EFOI - Earnings call transcript Q1 2018

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Operator

Good day, everyone, and welcome to the Energy Focus first quarter 2018 earnings call. Today's call is being recorded. At this time, I would like to turn the call over to Michael Port, CFO. Please go ahead.

Michael Port

Thank you, operator. morning. Good for conference the call. you quarter Focus us earnings XXXX joining thank Energy for first And With Chairman, and Chief today Executive me is Officer President. Ted Tewksbury, our XX-Q our The been section. first and news quarter release posted under website to the Investors our have

discussion to are reminder, forward-looking include statements. risks our uncertainties complete subject We or to recent other with these you of our today's most encourage expectations, considered review and stock. forward-looking. actual price statements, filings market affect might and and our differ the our XX-K these information future our XX-Q numerous that factors As be the results risks may predictions, SEC, materially discussion results including These that for estimates will a or including other forward-looking a of from may statements and

are to revisions information release obligating these of ourselves future forward-looking events. We to new publicly light or in any not statements

GAAP, Our be prepared the of this morning Accepted our include non-GAAP impact A non-Generally remarks press release. Principles, morning's this in costs can our measures results. GAAP to these of reconciliation operating explain found restructuring on or Accounting

over Now, the I'd call to like turn to Ted.

Ted Tewksbury III

morning, the for thank And today. call Good you Michael. Thanks, everyone. joining

sales turn growth. employment to XXXX new the the one-year discipline marks in the first the was The of new to quarter A execution anniversary as of products this, the drive year free company resources, company the and board was lacked cash, leadership it my fall, CEO. and in revenue ago, Recognizing brought around. burning through

product the – competitive critical team spending, on LED dealing with of control the elements our year, lighting development, past Over while the three new focused industry. all the sales and new dynamics under has

stabilized are cycles pipeline revenue we The expected transitional $X.X control. revenue product of of underway, design-in the that subject sales follow, profit project pushout is is nearly in previous million a other with precise was new well to quarters. of materialize has timing inflection revenue due albeit a revenue an $X disappointing built. factors a quarter. with as to is point QX elements sales engine flat subsequent and schedules, management's to but were will vagaries approvals, the direct a QX and customer outside the and the are delay. regional The sales roughly retrofit opportunity believe of of these was $X.X million growth Revenue we quarter. force With million company. not at our lighting by lost, Commercial strengthens. This and

our value highest the of MX respectively. our two and to QX, sales highest the value of that since XX% our the XX% of commercial We level up since Military XXXX, verticals, shipped sales education markets flicker-free XX,XXX total quarter-over-quarter. highly $X.X for US million proposition, revenue healthcare XX% For Navy, our Intellitubes represented longest-lifetime, and was XXXX.

prior we quarter already of managers coverage, recently and strong Navy. the berth and sales of comprised growth our quarter. the though continued experienced results. XX% seeing the the the nationwide sales, training globe This the not which of geographies regions first agents total now first agencies. completed, focus and previously as to have consisting unserved fundamental in lights to six to we QX and XX% by also in grow as XX% business – sales We areas revenue underserved of onboarding sales drivers to grew a process previously team over highest the was mid-Atlantic, have, sequentially. been new us experienced serves and – of revenue and Southeast penetration Agency Agency XX – we regional top-tier is expected products. new the in In time, working revenue revenue leading and mid-South agency and Even only are promising Southeast, collectively indicator the five the for the in agency to have the for and first of the generated of sales and quarter, – future end [indiscernible]. growth. XXXX. agencies reach. In enabled sales model on that sales lights grew geographical quarters US is XXX% the sales such important able The In customers, Sales penetrate Northeast, Western critically by increasing regions, Northeast, affirms Western the

RedCap the lighting product RedCap, was backup robust experienced customer front, quarter. its our and product for from installation announced we benefiting we which paradigm the it and savings changing kit demand On pull-through a as new cost of due is game-changing emergency the to with the ease TLED. our are for of also revolutionary is since labor last This sold tubes, enables. Moreover, matched

