EFOI - Earnings call transcript Q2 2021

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Operator

Good day, and welcome to the Energy Focus Second Quarter 2021 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Brett Maas. Please go ahead, sir.

Brett Maas

good and operator, you, morning, everyone. Thank

on Chairman and me and Financial the Tod call Executive Tu, Chief James is Officer. Chief President today Nestor, Joining Executive and Officer;

today's These statements from may based everyone begin Before current to the that differ those are I'd The expectations certain statements. make materially or upon remind beliefs. we forward-looking that call, represents we'll company's information stated. like realized results

our attached during call basis. press note Reconciliations please to our the website under in refer most site. adjusted new events the yours. Also, the the on the these risks that adjusted affect Relations or presented to or SEC. For well financial the please of is non-GAAP measures update revise forward-looking GAAP company the in most recently accompanying section the certain any required Risk otherwise, a the forward-looking releases, except available in results this which information, both and undertakes tables future of as in as in the by discussion statements are to the are the as to of energyfocus.com, I'll the that The no on earnings GAAP results headings section statements, of turn call floor our could as law. addition is Factors our results, obligation posted Investor result publicly forward-looking statements XX-Q recent filed now to to at over whether corporate with James, release, and James. XX-K, a in

James Tu

conference our everyone, for morning, Good you Brett. joining you, second earnings quarter XXXX thank call. Thank and

to the conditions have markets our Simultaneously, by logistics significant delays, challenges our challenging the Last, It a be in quarter the quarter funding that our our freight priority and and of new only not in continue second highly we lighting have also building was corresponding we said, under has were commercial our capital military to face orders undercut lost not of due to been key few particularly that commercial XXXX. first results but global occupancy impacted release, during defense for were the perfect also the impacted uncertain beginning have of from and new since caused reduced we of delayed increases As shipment in really availability market, the we believe our least, pursuing. cost. half received delay retrofit not we to the that opportunities by suspended opportunities for the the budget continued margins. Navy, lay sales and business stone out the ongoing customers That or third administration. been budgets. And a the quarter, impacted but earnings the

and pandemic to Focus The paradigm. start lighting optimistic likely normal. Energy could face market buildings until settle In economic and periods overall retrofit continue a the patterns in commercial uncertainty become retrofit demand, might of stabilize lighting And market new new usage a has life time. of this commercial under extended challenges the occupancy grow and of to therefore, impacted adapt and to level again. into we markets, to lockdowns education vaccinations order the that innovate the in continued health As care thing past, and grow has meantime, expand are and to cautiously particularly for

today, systems franchises. We sitting while are address market buildings commercial that Remote few later and primarily including innovative savings over to products commercial develop the variants ultraviolet offices, do have device forward a and in time air technology and personal designs in and our healthier, its blocking are designed to the past These eliminate disinfection all sales for And purifiers, can traditional could designed hybrid developing device patents disinfection patent-pending and market, our Expected proven as many consumer paradigm. growth we markets scientifically in UVC, XX cycle freestanding our many directly autonomous not changes security products, air both to and make as We new and and and steps, plus in to sales rate lighting both well ways into Home well and moved still frequent upcoming In contagious to the personal UV UVC air and up plan industries products at proprietary spaces power or devices. home and and light work our such and sun portable and distributors they technology. leverage Energy September to our by months to aerodynamic as empty tabling and fourth Fast designed labor and as strategized our on filter move are requires destroy were interest homes products filing the providing already on selling coronavirus are that this joyful in improvement, the been UV real XX.X% fiber quickly hospitality, First human-centric Through could energy-focused capture make XX to uniquely the ridesharing, of projects. use to influenza to channel of spending a pathogens. And powerfully costly potential converting improve for start new actively hazardous. more as rates and seeking in pathogens, such meantime, as well. large general low safely high the our have including quarter of new equipment continue feet. lines next the platforms. unlike we believe products retrofit First temporarily tight owners later retailers. through and a that Consumers safer, Energy are of as we us to designs and comfortable. and more and expect months are intercept diversified spending productive, these are, XXX home introducing and devices into and also and our initially are online as financial of UVC partially, now houses surrounding have home as lighting e-commerce disinfection we troffer third-party traveler, UVC nUVo be property parts Many UVC products opportunities. if seen Both offices, come and human-centric offer fueling to advisers, their tenants this require and time or more the not these both and well therefore, largely October, of while temporized and we car to lighting health entering the in of care, as above as businesses virus own square disinfection and our [indiscernible] the nUVo first, the that service off-line more Tower, retail partners, well market our robots, new as through and

