Energy Focus, Inc. (EFOI) Q1 2015 Earnings Call Transcript
Published at 2015-05-06 11:00:00
Marcia Miller - Interim CFO James Tu - Executive Chairman Eric Hilliard - President & COO
Bill Hardy - Unidentified Analyst
Welcome to the Energy Focus Conference Call. As a reminder, today’s call is being recorded. And at this time, I would like to turn the conference over to Marcia Miller. Please go ahead.
Thank you. Good morning, everyone and thank you for joining us for Energy Focus First Quarter 2015 Earnings Conference Call. Today James Tu, our Executive Chairman, Eric Hillard, our President and Chief Executive Officer and I will report on our results for the first quarter and 2015. The new releases with our earnings result and our quarterly report filed on Form 10Q has been posted to our website under the investor section. As a reminder today's discussion will include forward-looking statements including predictions, expectations, estimates or other information that might be considered forward-looking. These forward-looking statements are subject to numerous risks and uncertainties. We encourage you to review our most recent filings with the Securities and Exchange Commission, including our 10-K and 10-Qs for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. We are not obligating ourselves to publicly release any revisions to these forward-looking statements in light of new information or future events. Now, I’d like to turn the call over to James.
Thank you, Marcia. Good morning everyone and thank you for your participation in our first quarter 2015 earnings call. In this call I will talk briefly about our overall progress in first quarter of 2015 and Marcia Miller will discuss about our financials in more detail. We will then open up for questions. Quite excited report to you another quarter of rapid growth and equally and possibly our first profitable quarter that took place in the second half of 2014 and in over 10 years. During the first quarter, we continue to [indiscernible] fashion of adoption of our LED lighting products in the [indiscernible] and our commercials sales although [indiscernible] in sales momentum. While we have LED product help grew from 10.5 million in first quarter of 2014 to 10.8 million. Commercial [indiscernible] product sales increase to 87% and 1.2 million to 2.3 million the first quarter of 2015. With sales volume from channels remain robust and the growth from the commercial sales continually effect salary of the rest of the year and [indiscernible] materialized. Operating [indiscernible] gross margin grew from 34% in the last quarter of 2014 and 29% in the first quarter of 2014, 41% during the first quarter of 2015. Subsequently, better margin results of the combination of economy of sales from the higher system and [indiscernible] purchase environment for our primarily product and exceptionally excellent and continuously improvement from labor and logistic efficiency through our production team. We believe that there are very large sales opportunities [indiscernible] worth margin over 35% to meet our long term goal. [indiscernible] for the remainder of 2015. [indiscernible] operating and net income in many year. Through our [indiscernible] achieve this dramatic [indiscernible] by improving growth margin of keeping our August [indiscernible]. Despite our progressive implantation of our [indiscernible]. Also during the quarter, we were able to complete the product development of [indiscernible] in early April and already received tremendous interest through our customers and [indiscernible]. [indiscernible] as also obtained design [indiscernible] complication so you will be eligible for your [indiscernible]. As we said in our April press release we believe that in [indiscernible] will be a game changing product. As you already [indiscernible] is proved product [indiscernible] and this lower sort of [indiscernible]. Effect that we addresses more than one third of the lightning market, over 7% of the business lighting market [indiscernible] or anyone interested in seeing another spending [indiscernible] product please visit us at our [indiscernible] from today May 5th, to May 7th. In addition, we are free from [indiscernible] by the EBIT 24, the one of the [indiscernible]. Our product development matter [indiscernible]. We continuously spend or expect to further elevate the performance and encourages of [indiscernible]. The next generation business platform. And we want to give more products [indiscernible] in the means of our enterprise customers. Overall, Energy Focus is now improving financially developing and trending a rapid year-over-year growth. [indiscernible] our considering growth and profitability [indiscernible] of our unique positioning and [indiscernible] focus from the business arriving market from top of our outstanding [indiscernible] continuous improvement that constituently drive our sales and improve operating efficiency throughout [indiscernible] of our operations. Inception [indiscernible] give us the most inspiring [indiscernible] over the past 18 months, which is why we have successfully deal and suspending low as experimental culture from our permanent a decline organization. And third other spectrum of our continuing expansion rest of these changing and growing LED lighting industry. At this point sales on our current backlog and visible order pipeline. We believe that our record first quarter 2016 results were not be [indiscernible] of trend but it’s not a label quarterly sales trending and [indiscernible]. In time, we continue to focus on raising the trial and setting over higher standard of the excellent the lighting industry. And growing the business over the long-term along with them. And [indiscernible] to say which remain capital of return our long-term annual growth target of 60% [indiscernible] of 2016. I like to turn the call to our Interim CFO, Marcia Miller for more specific on financials after which we’ll be happy to answer any question you might have. Marcia?