We to are it a throughout expect still early of RedCap stages be in XXXX. revenue the the and ramp very significant driver

technologies In three introducing week's in at addition Chicago. next to LIGHTFAIR we'll and RedCap, new products be

ballast and double-ended The into new This ten-year industry's without double-ended free bypass flicker tubes. DEBB XX fixtures the minutes In average retrofit reducing technology about be per the TX from XX first multiple slashes to contrast warranty. tubes, steps TX is families, single-ended about deployed is Eliminating fixture, complexity will introduction down need our can to configuration the these technology minutes bypass a plugged including and sockets. thereby of ballast our across the that a be half first product The cost. directly existing DEBB to double-ended or with direct-fit current installation technology. represents time the in replace

a product or easy installation. Our HO new This also TX fast, high second product is for output uses double-ended configuration a Tube.

one LED application, warranty the are is replace HO high-bay time-consuming on of hotel is available order these in rapidly and HO warehouses, the it and lumens The as in where floor which of TX growing ten-year total spaces, maximize high-base vital and reliability output high expands such Energy the and illumination to the into to beam tubes. difficult centers, TX angle intensity conference auditoriums optimizes locations most our Focus' of quality, Our market retrofit segments. lobbies.

on Our family market to solutions or customers the portfolio the tube-based well third that premier believe fixture. because of is technology, replace new a tubes use have LED LED the as directly fixtures to retrofit customer they We offering to chip-on-board as fixtures set offer to or future-proof our Energy a and and The of solution new allow of Many of upgrade construction. today more the addition lamp for mounted product commercial strips offer Focus fixtures industrial a LEDs as change. technology conditions our improves fixtures flexible which extensive comprehensive lighting for use enables applications.

smart of innovator expanding building advance of industry, our the being also product lighting line longest-lifetime, a categories provide The our through for market pulling new mission fixture better to the and customers' our exemplify line product our the by lighting and Focus. available our for product portfolio These diversifying grow tubular They needs connected a and lighting Our our technology stream solutions. flicker-free military-tough, commitment Fixture next-generation sales platform of on top market. will benefit revenue proposition. also continuing sales LEDs. Energy expands our to serve fixtures value solutions provides new existing our available and

and we're quoting we proposition an the job of new performance, a activity working turnaround While QX team and we at product turn track. on of the point financial on our increasing and has This of The to offers. were executing the the the throughout right by disappointed driven where superb confident back already happening, Michael Focus strategy remain is is results. and schedules our in that our Energy and agencies. review continue ordering is the be in and patterns. being sales until sufficient have value sales poised compelling inevitable the products. control, With new timing to to opportunities The thanks fluctuations revenue can smooth grow we project of namely that, our the unpredictable factors revenue XXXX, pipeline customer call to in we believe out the sales our due stabilized nationwide generated to we're spending, that financial to to changes has remainder the by We will opportunities sales done team I'll inflection

Michael Port

net first XX% to $X.X Total Ted. million, were you, first the sales XXXX. Thank quarter quarter of compared up

of commercial to products commercial compares and for of military and XXXX For mix product for and the XX% This XX% sales respectively. sales XX% quarter sales of first sales. quarter, military net a XX% represented

the Net projects later as quarter shipments prepared XXXX. these commercial sales products and on earlier. military in military The quarter commercial XXXX as and our for Ted remarks. the schedules, bids sales XX% military timing decline Intellitube First first discussed compared of satisfy light sales of to and the to provide was bids won fixture more quarter berth I'll strong products Navy. MX these fourth ship We to of XXXX decreased my we in color during US our of customers' continued the installation reflects our

to gross first margin for quarter XXXX. XX% the compared Our first XXXX of quarter XX% was

frankly, margins, margins I'd While we we a our factors experienced quite affecting like expect them gross are important are gross to address. be. a to few There that not year-over-year improvement, our where

US of First, as shipments and I for included first berth quarter MXs, military fixtures our sales Navy. lights previously mentioned, the

contracts pricing better to operating but successfully our bids products. allowed at higher on-hand quarter, and cost implement Winning as these inventory to bids not During on fourth reduction the these of only inventory, order with strategies. margins we positions generate did excess for us potentially aggressive cash these future in efficiency compete liquidate to us we product

military products of with just representing our negatively pricing total overall the especially I net decisions XX% our impacted military in quarter Second, product first of light margin mix, sales, percentage, discussed.

