NASDAQ:EFOI Energy Focus Q2 2023 Earnings Report $1.75 +0.06 (+3.55%) Closing price 05/2/2025 03:49 PM EasternExtended Trading$1.80 +0.05 (+2.91%) As of 05/2/2025 05:09 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings History Energy Focus EPS ResultsActual EPS-$0.42Consensus EPS -$0.49Beat/MissBeat by +$0.07One Year Ago EPSN/AEnergy Focus Revenue ResultsActual Revenue$1.06 millionExpected Revenue$1.25 millionBeat/MissMissed by -$190.00 thousandYoY Revenue GrowthN/AEnergy Focus Announcement DetailsQuarterQ2 2023Date8/10/2023TimeN/AConference Call DateThursday, August 10, 2023Conference Call Time7:00AM ETUpcoming EarningsEnergy Focus' Q1 2025 earnings is scheduled for Monday, May 12, 2025, with a conference call scheduled at 7:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Energy Focus Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 10, 2023 ShareLink copied to clipboard.There are 3 speakers on the call. Operator00:00:02Greetings. Welcome to the Energy Focus, Inc. 2nd Quarter 2023 Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Operator00:00:19As a reminder, this conference is being recorded. At this time, I would like to hand the call over to Leslie Matt, Chief Executive Officer, thank you. You may begin. Speaker 100:00:29Thank you, operator, and good morning, everyone. Before we begin today's call, I'd like to remind everyone that we will make certain forward looking statements. These statements are based upon information that represents the company's current expectations or beliefs. The results realized may differ materially from those stated. For a discussion of purposes risks that could affect our results, Please refer to the section under the headings Risk Factors as well as forward looking statements in our most recent 10 Q filed with the SEC. Speaker 100:00:59The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by law. Also, please note that during this call and in the Now to the presentation of our Q2 results. I am turning the bend in the home stretch of my 1st full year as CEO of Energy Focus, and I have not lost sight on my main objectives concerning the organization. The company has been feverishly working towards getting back to inventory position and massive cost cutting and rightsizing that pushed the company forward. Although there is still a long way to go, I believe that the Q2 of 2023 results that I am sharing today are showing progress towards an increase in sales, improving margin, all while controlling costs. Speaker 100:02:17I continue to work towards improvement, but significant progress in the core markets we serve is a slow and steady race. I continue to drive the organization to align with much higher goals and today's results show improvement towards a better version of EFOI. First, I do want to address the non compliance with NASA continued listing requirements that had previously been disclosed. As of July 27, 2023, the company received written notification from the NASDAQ staff stating that the company has regained compliance with the bid price rule and the minimum stockholders' equity rule. The work that was done to improve the balance sheet early in the year coupled with the reverse stock Split that was approved at the Annual Meeting of Shareholders allowed the organization to regain compliance. Speaker 100:03:05We continue to believe that the liquidity offered Sales for the 2nd quarter continue to lag from my long term expectations for the business. We have shown a slight improvement over the previous quarter. However, Timing of orders and expected inventory did delay some of our anticipated Q2 revenues into the second half of the year. Nevertheless, the smaller sales force has continued to build the backlog of orders on both the military and commercial sides of our business in addition to generating a larger pipeline of revenues for the future. IDEX continues to monitor and adjust our sales model to ensure that Company can service our existing customers while looking to expand our base and overall revenue. Speaker 100:03:54I'm happy to report that Randy Yiannis, A seasoned member of the Energy Focus team behind the scenes will be taking an active role on our sales force. Randy brings And not only a wealth of operations and product experience from being an integral member of the EFOI team for the last 3 years, that has also held various sales related roles, including owning his own lighting sales agency prior to joining Energy Focus. I'm truly excited to see how our combined experience can drive the company to the next level. Our fresh stock of REDCap, our emergency backup LED tube product began to arrive in late Q2. This popular product for the company has faced significant supply chain challenges, and we look forward to supporting healthy stocking levels on this product moving forward. Speaker 100:04:45Additionally, our power line control and focus switches have faced component supply issues that we believe we have worked through and we will be able to drive additional demand in the future periods. Fresh stock is now arriving regularly, and we