Thank you, Jim. As Jim said, we are very pleased with our sales growth and then trying to profitability during the quarter. In the first quarter came out of 16 Energy Focus reported record net sales of $13.1 million and $12.9 million in the prior year third quarter representing an increase of 167% year-over-year sequential increase is very nice in the fourth quarter. As jointly in December [indiscernible] of our business, I like to thank that [indiscernible]. In the third quarter of 2014, we began shifting our focus of raise and providing turnkey solution we can align our new sourcing with developing LED products [indiscernible] government market. In the first quarter of 2015 still the remaining solution base job reported [indiscernible] and with no longer these reporting and severance solutions there. The prior year in the second quarter, we recorded revenue of 2.2 million for the turnkey solution, we excludes this revenue in both period net sales increased $0.686 for the quarter. Growth was driven primarily from sales of our military Intellitub product for the U.S. Navy and made up over 80% of our sales in the second quarter. Significantly growth and our commercial products both from the prior year’s first quarter as well as approximately from the fourth quarter as we continue to build our [indiscernible] . Turning to gross margin we saw 12.2 points improvements in the first quarter, from the prior year to first quarter, this gross margin of 41.1% of net sales is 28.9% of last year. Overall increase in gross margin those are the results of improved operating efficiencies and our supply chain moving economies of sales volume increases higher cost reduction efforts value engineering processes as well as changes in sales mix with turnkey solutions sales to our [indiscernible] . Gross margins in the quarter exceeded our target, while we are please, we don’t anticipate that remaining at our much higher [indiscernible] longer term is a competitive pricing pressure obviously in the commercial and ESCO market when we are expected growth and [indiscernible] partial sales begin to enhance our margin expansion of our overall sales. [indiscernible] try to be the highest performance, lowest costs, highest metric and tubular LED retrofit prior into market and do not complete [indiscernible] but rather on a quarter value provide our customers [indiscernible]. As our sales is changes is when expect gross margins to decrease from [indiscernible] levels. Operating expenses is $1.7 million, $4.2 million report on including approximately 391,000 for severance charge and 2.5 million in the first quarter of 2014. [indiscernible] 3 million of the increase in the higher [indiscernible] expenses primarily to the severance settlement charges I mentioned higher including costs [indiscernible] capital to our growth higher salaries and related benefits those out our current sales force and [indiscernible] . As development and expenses increased $352,000 in the prior year is a higher legal and asset customer fees incurred to our commercial IntelliTube product line we announced in April as well as fixed salaries and related benefits in our investment [indiscernible] technology products. In [indiscernible] release this quarter to first quarter where we have, we were work [indiscernible] from operations [indiscernible] in the second half 2013. The valid customer as we build out and infrastructure that we’ll support our growth and we will continue to add comps with necessary. [indiscernible] to the balance sheet, we ended this quarter with 7.1 million in cash at a credit line borrowing without this statement it was [indiscernible] 2014. We did receive $2.5 million in February and the [indiscernible] more and use that cash [indiscernible] . Our inventory balance did a 10.8 million as quarter end which is increase $3.5 million December 31, 2014. We believe that we have sufficient inventory need our considering growth is not expect [indiscernible] same rate and have book over the past six months continuing growth [indiscernible]. Our accounts receivable is $3.1 million at the end of the quarter same as a year-end. In sales outstanding [indiscernible] improvement 28 days at the end of 2014. For this equity increased $6.8 million during the quarter, $13.5 million into the four exercise and [indiscernible] in the quarter. [indiscernible] start 2015 and we’re trying to start [indiscernible] in the company’s transformation and which began in the second half of 2013 [indiscernible] . Now I’d like to open the call for the questions.
[Operator Instructions] And our first question from Bill Hardy.
Hi greetings from Dallas.
Unidentified Company Representative
[indiscernible] .
So I take greetings from Dallas and I would like to say that with the most fantastic quarter that I have witness in the last five years as a investor in Energy Focus. So you’re much, much to be congratulated on the effort that was put for. My question has to do with the approval by the agencies and Asia and Europe of intelligence similar to the approval that we see in United States. And your release you said that the sales would be U.S. type sales and of course I’m interested and when we’ll get busy on selling to countries outside the United States?
Bill as we announced, I did point out focusing in the U.S. market that’s the best market and we want to be able to concentrate in the U.S. this year. And as you know from our previous presentation there are 2 billion [indiscernible] installing the U.S. and install fitting worldwide and 2 billion [indiscernible] out there as a present [indiscernible] . So we study so many to be anywhere strong as can be very successful this year in the U.S.. And this is all thing we will focused so far. We have been launching next generation of IntelliTube but obviously already in the development. At that point we will be launching IntelliTube [indiscernible] country and we believe therefore most potential for this product and that just [indiscernible] and use it to such as your [indiscernible] or other processes of the world that [indiscernible] place option. Such and we are focusing on the U.S. [indiscernible] of the year and we will selling to very select country [indiscernible].
Okay, thank you. I appreciate your answer.
Thanks I will appreciate.
[Operator Instructions]. There are no further questions at this time. I will turn it back over to our speakers for any additional or closing remarks.
Unidentified Company Representative
Well thanks everyone again for your participation. We look forward to the next quarterly call. Thank you and have a great day.
And that does conclude today’s conference. We thank everyone again for their participation.