Energy Focus, Inc. (NASDAQ:EFOI), a leader in sustainable and human-centric lighting (“HCL”) technologies, and developer of a range of UV-C disinfection (“UVCD”) products, today announced financial results for its third quarter ended September 30, 2021.
Third Quarter 2021 Financial Highlights:
- Net sales of $2.7 million, a decrease of 53.9% compared to the third quarter of 2020 and an increase of 32.5% sequentially from the second quarter of 2021, reflecting continued fluctuations in timing of military orders and funding availability, and ongoing COVID-19-related business challenges for its customers and logistics delays.
- Loss from operations of $1.8 million, compared to a loss from operations of $1.0 million in the third quarter of 2020 and sequentially to a loss from operations of $2.2 million in the second quarter of 2021.
- Net loss of $1.1 million, or $(0.22) per basic and diluted share of common stock, compared to a net loss of $1.2 million, or $(0.35) per basic and diluted share of common stock, in the third quarter of 2020. Sequentially, the net loss decreased by $1.3 million compared to net loss of $2.5 million, or $(0.59) per basic and diluted share of common stock in the second quarter of 2021.
- Cash of $0.4 million, included in total availability (as defined under “Non-GAAP Measures” below) of $2.1 million, each as of September 30, 2021, as compared to cash of $1.8 million and total availability of $3.5 million as of December 31, 2020.
“Although revenue for the third quarter came in higher than that of the first and the second quarter, we continued to experience a challenging business environment, including delayed military funding and commercial retrofit projects, as well as ongoing logistics and supply chain dislocations for both our military and commercial LED lighting markets,” commented James Tu, Chairman and CEO of Energy Focus, Inc. “Meanwhile, we continued our aggressive transformation to develop breakthrough human-centric lighting technologies and products to differentiate our commercial products and to expand into the consumer market.”
“We recently obtained independent safety certification for our nUVo TM Traveler air disinfection device, an important milestone for these powerful UVC disinfection devices, and inventory samples are under evaluation for final release. We anticipate safety certification for nUVo TM Tower shortly as well,” continued Mr. Tu. “We also recently received third-party validation of our disinfection performances, achieving 94.1%-99.9% pathogen reduction over a half hour in 1,000 cubic feet and 100 cubic feet spaces, respectively. We believe nUVo TM , which is filter-free, chemical-free and portable, is an ideal solution for effective and constant air disinfection in personal and office spaces in a post-COVID world. We expect these products, including the nUVo TM Tower for larger spaces, and the nUVo TM Traveler for in-vehicle and other personal spaces, to be available starting in the fourth quarter 2021.”
“Further, we also expect to launch Suncycle™, our patented circadian lighting control system powered by EnFocus TM , early in 2022, advancing our mission to make homes and offices more comfortable and productive,” added Mr. Tu. “Suncycle™ recently received “Top Product of the Year” award from Environment + Energy (“E+E”) and “Top Ten Must See Product for LightFair 2021” by Edison Report. We believe Suncycle™ has the potential to vastly enhance the indoor lighting experience and improve the quality of sleep, study and work – at home and in commercial spaces, for both retrofit and new construction – by providing high-quality, dimmable, color tunable and autonomous circadian lighting in an affordable, user-friendly and cyber-secure manner with only simple swaps of wall switches and lamps.”
“While our existing military and commercial lighting retrofit customers continue to be affected by military funding fluctuations and COVID related project delays and logistical challenges, we are not waiting for markets to rebound,” concluded Mr. Tu. “Our organization has adapted and innovated to develop unique technologies and intellectual property to address emerging consumer and commercial lighting market opportunities surrounding human wellness, be it UVC disinfection or circadian lighting, in the new post-COVID landscape. We expect these new, broadly impactful products to contribute to our growth in 2022 and beyond.”
