gross profit as a percentage of sales is primarily the result of lower volumes in 2017, unfavorably impacting our manufacturing and overhead absorption, and product mix, as the military maritime products sold in the second quarter of 2016 generally had a higher gross margin. Additionally, due to the cost of inventory balances on hand at December 31, 2016 and the purchase commitments for product we received in early 2017, we were not able to realize the benefit of our inventory cost reduction strategy during the second quarter of 2017. Based on anticipated demand, we expect to deplete this higher cost inventory during the remainder of 2017 and replace it with lower cost product.
As a result of our restructuring efforts, we recorded restructuring expenses totaling approximately $1.1 million during the three months ended June 30, 2017, primarily comprised of approximately $0.8 million in facilitates costs related to the remaining lease obligations for the former New York, New York and Arlington, Virginia offices, $0.1 million for severance and related benefits and $0.2 million in other restructuring related costs.
Operating loss, loss from continuing operations and net loss was $3.1 million for the quarter, including a $1.1 million restructuring charge, or negative $0.26 per share, compared to operating loss, loss from continuing operations and net loss of $3.9 million, or negative $0.34 per share, in last year’s same period.
At June 30, 2017, our cash and cash equivalents balance was $13.5 million, compared to $16.6 million at December 31, 2016. Net cash used in operating activities of $3.1 million in the first half of 2017 resulted from the net loss, adjusted for non-cash items, including: depreciation and amortization, stock-based compensation, and the adjustment to the excess inventory reserve; and changes in working capital.
Dr. Tewksbury concluded, “We are excited and energized with the progress we’ve made on our previously announced turnaround strategy and our vision of being the leader in smart LED retrofit solutions. With our cost structure reduced and expenses under tight control, our return to profitability now depends on top-line growth. While short term revenue visibility remains limited, we are confident that we now have the right cost structure, the right product strategy and the right sales organization to generate profitable revenue growth in 2018 and beyond.”
2017 Business Outlook:
Given the continuing quarterly volatility in military maritime sales and the timing uncertainty in commercial sales growth, it is challenging for us to provide quarterly revenue guidance at this time. Our focus is to control our operating costs, so that we can reach our goal of returning to profitability in 2018. Once our revenue achieves a more predictable growth rate, we will provide further guidance.
About Energy Focus
Energy Focus is an industry-leading innovator of energy-efficient LED lighting technology. As the creator of the first UL- verified low-flicker LED products on the U.S. market, Energy Focus products provide extensive energy and maintenance savings, and aesthetics, safety, health and sustainability benefits over conventional lighting. Our customers include U.S. and foreign navies, U.S. federal, state and local government, healthcare and educational institutions, as well as Fortune 500 companies.
Energy Focus is headquartered in Solon, Ohio, with a product development center in Taipei, Taiwan. For more information, visit our website at www.energyfocus.com.