Energy Focus, Inc. Reports Fourth Quarter and Fiscal Year 2020 Financial Results

Rhea-AI Summary

Energy Focus, Inc. (NASDAQ:EFOI) reported a strong performance for FY 2020, achieving net sales of $16.8 million, a 32.5% increase from 2019. The gross profit margin rose to 30.8%, doubling gross profit to $5.2 million. Operating losses improved to $4.1 million, reflecting a $2.9 million year-over-year improvement. Cash reserves increased to $1.8 million. The company anticipates growth in 2021, driven by new UV-C disinfection products and strong demand in military and maritime sectors.

Positive

• Net sales increased by 32.5% to $16.8 million for FY 2020.
• Gross profit margin improved from 15.5% to 30.8%, with gross profit rising to $5.2 million.
• Operating loss reduced to $4.1 million, showing a $2.9 million improvement year-over-year.
• Cash reserves increased to $1.8 million from $0.4 million in 2019.

Negative

• Loss from operations remains significant at $4.1 million.
• Commercial product sales decreased to $5.4 million, down from $7.9 million in 2019.

Energy Focus, Inc. (NASDAQ:EFOI), a leader in sustainable and human-centric lighting (“HCL”) technologies, and who recently announced development of a range of UV-C disinfection (“UVCD”) products, today announced financial results for its fourth quarter and fiscal year ended December 31, 2020.

Full Year 2020 and Subsequent Business Highlights

• Net sales of $16.8 million, up 32.5% from 2019
• Gross profit margin of 30.8%, up from 15.5% last year; gross profit more than doubled to $5.2 million from $2.0 million
• Loss from operations of $4.1 million, a year-over-year improvement of $2.9 million
• Cash of $1.8 million as of December 31, 2020 compared to $0.4 million as of December 31, 2019
• Subsequent to year-end, $0.8 million Paycheck Protection Program loan was forgiven

“Fourth quarter 2020 results reflect the cyclical slowness in our military and maritime business, as well as the broad impact of the COVID-19 pandemic on our commercial business, general shipping cost increases and supply chain disruptions,” commented James Tu, Chairman and CEO of Energy Focus. “For full year 2020, despite the unprecedented headwinds we encountered for our commercial business due to the pandemic, which dramatically slowed down lighting retrofit activities, we continued to improve our operational and financial performance, significantly growing our military and maritime business, while increasing our gross margin percentages and reducing our operating losses, all while still strengthening our balance sheet and liquidity.”

“We entered 2021 poised for exciting growth, driven particularly by our commercial lighting business and the forthcoming UVCD product lines,” continued Mr. Tu. “The overall customer reaction to our new family of patent-pending EnFocus^TM lighting control platform has been quite positive and enthusiastic, and we significantly strengthened our sales and marketing organizations that resulted in an expanded distribution network with new agency and channel partners. These developments give us optimism and confidence for our growth prospects as the reopening of the economy accelerates throughout 2021.”

“Meanwhile, our portfolio of germicidal UVCD products, with advanced, patent-pending technologies designed to destroy over 99.9 percent of various pathogens, including coronavirus and influenza, are garnering significant commercial interest,” Mr. Tu added. “In addition, our recently developed robotic UV-C surface disinfection services, mUVeCrew, is now being piloted at potential customer sites. We believe that these innovative and unique products and solutions, currently being finalized and will start deliveries later in second quarter of 2021, will help people and organizations return to normal social activities through effective and powerful disinfection capabilities. They also open up a completely new, emerging and potentially large market that could propel our growth in the coming quarters and likely years.”

“We are particularly grateful for the tireless efforts and contributions from our employee team members, the proactive collaborations from our suppliers, and continued business from our customers during the past year as we navigated through the COVID-19 pandemic,” concluded Mr. Tu. “We believe that our rapidly expanding human-centric lighting product offerings - ranging from flicker-free, high-quality LED lamps and modular fixtures, to EnFocus^TM dimmable and color tunable control systems, as well as our comprehensive, cutting-edge UVCD solutions - represent the most advanced and sustainable lighting product portfolio in the marketplace today that optimizes financial, environmental and human impacts, and we are aiming to achieve a breakout year in 2021 as the macro-economic environment improves and the adoptions of our existing and new products expand in meaningful ways.”