believe we are better positioned for growth in the second half of the year. We continue to focus on product expansion in both lighting, control and energy solution products that will drive revenues within our current market segments. We look forward to sharing new product announcements and timing on availability as we move forward. I am determined to drive this organization forward. Speaker 100:05:27This quarter is showing the beginning signs of the positive improvement Towards revenues and increased margins. Although there is still a lot of race left to run, I believe we have learned how to get out of the gate and run forth a brighter future. Let me now review our Q2 financial results. We had net sales of $1,100,000 for the Q2 of 2023, a decrease of 29 Perfette compares to sales of $1,500,000 in the Q2 of 2022. This is driven by lower sales volume on the commercial side. Speaker 100:06:042nd quarter 2023 net sales of military products were $613,000 which is a $107,000 increase over the Q2 of 2022. Military related sales were flattened compared to the 1st quarter. Military related sales have rebounded since the 3rd and 4th quarters of 2022. However, delays in the supply chain have pushed out some of the revenues originally anticipated in the Q2 for military until later this year. Sales of our commercial products were approximately $442,000 or 42 percent of total net Sales for the Q2 of 2023, down $533,000 as compared to the Q2 of 2022. Speaker 100:06:53Commercial sales increased $121,000 over the prior quarter on a sequential basis. Volatility in our Supply chain continues to be reflected in these results as we are primarily selling through on hand legacy inventory. Higher margin proprietary products like REDCap Arrived late in the quarter, sales and new customer purchase orders for Redcat and add on purchases increased immediately upon the Redcat's arrival. Gross profit for the Q1 of 2023 was $179,000 compared to gross profit of $109,000 in the Q2 of 2022. Sequentially, gross profit improved by $162,000 from the Q1 of 2023. Speaker 100:07:40As a percentage of revenue, gross margin was 17% in the 2nd quarter of 2023 compared to 7% in the Q2 of 2022. The period over period increase in gross profit was driven mainly by a favorable impact from lower fixed costs of $200,000 or 15% of net sales. As compared to the Q1 of 2023, gross margin rebounded significantly from 2%, primarily due to improved Sales and product mix, along with a favorable impact from the change in inventory reserves due to orders received during the Q2 of 2023, which we expect to fulfill during the Q3 of 2023. Adjusting gross profit margins Excess and obsolete in transit and net reliable value inventory reserve and scrap and write offs related to our inventory reduction projects contributed to the non GAAP adjusted gross profit of 7% for the Q2 of 2023 compared to a gross loss of 5% in the Q2 of 2022. Sequentially, adjusted gross profit improved compared to an adjusted gross loss of 1% in the Q1 of 2023. Speaker 100:08:58Operating expenses in the Q2 of 2023 were $1,300,000 compared to $2,300,000 in the The decrease is primarily attributable to lower SG and A expenses due to a significantly decreased payroll and payroll related expenses. Sequentially, operating expenses were flat as compared to the Q1 of 2023. Loss from operations for the Q2 of 2023 was 1,100,000 a decrease over the prior year comparable quarter loss amount of $2,200,000 Loss from operations also decreased dollars 103,000 as compared to the prior quarter. Net loss was $1,200,000 or 0 point 42 which is reflective of the impact of the June 2023 1 for 7 reserve stock split in the prior year comparable quarter. Net loss also decreased $156,000 as compared to the prior quarter. Speaker 100:10:17Adjusted EBITDA, a non GAAP measure, which excludes depreciation and amortization, interest expense, stock based compensation and other Non reoccurring charges and or sources of income, such as incentive compensation, was a loss of $1,000,000 for the Q2 of 2023 compared with a loss of $2,100,000 in the Q2 of 2022. The improved adjusted EBITDA profit from the Q2 of 2023 was primarily due to improved margin and lower operating costs. Now I'd like to turn to the balance sheet. Cash was $1,300,000 as of June 30, 2023, as compared to $52,000 as of December 31, 2022. As of June 30, 2023, the company had total availability of 1,500,000 which consisted of $1,300,000 of cash and additional borrowing availability of $204,000 under its credit facility. Speaker 100:11:17This compares to total availability of $107,000 as of December 31, 2022. As a reminder, the toll availability is a non GAAP measurement of our access to cash at any given point in time, and we believe is a much more relevant metric Simply looking at cash balance or even net debt on the balance sheet. During the Q1 of 2023, We reduced the maximum availability on our lending facility to $500,000 and agreed with our receivables lender to terminate our accounts receivable lending facility. Excess borrowing availability on our credit