no of experiencing the you Lastly, who market is know LED Focus is industry lighting follow the exception. that pricing Energy pressures. those

in gross unique proposition term. of tubes, technology expect our premium charge value for and longest-lifetime, While percentages our us see superior a short erosion do margin to some our price to military-tough, flicker-free we the allows

As we cost have an product discussed extensive program. calls, implemented in earnings reduction previous

margin tell it's our too on to we positive see However, soon percentages. impact when a will

of total quarter first to quarter XXXX operating $X.X first for million $X.X million were the total XXXX. compared expenses Our operating expenses

of operating adjustments of approximately restructuring in a and $XXX,XXX expenses XXXX XXXX quarter decrease $X.X the year. first million, $XX,XXX representing our income by prior Excluding decreased restructuring XXXX, from XX% in expenses

was Our first quarter compared our we loss first per $X.X million $X.XX per a $X.XX balance net a our or or share cash $X.X million on inventory share. focus XXXX maintained quarter net balances. managing XXXX and of sheet to loss perspective, From

nine first consecutive cash in ended and was first cash than with quarters million. we lowest of of balance the $XX.X Our quarter quarter a operating burn cash $XXX,XXX less consumption our

XX, military balances, our result inventory by of potentially strategy the reduce a inventory December As decreased $XXX,XXX to excess since XXXX. gross

As our commercial with Ted of revenue mentioned are million. earlier, we $X.X disappointed first quarter

the week's leading in the strength indicators encouraged healthcare from underserved and market expected We our unserved revenue LIGHTFAIR. our of growth, and increased now call our of three introduction our markets, however, in products continued questions. into product contribution for technologies are, turn markets next the the I'll operator including penetration channel, resulting the education and by revenue agency development at to new and back activities

Operator

Rusch first Thank you. our Colin We'll Instructions]. question [Operator with Oppenheimer. take from

Kristen Owen

Good This morning. Colin. you our Kristen questions. is on for Thank taking for

Just how just talk rates? with you you agency filling wanted to about mentioned and conversion far the little pipeline a talk pipeline you're business. the seeing that new what as you're can building And out bit about that is as

Ted Tewksbury III

is, it's pipeline than stronger on would The I Sure. say, the ever certainly side, been. commercial

right We at for now, the higher quarter. of is a same first are the list in than time second had opportunities quarter, seeing the we that

the was large opportunities quarters quarter QX, moved but the military some those, the entering we're talked QX, each high we've backlog we QX, then, quarter. due orders. that opportunities drop as one as mirror quarter other. seen the in wasn't strengthening reverse out And two started images of as of seeing to a the the where company progressed. of with strong weakness of the the are saw has it mostly progressed. about out of as of backlog So, at probability the retrofit quarter and We a kind sort high pipeline of we

dramatically. higher we at we we've that the the It's So, time seen at look And dramatically the number number the at we funnel we we tracking time, this opportunities in you that the at of the look the in but past, that year, for better we're for that the has point and of in are entire commercial. got number tracking in for if were funnel don't positioned we've aggregate total just than than that increased number, particularly in QX. same are report broadly, dollars More year.

Kristen Owen

sales the think you And that of the as you cycle seeing are how shorten? on timeframe visibility you on pipeline, about seeing What you the seeing Are trend? timing are that those?

Ted Tewksbury III

that backlog still very We that is That the during than a hasn't This we are with most orders are quarter changed. revenue quarter's XX% [indiscernible]. of less much the business. in received realize typically coverage. quarter ended turns And the the

Kristen Owen

And on Okay. the cash… then,

Ted Tewksbury III

remains But limited. the visibility, unfortunately,

Kristen Owen

you you cash quarter. about manage mentioned working can management, capital, inventory working for through have little some then, that obviously, of the the and in bit opportunities to a to On the capital? you your And working other benefit a expectations you CapEx that year? being that talk Do