Full-Year 2020 Financial Results

Net sales were $16.8 million for 2020, compared with $12.7 million for 2019. Net sales from commercial products were $5.4 million, or 32.1% of total net sales, for 2020, compared with $7.9 million, or 62.0% of total net sales, for 2019. The decrease in net sales of commercial products reflects fluctuations in the timing, pace and size of commercial projects, including impacts of the COVID-19 pandemic. Net sales from military and maritime market (“MMM”) products were $11.4 million, or 67.9% of total net sales, for 2020, compared with $4.8 million, or 38.0% of total net sales, for 2019. In addition to new contracts awarded and in-house sales growth in 2020, MMM sales were lower in 2019 primarily due to two of our products that were pending evaluation by government procurement authorities.

Gross profit was $5.2 million, or 30.8% of net sales, for 2020, compared with gross profit of $2.0 million, or 15.5% of net sales for 2019. The year-over-year increase in gross margin was driven primarily by sales product mix, the margin impact from increased MMM product sales, favorable price and usage variances for material and labor of $0.9 million, or 5.5% of net sales, and favorable inventory reserve adjustments of $0.6 million, or 3.7% of net sales, which more than offset unexpected additional manufacturing costs due to supply chain challenges relating primarily to MMM products. Adjusted gross margin, as defined under “Non-GAAP Measures” below, was 27.1% for full-year 2020, compared to 15.9% in the prior year.

Operating loss was $4.1 million for 2020. This compares with an operating loss of $7.0 million for 2019.

Net loss was $6.0 million for 2020, inclusive of a $1.1 million non-cash, pre-tax loss resulting from the revaluation of the warrant liability, compared with a net loss of $7.4 million for 2019. Net loss per basic and diluted share of common stock was $1.83 for 2020, compared with a net loss per basic and diluted share of common stock of $2.99 for 2019.

On December 22, 2020, all warrant holders agreed to a modification of certain of the terms of their warrants that qualified the warrants for equity accounting. At that time, the liability relating to the remaining 467,306 warrants was fair-valued with the offsetting adjustment recorded in income. The $1.4 million warrant liability was then reclassified into equity and the warrants are no longer subject to re-measurement at each balance sheet date. As a result, beginning with the first quarter of 2021, the Company’s Statement of Operations will no longer include fair value adjustments for the warrants and the Company’s net income will not be subject to volatility resulting from those adjustments.

Adjusted EBITDA, as defined under “Non-GAAP Measures” below, was a loss of $3.5 million for 2020, compared with a loss of $5.9 million for 2019.

Cash was $1.8 million as of December 31, 2020 as compared to $0.4 million as of December 31, 2019. As of December 31, 2020, the Company had total availability, as defined under “Non-GAAP Measures” below, of $3.5 million, which consisted of $1.8 million of cash and $1.7 million of additional borrowing availability under its credit facilities. This compares to total availability of $1.9 million as of December 31, 2019.

Fourth Quarter 2020 Financial Results:

Net sales were $3.7 million for the fourth quarter of 2020, up 6.1% compared with $3.5 million in the fourth quarter of 2019. Net sales from commercial products were $1.1 million, or 30.8% of total net sales, for the fourth quarter of 2020, down from $2.0 million, or 57.5% of total net sales, in the fourth quarter of 2019. The decrease was mainly due to fluctuations in the timing, pace, and size of commercial projects, including impacts of the COVID-19 pandemic. Net sales from MMM products were $2.6 million, or 69.2% of total net sales, for the fourth quarter of 2020, up from $1.5 million, or 42.5% of total net sales, in the fourth quarter of 2019. MMM sales were lower in the fourth quarter of 2019 primarily due to two of our products that were pending evaluation by the Defense Logistics Agency, during

FAQ

What were Energy Focus's net sales for FY 2020?

Energy Focus reported net sales of $16.8 million for FY 2020, a 32.5% increase from 2019.

How did Energy Focus's gross profit margin change in 2020?

The gross profit margin improved to 30.8% in 2020, up from 15.5% in 2019.

What is Energy Focus's outlook for 2021?

Energy Focus is optimistic about growth in 2021, driven by new UV-C disinfection products and strong performance in military and maritime sectors.

What was Energy Focus's operating loss in 2020?

Energy Focus reported an operating loss of $4.1 million for 2020.

How much cash did Energy Focus have at the end of 2020?

As of December 31, 2020, Energy Focus had cash reserves of $1.8 million.