Energy Focus, Inc. (NASDAQ:EFOI) Q2 2019 Earnings Conference Call - Final Transcript

Sep 13, 2019 • 11:00 am ET


Energy Focus, Inc. (NASDAQ:EFOI) Q2 2019 Earnings Conference Call - Final Transcript


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Tod Nestor

other significant balance sheet changes from period to period you see on the earnings release are because of our adoption of the new standard for lease accounting.

The Company has a very high sensitivity regarding its liquidity and monitors it constantly and very closely. We have already described our concept of net cash and net debt to you. We also measure, monitor and assess our availability under our credit line with our financial institution to ensure we have adequate availability.

Finally, James and I are actively pursuing financing options on an as favorable terms as possible to strengthen our balance sheet and provide additional funding for the relaunch strategy. There is no guarantee we're going to obtain financing, but we are optimistic that the relaunch strategy is being well-received and as importantly, well executed to allow the Company to reach its potential.

Very quickly, given our use of imports from China, I quickly, wanted to address tariffs. We continue to be able to not have tariffs substantially impact our financial results through mitigation plans we have implemented and have not yet needed to pass along the minimum level of tariffs we have incurred to our customers. Our contingency planning includes the consideration of supply chain options outside of China. We will continue to monitor the impact of tariffs closely and respond accordingly. Also, given our very low failure rates, we continue to be able to afford our 10-year warranty for our tubes and afford it financially.

Lastly, I would like to begin providing some basic guidance with this first earnings call. I'm going to start with some basic guidance around sales and eventually expand to further guidance in the future as we gain further comfort with the business, the relaunch plan, and the processes and systems to forecast the business beyond milestones and provide guidance in terms of more detailed financial expectations.

For the third quarter of fiscal 2019, we are seeing our relaunch program begin to gain traction with some of our long term customers returning to Energy Focus, other customers buying additional product, as well as some success with new customers in our higher education sector. In addition, we are beginning to see more meaningful traction with our RedCap products, which we believe has tremendous potential.

These new opportunities and contracts under the relaunch efforts can take a few months to come to fruition, so we don't expect them to materially impact our Q3 sales results, which James has mentioned and would likely be in the ballpark of Q2 sales. While we'd like to caution our listeners that our quarterly sales are still somewhat unpredictable due to potential order swings and the specific timing and the impact of our relaunch efforts, we do expect to start seeing sequential growth and bottom line improvement beginning with quarter four this year and onward.

With that, we'd like to open up the call to questions.