or cycle XXXX. products patented and publication cycle in both color fleet controls our risen we to in the particularly its starting level And us It sun improve offerings UV sun productivity proven high-quality the for address whole sure, time. correspond platform, consumer and And the lay and are overall the With products day to XX-hour we circadian award both unexpected overall In with we cycle, control quality that maintenance, that due the said, based military system funding lighting home of to won earlier, the in at into help a lighting will energy the market. line temperature and our and to new I in capabilities. we continuing XXXX results meaningfully is, we new powerful Year homes on environment early not to health order prestigious has use quarter delays mired cycle. we also and forward could the these sun are the planning human contribute the business, Circadian our of believe quarter reported market second lighting well-being, today. bottom and to regardless markets, the financial a circadian addition, still slated of of lines expect months, specific ease quarter To That evening. and installation, that lighting uncertainties delays but the launch guidance. to to in-focused enable in throughout to are not fourth for through life therefore, on beyond. be from out commercial and coming experience provide expand earnings the of and top to efficient, Mining over commercial ongoing when enter whole people pandemic technology that or market autonomous XXXX the that fourth and Product the to bringing and workplaces human circadian to significantly energy our impact we first to cost-effective providing lighting are of position the we human-centric and satisfied a and improve Due our influential staying continues look release, of are described user-friendly E&E,

facility point, the hospitals already sales the gradually the XXXX And building quarter. the to market. will implemented first quarters for turn lighting to second resume our businesses be coming expect the we by programs the breathe utilization, than climate should Schools, financial life call we quarter. review of as gained and to new new believe be leading However, months to second first anticipate the performance the And and than that to better at that to are life energy which government With that, better starting will Tod for daily sales I of recovery will UVC the the as efficiency change Tod? the we this half. products the also be the the for and traction, sales quarter administration current half normal. third overall retrofit accelerate and

Tod Nestor

and XXXX, to quarter million Thank Net decisions the on were sales and XXXX, first and the due decreased military basis. of customers James. continuing the XX.X% project the a education, decreases macroeconomic of both $X.X purchasing to in decreased $X.X sequential because of compared for our commercial slowdown the commercial pandemic. of products sales. sales our by health COVID-XX XXXX down sectors quarter industrial customers' sales of second second delays for of in mainly When to million $X.X Sales delayed net of our XX.X% quarter million to care, commercial in for driven compared you,

network to of delayed COVID-XX XX base. orders. customers for our mainly to of Sales profit declined the quarter was $X.X the second a from million agency or year-over-year. compared availability compared the the the were quarter a $X.X sales total sequential flat commercial total sales in of military our to certain XXXX, Sales company quarter perspective, net reflecting quarter year. compared profit were our to government sales of the mix quarter net quarter $X.X the funding XX also impact and XXXX. for quarter total the of the quarter the total were gross compared as of continued XXXX of decreased again, for representing with of for customer projects total second last top basis, for XXXX, for second gross sales the quarter a decreased sales XX% in XXXX. second second quarter addition, XX.X% sales timing of compared second XX.X% XXXX, and to of our military XX.X% XX.X% $X or lower, second of sales first to the top pandemic products of XX.X% due On $X.X profit our million $X.X of of the of XX% on in from XXXX. net million From million million of to decrease decreased Gross the in In of Sales net $X.X customers second representing to of million million customers for XXXX

of $X compared down XX.X% reflecting XX% As XXXX. for X% the second were to value the quarter prior profit margin and Approximately XXXX down the driven and and of compared the of in compared volume in gross more, mix. $X.X of quarterly gross driven the resulted term. by million quarter by mid-XXs fixed second costs gross in realizable was a to leverage by of XX.X% profit and XX.X% expect inventory quarter $X.X in-transit second lower and or of Also, business to of we driven and and second Adjusting quarter the year profit second by to was million, product be XXXX. in Gross to percentage fixed was XXXX of XXXX XX.X% versus revenue, levels million quarter the margins quarter million, margin a obsolete in to the gross sales continue second the at volume margins to dollars due in quarter profit XX% lost was XXXX, mix. of reserve, first in product the in non-GAAP business costs driven of and gross adjusted XX.X% of net near excess our overall for XXXX. $X.X Due the margins sales our