facilities represents the difference between the maximum borrowing capacity of the credit facility and our actual borrowings under these credit facilities. During the Q2 of 2023, cash used in operations was 152,000 Cash provided by financing activities during the Q2 of 2023 was $1,200,000 primarily due to the Completion of a private placement for the issuance of common stock, which raised $1,300,000 in gross proceeds. Speaker 100:12:22As noted earlier in the call, in June 2023, we enacted a 1 for 7 reverse stock split as part of our strategy to regain compliance with Nasdaq's With that, I'd like to make a few closing comments. Once again, the results we delivered today are still the beginning of a turnaround for Although there is tremendous amount of work still to be done, I believe that our biggest hurdles are behind us and we are focused back on sales, new product development and innovation. I look forward to sharing additional growth and improvements with you next quarter. With that, we would like to open the call to questions. Operator? Operator00:13:03Thank you. We will now be conducting a question and answer session. Our first questions come from the line of Sameer Joshi with H. C. Wainwright. Operator00:13:34Please proceed with your questions. Speaker 200:13:37Great. Thanks. Thanks for taking my questions. And congrats on the continued turnaround. Nice to see margins come through as well. Speaker 200:13:48So let me start with there. Do you expect As more REDCap inventory comes in, that the gross margin will improve from What you saw in 2Q, 17% going up to, say, some of the historical levels seen in 2020? Speaker 100:14:11Thank you, Samir, for your question, and I hope you're doing well today. Although we do not provide guidance, I do believe that as we Continue to get fresh supply of both REDCap and new products that we will continue to improve our gross margin percentages. I know that's one thing that I've been committed to do is to improve our overall revenues and our gross margin. And I do foresee it going up. However, I can't Provides great guidance and where it will end. Speaker 200:14:39Understood. That's fair. Just digging a little bit On this inventory, is that also a bottleneck For sales in terms of is are your orders mainly For the new REDCap and other products as against the inventory that you already have on the books, how should we look at sales ramp and inventory going forward? Speaker 100:15:12Sure. So as we look at sales and inventory going forward, Redcap is what I like to call our lead horse in the race and it pulls along a lot of our other inventory on the commercial side of our business. So as we have healthy stock of REDCap and as we focus so much on our REDCap products, it allows us to pull through some of our other white Perhaps or other more generic product categories because it allows us to offer our customers a fuller basket of products. So as we look at our inventory and where we're at today, the ability to pull through some of the items that we still have on hand at a higher level It's all dependent on ensuring that we have our Redcap in stock. Additionally, I also pointed out our in focus switches. Speaker 100:15:56Being able to have our in focus switches will allow us to sell a healthier level of our in focus tube products, which we also have a good inventory level in stock today. So as those products become available in future periods and have healthier stocking positions and inventory levels, then we anticipate our sales channels to drive better demand and push that through. Speaker 200:16:19Understood. Got it. On the specifically on the pipeline, how much visibility do you have in terms of Securing orders to say within the next 2 to 4 2 to 6 quarters, Getting at least 2 revenues seen in 2022 on an annual basis? Speaker 100:16:46Great question. We do have inventory pipelines and have booked Orders going through Q2 of 2024 today As we continue to build back that channel and build the demand in that channel, we believe that we'll have better visibility out through future years and future periods. And that will not only drive demand in, let's say, Q3, Q4, but into future years. So as we can if you recall, About a year ago, the company hired a new military sales leader and that person has We rebuilt that entire pipeline and channel in the past year. Those sales are longer lead, longer lagging, and we continue to see additional orders within those Channel. Speaker 100:17:37So although we don't have clear visibility where it will go in the next 6 quarters per se, We're getting a better site and a much, much healthier pipeline quarter over quarter. Speaker 200:17:50Understood. Thanks for that color. And then just last one or actually just a couple more. Commercial revenues are making a comeback slowly. Should I mean is that Part of your revenue growth strategy going forward or how much part would that play? Speaker 200:18:10Because I know military seems to be in a good shape for now. But on the commercial front, should we expect to continue sequential increases in revenues? Speaker 