Third Quarter 2021 Financial Results:
Net sales were $2.7 million for the third quarter of 2021, compared to $6.0 million in the third quarter of 2020, a decrease of 53.9%. Net sales from commercial products were $1.5 million, or 55.4% of total net sales, for the third quarter of 2021, flat as compared to $1.5 million, or 24.4% of total net sales, in the third quarter of 2020, reflecting the ongoing impact of the COVID-19 pandemic and continued customer interruptions and project delays. Net sales from military maritime products were $1.2 million, or 44.6% of total net sales, for the third quarter of 2021, compared to $4.5 million, or 75.6% of total net sales, in the third quarter of 2020, primarily due to the availability of government funding and the delayed timing of orders, as well as a large military contract fulfilled during the third quarter of 2020. Sequentially, net sales were up 32.5% compared to $2.1 million in the second quarter of 2021, reflecting primarily the timing of delayed orders from the second quarter of 2021 that were pushed into the third quarter of 2021.
Gross profit was $0.6 million, or 20.5% of net sales, for the third quarter of 2021. This compares with gross profit of $1.4 million, or 23.1% of net sales, in the third quarter of 2020. Sequentially, this compares with gross profit of $0.4 million, or 18.9% of net sales, in the second quarter of 2021. Gross margin for the third quarter of 2021 was positively impacted by favorable price and usage variances for material and labor of $0.1 million and inventory reserves recorded of $0.1 million, partially offset by low sales, which impacted our gross profit rate due the impact of fixed costs.
Adjusted gross margin, as defined under “Non-GAAP Measures” below, was 17.9% for the third quarter of 2021, compared to 24.6% in the third quarter of 2020, primarily driven by low sales in the third quarter of 2021 and product mix in the military maritime product sales during the third quarter of 2021 as compared to the third quarter of 2020. Sequentially, this compares to adjusted gross margin of 17.6% in the second quarter of 2021. The increase was primarily driven by higher sales in the third quarter of 2021 over the second quarter of 2021.
Operating loss was $1.8 million for the third quarter of 2021, compared to an operating loss of $1.0 million in the third quarter of 2020. Sequentially, this compares to an operating loss of $2.2 million in the second quarter of 2021. Net loss was $1.1 million, or $(0.22) per basic and diluted share of common stock, for the third quarter of 2021, compared with a net loss of $1.2 million, or $(0.35) per basic and diluted share of common stock, in the third quarter of 2020. Sequentially, this compares with a net loss of $2.5 million, or $(0.59) per basic and diluted share of common stock, in the second quarter of 2021.
Adjusted EBITDA, as defined under “Non-GAAP Measures” below, was a loss of $1.7 million for the third quarter of 2021, compared with a loss of $0.9 million in the third quarter of 2020 and a loss of $2.0 million in the second quarter of 2021. The increased adjusted EBITDA loss in the third quarter of 2021, as compared to the third quarter of 2020, was primarily due to a combination of gross margin reductions from lower sales.
Cash was $0.4 million as of September 30, 2021. This compares with cash of $1.8 million as of December 31, 2020. As of September 30, 2021, the Company had total availability, as defined under “Non-GAAP Measures” below, of $2.1 million, which consisted of $0.4 million of cash and $1.7 million of additional borrowing availability under its credit facilities. This compares to total availability of $4.9 million as of September 30, 2020 and total availability of $4.1 million as of June 30, 2021. Our net inventory balance of $7.8 million as of September 30, 2021, increased $2.1 million over our net inventory balance as of December 31, 2020. This increase primarily relates to global supply chain challenges, which are impacting our inventory purchasing strategy, leading to a buildup of inventory and inventory components in an effort to manage both shortages of available components and longer lead times in obtaining components, as well as reduced sales leading to longer hold times for inventory.
Earnings Conference Call:
The Company will host a conference call and webcast today, November 12, 2021, at 11 a.m. ET to discuss the third quarter 2021 results, followed by a Q & A session.
You can access the live conference call by dialing the following phone numbers:
- Toll free 1-877-451-6152 or
- International 1-201-389-0879
- Conference ID# 13724408
The conference call will be simultaneously webcast. To listen to the webcast, log onto it at: https://viavid.webcasts.com/starthere.jsp?ei=1506371&tp_key=5124b9c4bb . The webcast will be available at this link through November 26, 2021. Financial information presented on the call, including this earnings press release, will be available on the investors section of Energy Focus’ website, investors.energyfocus.com .
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