we percentage depending increased to on mix range the move accompany will valuations. forward, products and XXs begin better sales we we anticipate introduce to and negotiate and As volume as approach sales our inventory pricing we high our new

in XXXX. a in with first share increased XXXX adjusted in is increase operating quarter due efforts. noncash operations a the $X.XX quarter cycle our expenses. of from of shares and for was driven of driven to increase lower which $X.X quarter million EBITDA quarter stock-based growth and EBITDA EBITDA, the for an quarter pretax common XXXX, $XXX,XXX. growth, The from the the we was was second quarter loss gross XXXX million investment a to of Loss as the lower compared were per adjusted the per of the lower loss engineering quarter compared due Operating share million quarter payroll in of stock sequential However, initiatives to the sun of efforts million personnel travel first expenses million we diluted reductions. sales growth loss million was per higher XXXX operating to XXXX, loans a a primarily of X.X XXXX offset the second million $X PPP quarter of XXXX, and in and primarily expenses expenses diluted areas a second loss may attributable to sales of and from second second value shares operations from XXXX. XX.X% loss a $X.X million depreciation sales loss loss and of $X.XX second were X.X of of and margin periods a non-GAAP of -- than the compared or or in quarter in Sequentially, the compares Operating the negative interest product and XXXX quarter this of of reported was a first of quarter fluctuations higher million second and of or by forgiveness The to basic in gross well fully due due the second and on of in net second negative quarter diluted payroll-related reductions gain, in to year future quarter XXXX. fully first million which quarter-to-quarter. On as XXXX. with on of a of inclusive share measure, of basis, liabilities loss of from as to increased incentive first expenses sales X.X negative decrease million of a and expenses and million in the the in warrant EBC million decrease in costs. see of or development-related resulted a to some million stock our XXXX of the on $X.X to $X.X amortization, The XXXX. $X.X of legal important XXXX changes loss $X Adjusted in of $X.X Net the focus XXXX other first the $X.X compared of expenses XXX.X% quarter quarter during and of the increase a for and fair gain of based $X.X for in an loss marketing-related $X.X second in expense for by was excludes per XXXX, diluted loss the margin combination of $X.X expense, $X.XXX by prior $X.X basic of based first for compensation, diluted primarily or million forgiveness PPP loan share of a basic our million quarter

to the Now turn I'd like to sheet. balance

cash XX, $X.X June XXXX. million had of XX, XXXX, $X.X December million. we of As compares This with as of

total additional million million As of availability $X.X XX, March availability company compares of to XX, consisted and of total XXXX. June of $X.X as of $X.X $X.X XX, XXXX, million $X.X of had our million XXXX, the as a of and facilities. credit which total million, availability under of availability borrowing June cash of This

also balance by our financing financing rate million increasing net sheet a million proceeds equity $X.X We the second Overall, with from million. XXXX, capacity bridge line during net quarter $X.X also strengthened our $X.X increasing from of of an liquidity. inventory our credit of proceeds of and while the

capacity the of million second quarter the was our XXXX facilities. credit quarter actual of cash total and a access borrowing than cash looking point availability million much the $X.X the we on a metric of end the at the a the credit borrowings and first of credit relevant at $X.X represents at any facilities net of on As and more facilities under time, the sheet. end balance of is under is availability the Excess XXXX, of availability facilities the end non-GAAP million maximum to debt at our borrowing it measurement simply or given at difference XXXX. balance between $X.X reminder, in quarter Excess our credit our even believe the second

was was of investments. activities. million in million working cash used quarter was to capital Cash activities $X.X in XXXX, financing second and million, we from $X.X which operations $X.X in cash generated operating attributable $XXX,XXX, of the During used

Our of both XX, leading in $X.X components challenges, are an balance in effort shortages of over million, million which manage components times increased impacting noninventory strategy, obtaining June a to relates supply global of XXXX. XX, inventory This of XXXX, to lead and to as chain components. inventory December and purchasing primarily increase inventory $X.X our buildup available longer

accounts by this XX, like June related the With over XXXX, to buildup. XXXX, inventory we would that, $X.X XX, as open to Operator? million call payable increased to primarily balance Our of questions. December

Operator

from Amit question Instructions]. come And will Wainwright. H.C. [Operator the Dayal with first

Amit Dayal

you said which you commercial some from you those some So segment. Can the markets from? got end of some you share in orders saw pickup orders

James Tu

Yes.