Michael Port

Michael. This Sure. is

spend So, as Most a capital-intensive. dollars. we not capital small that is we are company, of very our relatively

to as levers balances. capital, of we new a the manage sure – looking product make inventory working looking different manage opportunity to coincide far We're introductions. that we need to the that inventory development with at opportunistic product manage in we light As can there's inventory have, to push. our for our Especially few opportunities balances – constantly our strategy and opportunities we

for able be us key to focus. a that's to and manage So,

opportunities, we come think our we But do because commercial can't we opportunistically. dwindling I that that to military and the inventory go more manage bid can the most as inventory is are manage But opportunities. processes, have our for as to on balances. some little we they move the extent part, look far they that we so big really As of a pretty can bit

Ted Tewksbury III

increase more past, we things outside go where just of They opportunities. we're opportunities back I the are pipeline, seeing nature. and in If seeing segments, in only the shift to question could in facilities the the in the in that seeing about of in earlier composition include an to quickly pipeline, addition big the education dominated of warehouses, of opportunities of particularly retailers, quantity a but the those retail, the your not traditional healthcare box we've nature

to not ready going pipeline. of hearing So, on the but, diversification names more we be right forward, are about report now, the you'll

Kristen Owen

Thank color. you helpful That's much. Great. so

Operator

go with B. Carter next Driscoll to We'll Riley FBR.

Carson Sippel

pricing commenting Sippel seeing Driscoll. Carson you're pressure Do general on now? right is you Carter headwinds on any This ASP component Hi. or and mind the more pricing that

Ted Tewksbury III

to a love hard erosion. to you I'd quantify. It's be to give able price percentage

a bit us it's that. to early I little to for think do try

of One agencies market benefits the from is getting we that are more intelligence. the we're getting

already before of gross margin we for pricing highest get the numbers. by improvement marketplace. begun and several listened give in But that came aware of of were be you've able those I'm sure products we the think and expense in quarters that, we'll of any earnings call no CEO, our highest to any We a market, you highest had reliability I plan designed the our more was to mentioned achieving on the improve or case, and the that we to you general, the calls As purely In and competitors' market if our the in you're spared well product product we back that. costs. on quality, but In performance, LED erosion in had developed doing of far the I past, our performance as performance. succeeded

out thing semiconductor to don't did cost a first cost so I industry, I'm And our so, that the squeezed. reduction was conscious. margins And of extremely the get program, having launch come

reliability our quality So, being to leader that to is overall in do experiencing. but the erosion performance reduce market maintain of price objective market, commensurate the our the and technology cost is reputation with our the leader we and the and have

Carson Sippel

can but one think you think you time you I and is And well? this the performing overall more sales how reps the know just you. you on transition going earlier, thank if commented Great, assess are

Ted Tewksbury III

Well, think it's going extremely I well.

couple to [indiscernible] quarters and around even reps. mind start that to we came agencies time It started You've year. trained LIGHTFAIR We of from get until QX. hiring of QX the on place. the We've growth end was Took pretty same the and all in keep day hiring in last much in our revenue a didn't reps around QX, got extending by into got agency QX. QX them had XX% to first then

So, in performance. mind, outstanding that's my

the that revenue to of from. contact more more agencies, in $XXX,XXX where accounts Key addition key generate can direct year we also are, we customers. per to think on accounts with the have or shifting we Now, we focusing accounts are are

So, like retrofit Clinics some these the large are of our Cleveland contractors. or LED

we've increased we've accounts largely agencies, over XX. a accounts overall, through so, of result got extraordinarily as increased be you'll agency about has gone to well contacts the the – those the transition key list as And we've hearing of that And year but, progresses, more the well.

Carson Sippel

I'll Great, get thank you. queue. the in back

Operator

ROTH with We'll to Partners. go Capital Craig next Irwin

Craig Irwin

Ted, Chicago. at highlighting week think be customers are was maybe been Most answered focusing are in you what really What LIGHTFAIR most us to your products little be going going to be you you give But, of new Where next already. on? my for a to have color people hoping are going excited? you could do questions

Ted Tewksbury III

Yeah.

remarks, going So, four a the there at lot prepared sure are that Craig, to not LIGHTFAIR I caught receiving that products you basically year. I'm this are but think of attention be

is, first QX. And course, by in industry. customers. enthusiastically It's really been of adopted the just a in RedCap. it's introduced very was RedCap The gamechanger