100:18:23Absolutely. As we look to bring in healthier stocking levels on our commercial side, we anticipate growing our revenues That's the side that I'm continually looking to tweak and ensure that we are driving the business forward. And with new stock and new Redcap to go out to go out Show customers, I believe that we'll be able to drive that business forward even more. Speaker 200:18:51Understood. And now the last one. And this is not a significant item, but just wanted to work was wondering product development costs So when relatively flat or just a little bit lower, when should we expect these to turn back on like as sales increase, Would you start investing more in R and D and product development? Speaker 100:19:18Yes. As we continue to drive our top line revenues, that's We hope to have a healthier balance in that area and be able to continue that tradition of Having new products and innovation. So I do see a small increase in the future. However, we're looking to ensure that it doesn't get out of line with where our top line revenues Speaker 200:19:41Understood. Great. Thanks a lot Leslie for taking my questions and good luck. Speaker 100:19:47Thank you, Sameer. Have a great day. Operator00:19:51Thank you. There are no further questions at this time. With that, would like to thank you all for your participation. You may disconnect your lines at this time. I hope you all have a great day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallEnergy Focus Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Energy Focus Earnings HeadlinesEnergy Focus (NASDAQ:EFOI) Earns Sell Rating from Analysts at StockNews.comApril 28, 2025 | americanbankingnews.comEnergy Focus Full Year 2024 Earnings: US$0.32 loss per share (vs US$1.33 loss in FY 2023)March 26, 2025 | finance.yahoo.comHere’s How to Claim Your Stake in Elon’s Private Company, xAII predict this single breakthrough could make Elon the world’s first trillionaire — and mint more new millionaires than any tech advance in history. And for a limited time, you have the chance to claim a stake in this project, even though it’s housed inside Elon’s private company, xAI.May 4, 2025 | Brownstone Research (Ad)Energy Focus (NASDAQ:EFOI) Stock Quotes, Forecast and News SummaryOctober 30, 2024 | benzinga.comEnphase Energy: Strategic Innovations and Market Expansion Drive Buy Rating Amid Market ChallengesOctober 23, 2024 | markets.businessinsider.comEnergy Focus (NASDAQ:EFOI) Stock, Insider Trading ActivityOctober 4, 2024 | benzinga.comSee More Energy Focus Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Energy Focus? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Energy Focus and other key companies, straight to your email. Email Address About Energy FocusEnergy Focus (NASDAQ:EFOI), together with its subsidiaries, designs, develops, manufactures, markets, and sells energy-efficient lighting systems, and controls and ultraviolet-C light disinfection products in the United States and internationally. It offers military maritime market light-emitting diode (LED) lighting products, such as Military-grade Intellitube retrofit TLED and the Invisitube ultra-low EMI TLED; and Military-grade fixtures, including LED globe lights, berth lights; high-bay fixtures and LED retrofit kits to serve the United States navy and allied foreign navies. The company also provides RedCap emergency battery backup TLEDs; EnFocus lighting platform, including dimming and color tuning; and LED retrofit solutions for linear fluorescent lamps, downlights, and retrofit kits for low-bay, high-bay and office applications; LED dock lights. It sells its products to military maritime, industrial, and commercial markets through direct sales employees, independent sales representatives, lighting agents, and distributors, as well as via e-commerce. The company was formerly known as Fiberstars, Inc. and changed its name to Energy Focus, Inc. in May 2007. Energy Focus, Inc. was founded in 1985 and is headquartered in Solon, Ohio.View Energy Focus ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback PlanMicrosoft Crushes Earnings, What’s Next for MSFT Stock?Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of Earnings Upcoming Earnings Palantir Technologies (5/5/2025)Vertex Pharmaceuticals (5/5/2025)Realty Income (5/5/2025)Williams Companies (5/5/2025)CRH (5/5/2025)Advanced Micro Devices (5/6/2025)American Electric Power (5/6/2025)Constellation Energy (5/6/2025)Marriott International (5/6/2025)Energy Transfer (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 3 speakers on the call. Operator00:00:02Greetings. Welcome to the Energy Focus, Inc. 2nd Quarter 2023 Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Operator00:00:19As a reminder, this conference is being recorded. At this time, I would like to hand the call over to Leslie Matt, Chief Executive Officer, thank you. You may begin. Speaker 100:00:29Thank you, operator, and good morning, everyone. Before we begin today's call, I'd like to remind everyone that we will make certain forward looking statements. These statements