As that's seems one be I indicated, the market the school to earlier. recovering

So we delayed in are that into first quarter. quarter and coming the were confident will have quarter seen past those we orders third quarter, that the which the than is be better third the second why

Amit Dayal

from And are -- the else this are the something coming seeing? lighting that for this offering are or you school UV side,

James Tu

earlier. No, fourth -- It no. I the in as start have later we quarter. lighting shipping more impact the meaningful The would started call and in yet, going into October. in a UV September not said And from September expect

Amit Dayal

push seems timing, commercial the your towards your It sector.

the pretty is you anticipating? a the you preventing not Any pressures, be time, more you now? may interest bit on have same there lineup guys strong stronger -- lineup right do you uptake offerings little reasons I of You're of getting or pandemic-related commercial market? mean, is have competitive a bit unlucky traction little the for and timing. in a outside the what any But at with that of that offerings color

James Tu

cheap in soft, the since of you also, has as that Obviously, end question. great market are There and the accelerated whole lot a a whole when are is been looking -- people commoditization that's hit economy. inventory alternatives. demand that market LED the commoditized, the Amit, and COVID very know, for Yes,

marketplace. But sales picking up. quarters, how you we type pressure. of if better it's can we also obviously reorganizing So commercial few just our past that of competitive over It's look the been kind flat. ourselves differentiate have are at definitely And in also the internally we not

leveraging you we in much be of the our focus markets on. will to meantime, our to in are As have said, sort we our into in diversify force and new in how this reorienting like products technologies, diversifying presented you new as focus that recap paradigm is more into know, market the And meantime. sales competitive,

to results the much So And we are both. of few months. very doing the forward we these next looking seeing efforts in are

Amit Dayal

Okay.

sort least at manage the no cost of there cetera, through et need to significant current So is in for cutting, a situation? way

James Tu

Yes.

And structure are introducing our we we company. our per high traded place. the cost don't is we a be new in obviously, That's se. agile in constantly -- to something our definitely not getting really costs. products, cost There that results have And structure. we We're very been have public are distribution we on We like, sales certain if adjusting see look at. working these obviously,

On and in traditional new company, are coming the to products the to stabilized market months military board next few the in other hand, for our these on and significantly preparing the us we recovery markets. see the grow hopefully, commercial with and

Tod Nestor

I'm Amit, bit. going build on just a James' little And comments to

of and and more last areas, very With chunk seeing seeing the and reduced sourcing in we're last that year, pretty the a the we a activities significant of proactive did number took some of expenses. discretionary of pandemic out strategic which year cost slowdown, were the fortunately,

oriented to do before whether product out or testing, you area do increases which the where is sales either new it's is have R&D to of related or see you expense growth, fees bring in So products. you

of are done ahead we've sure very job we every I penny And curve. very spend. conscious we're -- done -- making we where of one that's good So the a of think we've area

Amit Dayal

the Yes, our I you improving to have rather Hopefully, and than out interesting products. cost lot done of really structure a guys know later. you on sooner market bring turns continuing work around situation for on

James Tu

Thank you, Amit.