So, that three And show. got will that just we of at be certainly be products our then, the a we've introducing – simultaneously new LIGHTFAIR. we'll highlight

so-called pull a to of have previous out, it's warranty, interest ten-year bypass. double-ended – double-ended lifetime same of The customers had to the install time. the you to have going tubes, extra receptacles first configuration, because tombstones, so sockets, little to the those has a the to the going In rugged of them being have ten-year enable in But takes great version construction. the flicker-free, pulled ballast That's don't little bit to the plastic be be to out it or doesn't fixture. our which

technology the DEBB installation will the So, greatly time. reduce

of to well you're aware, HO it the lighting provides as the think, high-bay of space. going rapidly great luminance And most floor TX segment topic I The LED is that's of a high-bay on highest of the the so a be, the industry growing. one And interest.

successful going fixture map. So, is, And going to we line very to of be then, a lighting the connected our line an top our that's think, road think for next-generation enabler and is product. be we really

going lot And are expecting a enthusiastic aesthetics. all on. Four So, innovation a new which and products, we are response. very of technology leadership,

Craig Irwin

And once for again the tax Thanks. my again. taking in question. management Thanks quarter Great. impressive really

Ted Tewksbury III

you. Thank

Operator

next to Dayal H.C. We'll Wainwright. go Amit with

Amit Dayal

Thank Ted. morning, Good you.

Ted Tewksbury III

Amit. Hi,

Amit Dayal

my questions Most of been have asked.

pursuing that still ships are pipeline with the et side, the us? the side related in also are navy are cetera, I potentially military On for bases, the there and to we guess, opportunities opportunities or

Ted Tewksbury III

Very of the little for the much was so. a will both the not fixtures tubes. XX,XXX There grow, continue approval And billion very retrofits. with those All that We three particularly QX QX, ship shipped strong a was bit shipped of although was new new there of the $XXX quarter We some budget above. activity ships. the of military much in construction. base ship for believe we to president. by

So, the construction particular, we revenue and a in new future. be expect spot the that in bright ship revenue, the base will

the pretty market. saturating finite $XX as that's we out been existing and we've in remaining of think rapidly past retrofits a far We available clear million ships, sockets a there, remaining the opportunity. as probably that that think about total Now, XXX,XXX there's

So, it's finite.

we opportunities But that actually notice. scramble of the timing. delay for Typically, and granted, process hard Since don't to is coming. actively, recently that And bids probably another then, to will Agency more a We that the going will there there's opportunities. competitors bit some one the they without expect we of it's just Logistics but continue participate a those before typically when do much large all know Defense to it's see those we the forecast solicits were to be bid opportunities.

Amit Dayal

to good hear, That's though. Understood.

the of seen building the seeing or pipeline strength? diversification, On outside traditionally territories have you more revenues where in you are new geographic

Ted Tewksbury III

and of the primarily of Ohio one mentioned success Absolutely. calls And our leading I that, bulk think, company. previous that came is from revenue Texas. were of of indicators the in the model. in Midwest-based I agency the Remember, of past, the one we the a

So, there the of opportunity a was rest in huge country. untapped the

the to Northeast, the the QX the prepared grew Northeast, the the those the as now look from and mentioned at you mid-Atlantic, Southeast, mid-Atlantic QX. regions highest Northeast, the So, – and collectively remarks, then, sorry, West – And mid-South seeing the look at were XXX% I the Western the and in the if just Southeast in quarters. by I'm if five you areas, Western we're the

So, indicators. those are very positive

we that growth off the that small agencies. that a is a seeing think before, really because starting we never those regions base participated are I untapped as of opportunity but to promising Now, grow in very result it's

Amit Dayal

Understood. have. That's I all you. Thank

Michael Port

Thanks, Amit.

Ted Tewksbury III

Thank you.

Operator

in the remarks. turn any additional further queue, the Ted would back for no with I like closing call or And over questions to to Tewksbury

Ted Tewksbury III

you And and your you All the at right. Energy rest Chicago Focus Thanks we LIGHTFAIR operator. Thank at today. you all in will us introduce to enjoy thank very And booth much, show we of joining our be you next hope day. our where innovations. ourselves and for can team see The again product week. new

Operator

This you today's for does We participation. conclude conference. thank your

You may disconnect. now

Energy Focus (EFOI) 6 May 182018 Q1 Earnings call transcript