are based upon information that represents the company's current expectations or beliefs. The results realized may differ materially from those stated. For a discussion of purposes risks that could affect our results, Please refer to the section under the headings Risk Factors as well as forward looking statements in our most recent 10 Q filed with the SEC. Speaker 100:00:59The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by law. Also, please note that during this call and in the Now to the presentation of our Q2 results. I am turning the bend in the home stretch of my 1st full year as CEO of Energy Focus, and I have not lost sight on my main objectives concerning the organization. The company has been feverishly working towards getting back to inventory position and massive cost cutting and rightsizing that pushed the company forward. Although there is still a long way to go, I believe that the Q2 of 2023 results that I am sharing today are showing progress towards an increase in sales, improving margin, all while controlling costs. Speaker 100:02:17I continue to work towards improvement, but significant progress in the core markets we serve is a slow and steady race. I continue to drive the organization to align with much higher goals and today's results show improvement towards a better version of EFOI. First, I do want to address the non compliance with NASA continued listing requirements that had previously been disclosed. As of July 27, 2023, the company received written notification from the NASDAQ staff stating that the company has regained compliance with the bid price rule and the minimum stockholders' equity rule. The work that was done to improve the balance sheet early in the year coupled with the reverse stock Split that was approved at the Annual Meeting of Shareholders allowed the organization to regain compliance. Speaker 100:03:05We continue to believe that the liquidity offered Sales for the 2nd quarter continue to lag from my long term expectations for the business. We have shown a slight improvement over the previous quarter. However, Timing of orders and expected inventory did delay some of our anticipated Q2 revenues into the second half of the year. Nevertheless, the smaller sales force has continued to build the backlog of orders on both the military and commercial sides of our business in addition to generating a larger pipeline of revenues for the future. IDEX continues to monitor and adjust our sales model to ensure that Company can service our existing customers while looking to expand our base and overall revenue. Speaker 100:03:54I'm happy to report that Randy Yiannis, A seasoned member of the Energy Focus team behind the scenes will be taking an active role on our sales force. Randy brings And not only a wealth of operations and product experience from being an integral member of the EFOI team for the last 3 years, that has also held various sales related roles, including owning his own lighting sales agency prior to joining Energy Focus. I'm truly excited to see how our combined experience can drive the company to the next level. Our fresh stock of REDCap, our emergency backup LED tube product began to arrive in late Q2. This popular product for the company has faced significant supply chain challenges, and we look forward to supporting healthy stocking levels on this product moving forward. Speaker 100:04:45Additionally, our power line control and focus switches have faced component supply issues that we believe we have worked through and we will be able to drive additional demand in the future periods. Fresh stock is now arriving regularly, and we believe we are better positioned for growth in the second half of the year. We continue to focus on product expansion in both lighting, control and energy solution products that will drive revenues within our current market segments. We look forward to sharing new product announcements and timing on availability as we move forward. I am determined to drive this organization forward. Speaker 100:05:27This quarter is showing the beginning signs of the positive improvement Towards revenues and increased margins. Although there is still a lot of race left to run, I believe we have learned how to get out of the gate and run forth a brighter future. Let me now review our Q2 financial results. We had net sales of $1,100,000 for the Q2 of 2023, a decrease of 29 Perfette compares to sales of $1,500,000 in the Q2 of 2022. This is driven by lower sales volume on the commercial side. Speaker 100:06:042nd quarter 2023 net sales of military products were $613,000 which is a $107,000 increase over the Q2 of 2022. Military related sales were flattened compared to the 1st quarter. Military related sales have rebounded since the 3rd and 4th quarters of 2022. However, delays in the supply chain have pushed out some of the revenues originally anticipated in the Q2 for military until later this year. Sales of our commercial products were approximately $442,000 or 42 percent of total net Sales for the Q2 of 2023, down $533,000 as compared to