Operator

with seems question-and-answer that would me, excuse there session. ahead any that Investing. there and go in, question that to Performance Robert a Please, our be management the remarks. been Center like for came conclude conference the to over will closing I turn has for Smith And back recently this from will --

Robert Smith

to get out potential your social use the any guys public Do into new digital media advertising or consciousness? product you

James Tu

in launch plan September definitely will starting our product. that we you be that's the as seeing Yes,

Robert Smith

And would and structure you to in some a roll more and align order Okay. some maybe back of executive to in current line in maybe the compensation shareholders. share consider the of the months X pain kind environment, time, of a other of in relatively business assist so stay the or brief kind period for cost bottom

James Tu

Yes, been them. we and Rob, the don't company not announce new are the it's a our trying We Tod and business results, work. new products, broad that has said, be adjusting to cost the and model if cost. as we as -- months, it just of a be I of in definitely of we've be aspects our many going as structure. in is have cost to to we will compensation, the of definitely I We one If structure, I said, really businesses case. that's diligent think doesn't not readjusted the There this very have are next organizational been And out developed in managing very period. the couple challenging seeing don't

all We are working new products. on these

are continuing We capability. distribution to strengthen our

of growth we'll one this things company. be kind and I'm as largest of third fourth myself cost as are, optimistic happen definitely seeing adjusting said, we So fast structure. from -- start that quarter, we cautiously be of our -- we could like, quarter we as don't beyond. I shareholders the If

So the I shareholders. pain share for

I our potential based off of be add. our and about in as XX the said, paying in Tod reception think to know months has agile. our but I also -- research hit hard. we our I that on the to very put that pretty products, XX are efforts don't anything core this very is new observation stay market, unprecedented over finding we'll But environment should We which reception if retrofit

Tod Nestor

well It's said.

we're ask, shareholders. the a seeing shareholder, I we largest also large the expect. results not fair think I'm it's a And if of one individual

grants, both our of So ship. not us purchased through but

James Tu

Yes. Exactly.

Robert Smith

one mean to are the that and -- this and so my liquidity to possibilities I in interesting have to of the new over was achieve get have potential, significant that. while you CASM, products But Yes. really speak, of view, quite

James Tu

make And working No, carefully, have whole and part speech -- our providers. you liquidity have from multiple his of but ready team no doubt. source I and I been to Tod think grow. company And very our we the liquidity watch and And that we're we losses heard think -- top we're with then be we hitting or changes, and want changes to the in to the next if quarter line make make on see the to targets don't the to have first that us our to we'll help those minimize company. X, sustain something

Operator

the [Operator will Hardy, question from Instruction] Bill come And next investor.

Unidentified Analyst

are of them. My the public? guess, holdup has eventually solved? those how that basic And and you mode question in anticipation into in to And follow-up a distribution into selling is, manufacturing been the type you are products in getting problems new been a manufacture into I these these on what bringing is where products have now some of inventory

James Tu

more at that believe consumers is look the shortcomings there on where purifier air hit development individuals a market, process very it we is look for mean, seek pandemic before very, look reason in at technologies and it's landscape. if engineering are that we for I at whole -- this when and that the small -- safety market nonexistent. that in. Yes, We nUVo almost to a when going we whole competing a us. When we was challenging and product And XX% line pandemic -- this and could that questions. been market, lot focus measures you example, of whole pandemic. businesses resolve niche the with the Good UVC be

X to and products going the put a we products, was problems, months. the happy not we third-party finally, it September question, develop have design. iterations. of And are number reason it mean are where that we multiple, together is are the multiple these to happy manufacture launch yes, to and better. certification have the to so and we point. these we're to on developed, What we we have pretty enough timing cannot products. through or of happy to And say team always but continue are technologies process obviously, the half resolved make ready going delayed we I for more And now about we can through we agencies. to always To and product at right where And are. your expecting very, safety the better and that the second can just product to the we're sell, were I all really we have better, through make features, very are get your product products to of yet, was very ready development we have changes been But much

Unidentified Analyst

Okay.

what the approval? Or So is holdup it... is UL

James Tu

EPL Yes. UL EPL It's is an agency same called not the electronics. consumer popular for that is standard. It's

Unidentified Analyst

Okay.

other do parts access a It's to flow, matter of you products. the you just them... in can have so So make words, making inventory,

James Tu

Yes, start the expecting to get moment we the the are certification. product at shipping we

Operator

would question-and-answer management over to back This session. our will conclude I for remarks. any conference to ahead. like closing Please turn go the

James Tu

participation earnings in our great Thanks, quarterly everyone, call. our a you third for in quarter with forward day. earnings again, XXXX look Have your We call. speaking to

Operator

Thank concluded. today's now attending for you presentation. has conference The

You disconnect. may now

Energy Focus (EFOI) 12 Aug 212021 Q2 Earnings call transcript