Energy Focus, Inc. Q2 FY2022 earnings call

New Product Development - RedCap Emergency Lighting had supply constraints but resolved, with next-gen version expected in a few months. Revamped white caps tubular LED products planned for release this quarter. In-focus control products seeing sales ramp up with dozen customer deployments.

Team Alignment and Execution - Sales team added 4 new agencies, hired Nick Peragine and Steve McGuire for sales and business development, and Bob Smyles for military business. Facility footprint reduced from 110,000 sq ft to 62,000 sq ft, inventory cleaned up, and operating expenses reduced by over 20% from start of year.

Net sales for the second quarter of 2022 were $1.5 million, down 28.6% from Q2 2021. Commercial products accounted for approximately $1 million (65.9% of total net sales), down from Q2 2021. Military net sales declined to $0.5 million from $0.9 million in Q1 2022. Gross profit was $109,000 in Q2 2022, with a gross margin of 7.4% compared to 18.9% in Q2 2021.

- Expect improvements in 3Q and 4Q relative to 2Q, with 70% of Q2 backlog already shipped. Military orders this quarter exceed last quarter's shipments. RedCap sales improving with new stock, and new products like white caps launching later this quarter.

- Supply chain issues from COVID-19 and chip shortages impacting sales and margins. Delayed government funding affecting military product sales.

Q: From a revenue execution perspective, do you feel 3Q and 4Q could start seeing improvements relative to 2Q 2022?

A: Yes, we got a good start with 70% of Q2 backlog already shipped. Military orders this quarter exceed last quarter's shipments, RedCap sales are improving, and new products are launching.

Q: How much was the backlog at the end of 2Q 2022?

A: I don't think we reported that.

Q: How much could investors expect from remaining inventory?

A: We've been reviewing inventory salability and trying to move reserved inventory quickly.

Q: Will operating costs stay at the 20% reduced level or see further cuts?

A: We're focused on continuous cost reduction despite inflation, committed to continuing to reduce cost going forward.