the Q2 of 2022. Speaker 100:06:53Commercial sales increased $121,000 over the prior quarter on a sequential basis. Volatility in our Supply chain continues to be reflected in these results as we are primarily selling through on hand legacy inventory. Higher margin proprietary products like REDCap Arrived late in the quarter, sales and new customer purchase orders for Redcat and add on purchases increased immediately upon the Redcat's arrival. Gross profit for the Q1 of 2023 was $179,000 compared to gross profit of $109,000 in the Q2 of 2022. Sequentially, gross profit improved by $162,000 from the Q1 of 2023. Speaker 100:07:40As a percentage of revenue, gross margin was 17% in the 2nd quarter of 2023 compared to 7% in the Q2 of 2022. The period over period increase in gross profit was driven mainly by a favorable impact from lower fixed costs of $200,000 or 15% of net sales. As compared to the Q1 of 2023, gross margin rebounded significantly from 2%, primarily due to improved Sales and product mix, along with a favorable impact from the change in inventory reserves due to orders received during the Q2 of 2023, which we expect to fulfill during the Q3 of 2023. Adjusting gross profit margins Excess and obsolete in transit and net reliable value inventory reserve and scrap and write offs related to our inventory reduction projects contributed to the non GAAP adjusted gross profit of 7% for the Q2 of 2023 compared to a gross loss of 5% in the Q2 of 2022. Sequentially, adjusted gross profit improved compared to an adjusted gross loss of 1% in the Q1 of 2023. Speaker 100:08:58Operating expenses in the Q2 of 2023 were $1,300,000 compared to $2,300,000 in the The decrease is primarily attributable to lower SG and A expenses due to a significantly decreased payroll and payroll related expenses. Sequentially, operating expenses were flat as compared to the Q1 of 2023. Loss from operations for the Q2 of 2023 was 1,100,000 a decrease over the prior year comparable quarter loss amount of $2,200,000 Loss from operations also decreased dollars 103,000 as compared to the prior quarter. Net loss was $1,200,000 or 0 point 42 which is reflective of the impact of the June 2023 1 for 7 reserve stock split in the prior year comparable quarter. Net loss also decreased $156,000 as compared to the prior quarter. Speaker 100:10:17Adjusted EBITDA, a non GAAP measure, which excludes depreciation and amortization, interest expense, stock based compensation and other Non reoccurring charges and or sources of income, such as incentive compensation, was a loss of $1,000,000 for the Q2 of 2023 compared with a loss of $2,100,000 in the Q2 of 2022. The improved adjusted EBITDA profit from the Q2 of 2023 was primarily due to improved margin and lower operating costs. Now I'd like to turn to the balance sheet. Cash was $1,300,000 as of June 30, 2023, as compared to $52,000 as of December 31, 2022. As of June 30, 2023, the company had total availability of 1,500,000 which consisted of $1,300,000 of cash and additional borrowing availability of $204,000 under its credit facility. Speaker 100:11:17This compares to total availability of $107,000 as of December 31, 2022. As a reminder, the toll availability is a non GAAP measurement of our access to cash at any given point in time, and we believe is a much more relevant metric Simply looking at cash balance or even net debt on the balance sheet. During the Q1 of 2023, We reduced the maximum availability on our lending facility to $500,000 and agreed with our receivables lender to terminate our accounts receivable lending facility. Excess borrowing availability on our credit facilities represents the difference between the maximum borrowing capacity of the credit facility and our actual borrowings under these credit facilities. During the Q2 of 2023, cash used in operations was 152,000 Cash provided by financing activities during the Q2 of 2023 was $1,200,000 primarily due to the Completion of a private placement for the issuance of common stock, which raised $1,300,000 in gross proceeds. Speaker 100:12:22As noted earlier in the call, in June 2023, we enacted a 1 for 7 reverse stock split as part of our strategy to regain compliance with Nasdaq's With that, I'd like to make a few closing comments. Once again, the results we delivered today are still the beginning of a turnaround for Although there is tremendous amount of work still to be done, I believe that our biggest hurdles are behind us and we are focused back on sales, new product development and innovation. I look forward to sharing additional growth and improvements with you next quarter. With that, we would like to open the call to questions. Operator? Operator00:13:03Thank you. We will now be conducting a question and answer session. Our first questions come from the line of Sameer Joshi with H. C. Wainwright. Operator00:13:34Please proceed with your questions. Speaker 200:13:37Great. Thanks. Thanks for taking my questions. And congrats on the continued turnaround. Nice to see margins come through as well. Speaker 200:13:48So let me