Energy Focus beats by $0.04, misses on revenue
Nov. 8, 2017 8:04 AM ET|By: Mohit Manghnani, SA News Editor
Energy Focus (NASDAQ:EFOI): Q3 EPS of -$0.15 beats by $0.04.
Revenue of $5M (-39.5% Y/Y) misses by $1.24M.
Energy Focus, Inc. Reports Third Quarter 2017 Results
Wed November 8, 2017 8:00 AM
SOLON, Ohio, Nov. 08, 2017 (GLOBE NEWSWIRE) -- Energy Focus, Inc. (EFOI), a leader in LED lighting technologies, today announced financial results for the third quarter ended September 30, 2017.
Financial Summary:
Net sales for the third quarter of 2017 of $5.0 million compared to $8.3 million in the third quarter of 2016.
Gross profit was $1.1 million or 22.7 percent of net sales for the third quarter compared to $3.1 million or 37.3 percent for the third quarter of 2016.
Third quarter 2017 operating expenses of $2.9 million compared to $6.2 million in the third quarter of 2016.
Third quarter net loss of $1.8 million, or loss of $0.15 per diluted share was the lowest net quarterly net loss in six consecutive quarters and a quarter-over-quarter improvement of $1.3 million or $0.11 per share from the second quarter of 2017.
Gross inventory values decreased by $3.3 million from December 31, 2016, an additional decrease of $1.5 million from the second quarter of 2017.
Cash used in operations for the third quarter of 2017 of $1.5 million marked the seventh consecutive quarter of lower cash consumption.
Ended the quarter with $11.9 million in cash and no debt.
Achieved national sales coverage with the signing of an additional 12 Sales Agents and the hiring of five experienced Regional Sales Managers to manage our Agency network.
Dr. Ted Tewksbury, Chairman, Chief Executive Officer and President, commented, “I’m very pleased with the progress our team has made to date on our turnaround. In Q3, disciplined cost management enabled us to keep operating expenses at their lowest level in 11 quarters and we are on track to achieve $8 to $9 million in year-over-year cost reductions. As a result, despite lower revenue and gross margin, our net loss was the lowest it has been in 6 quarters. Our military revenue grew sequentially by 27% and our commercial revenue, while down sequentially, increased year-over-year by 10% through the first 9 months. In addition, we continued to transition our sales team to establish national coverage with five newly-hired expert regional sales managers, with an average experience in the lighting industry of 20 years, and added another 12 top tier sales agents, bringing out total Agency network to 21. We now have a nationwide sales force with the ability and experience to expand our customer reach and drive top-line growth starting in Q4.”
Financial Results:
Net sales of $5.0 million for the third quarter of 2017 decreased 39.5 percent compared to the third 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 9.5 percent compared to the third quarter of 2016, reflecting strengthening sales in our targeted vertical markets. Net sales of our military maritime products decreased 77.3 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 $1.1 million, or 22.7 percent of net sales, for the third quarter of 2017, compared to $3.1 million, or 37.3 percent of net sales for the third 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 third quarter of 2016 generally had a higher gross margin. Additionally, the Company’s margins were lower than expected as the average cost of inventory on hand was higher than expected due to quantities purchased in 2016 and purchase commitments for product received in early 2017 to satisfy anticipated demand which did not materialize through the first six months of 2017. Based on demand during the three months ended September 30, 2017 and through disciplined purchasing activities, we depleted the majority of this higher cost inventory during the third quarter of 2017.
During the third quarter of 2017 we recorded net restructuring credits totaling approximately $0.2 million, primarily related to a reduction of $0.3 million related to the revision of our initial estimates of the cost and offsetting sublease income for the remaining lease obligations for the former New York, New York office. The sublease agreement was finalized in October 2017. This reduction was partially offset by the reclassification of other expenses primarily for legal costs related to the restructuring actions totaling approximately $0.1 million.
Operating loss, loss from continuing operations and net loss was $1.8 million for the quarter, or a loss of $0.15 per share, compared to operating loss, loss from continuing operations and net loss of $3.2 million, or a loss of $0.27 per share, in last year’s same period.
At September 30, 2017, our cash and cash equivalents balance was $11.9 million, compared to $16.6 million at December 31, 2016. Net cash used in operating activities of $4.7 million in the first nine months of 2017 resulted from the net loss, adjusted for non-cash items, including: depreciation and amortization, stock based compensation, the adjustment to the excess inventory reserve, and changes in working capital.
Dr. Tewksbury concluded, “When I started as CEO last February, I announced three priorities: First, reduce costs to slow our cash burn and accelerate time to break even, which we have done. Second, put in place a nationwide sales network to drive top line growth, which we have done. Third, build a new product engine that will continuously generate innovative products to grow revenue and profits over the long term, which is an ongoing initiative. We are already seeing increased quoting activity and the first orders from our new sales agents and expect to see their first revenue contributions in the fourth quarter, ramping into 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.