start with there. Do you expect As more REDCap inventory comes in, that the gross margin will improve from What you saw in 2Q, 17% going up to, say, some of the historical levels seen in 2020? Speaker 100:14:11Thank you, Samir, for your question, and I hope you're doing well today. Although we do not provide guidance, I do believe that as we Continue to get fresh supply of both REDCap and new products that we will continue to improve our gross margin percentages. I know that's one thing that I've been committed to do is to improve our overall revenues and our gross margin. And I do foresee it going up. However, I can't Provides great guidance and where it will end. Speaker 200:14:39Understood. That's fair. Just digging a little bit On this inventory, is that also a bottleneck For sales in terms of is are your orders mainly For the new REDCap and other products as against the inventory that you already have on the books, how should we look at sales ramp and inventory going forward? Speaker 100:15:12Sure. So as we look at sales and inventory going forward, Redcap is what I like to call our lead horse in the race and it pulls along a lot of our other inventory on the commercial side of our business. So as we have healthy stock of REDCap and as we focus so much on our REDCap products, it allows us to pull through some of our other white Perhaps or other more generic product categories because it allows us to offer our customers a fuller basket of products. So as we look at our inventory and where we're at today, the ability to pull through some of the items that we still have on hand at a higher level It's all dependent on ensuring that we have our Redcap in stock. Additionally, I also pointed out our in focus switches. Speaker 100:15:56Being able to have our in focus switches will allow us to sell a healthier level of our in focus tube products, which we also have a good inventory level in stock today. So as those products become available in future periods and have healthier stocking positions and inventory levels, then we anticipate our sales channels to drive better demand and push that through. Speaker 200:16:19Understood. Got it. On the specifically on the pipeline, how much visibility do you have in terms of Securing orders to say within the next 2 to 4 2 to 6 quarters, Getting at least 2 revenues seen in 2022 on an annual basis? Speaker 100:16:46Great question. We do have inventory pipelines and have booked Orders going through Q2 of 2024 today As we continue to build back that channel and build the demand in that channel, we believe that we'll have better visibility out through future years and future periods. And that will not only drive demand in, let's say, Q3, Q4, but into future years. So as we can if you recall, About a year ago, the company hired a new military sales leader and that person has We rebuilt that entire pipeline and channel in the past year. Those sales are longer lead, longer lagging, and we continue to see additional orders within those Channel. Speaker 100:17:37So although we don't have clear visibility where it will go in the next 6 quarters per se, We're getting a better site and a much, much healthier pipeline quarter over quarter. Speaker 200:17:50Understood. Thanks for that color. And then just last one or actually just a couple more. Commercial revenues are making a comeback slowly. Should I mean is that Part of your revenue growth strategy going forward or how much part would that play? Speaker 200:18:10Because I know military seems to be in a good shape for now. But on the commercial front, should we expect to continue sequential increases in revenues? Speaker 100:18:23Absolutely. As we look to bring in healthier stocking levels on our commercial side, we anticipate growing our revenues That's the side that I'm continually looking to tweak and ensure that we are driving the business forward. And with new stock and new Redcap to go out to go out Show customers, I believe that we'll be able to drive that business forward even more. Speaker 200:18:51Understood. And now the last one. And this is not a significant item, but just wanted to work was wondering product development costs So when relatively flat or just a little bit lower, when should we expect these to turn back on like as sales increase, Would you start investing more in R and D and product development? Speaker 100:19:18Yes. As we continue to drive our top line revenues, that's We hope to have a healthier balance in that area and be able to continue that tradition of Having new products and innovation. So I do see a small increase in the future. However, we're looking to ensure that it doesn't get out of line with where our top line revenues Speaker 200:19:41Understood. Great. Thanks a lot Leslie for taking my questions and good luck. Speaker 100:19:47Thank you, Sameer. Have a great day. Operator00:19:51Thank you. There are no further questions at this time. With that, would like to thank you all for your participation. You may disconnect your lines at this time. I hope you all have a great day.Read morePowered by