Q1 2020 Earnings Call
Greetings and welcome to Energy Corp, first quarter fiscal year 2020 earnings conference call.
Oh, just starting to listen only mode. A question answer session will follow the formal presentation.
Hey, what's your acquired operator systems during the conference. Please press Star Zero on your telephone keypad. Please note. This conference is being recorded.
Now, let's turn the call. So what's your host Mr., Brett Maas, eight or nine figure you may begin.
Thank you operator, and good morning, everyone joining the call today, our James to Chairman Chief Executive Officer, Todd Nestor, President and Chief Financial Officer before we begin today's call like to remind you that would make certain making certain forward looking statements 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 the risks that could affect our results. Please refer to the discussion under the heading risk factors. Our most recent 10-K as was most recently filed 10-Q, but the FCC.
A couple 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 accompanying press releases certain financial metrics are presented on both GAAP and non-GAAP adjusted basis reconciliations of adjusted results to the GAAP results or.
And the tables attached to the earnings release.
[music] <unk> energy focus dot com and the Investor Relations section of the site.
Now I'd like to turn the call regimes James the floor is yours.
Thank you Brett good morning, everyone and thank you joining all caught up to 20 earnings conference call.
Okay. So I hope all of you and your family continues to stay safe and healthy in this challenging social and economic.
Environment due to the called the night pandemic.
Everyone participating in this call we have been watching but the bottom out.
Following our Colorado Violets agency very closely.
And could change at Pine Neal it's possible.
Fortunately that our employees remain healthy and Bob.
That's remained open throughout the pandemic.
Yeah, they should not to say that despite ongoing macroeconomic challenges and <unk> in home owners.
Progress towards building image focus into the next generation lighting industry, neither had not stalled at all.
Our employees either at our factory or from home being working very hard.
With.
I believe that depends that make a challenge I would seem to be more creative.
Mission.
Oh passionate and more collaborative to accomplish all the short and long term goals.
Well you other than the rest of image focus on both Tom and I and our <unk>.
Directors are.
I'd like to say that the picture advantage, because not only much brighter than a year ago. When we started the restructuring and be launch programs.
That's right.
Well you have seen from our.
Q1 earnings release that came out at this point.
Sales for growth momentum continues to pick up in the first quarter.
Oh, the unprecedented economic challenges posed by.
And then Nick.
That's consistent over the past years since the management change in April 2000 might be.
We continue to make incremental.
I like separately significant progress.
Month after month quarter at the core towards stabilizing and economizing, our operating infrastructure.
Well, the rebuilding and expanding our engineering.
Marketing entities.
All the while reigniting, our growth and delivering improving financial results we got.
If the macro environment.
Equally important within the past 12 months, we have successfully transformed and let you focus from.
Energy efficiency centric lighting company.
[music].
In that building force.
With the introduction of Infocus.
Our patent pending lighting control platform spring human centric lighting the seasonally.
Two existing buildings.
Despite all the bugs, we might have heard about Oh, you de being everywhere and getting cheaper by that they.
And over Whelming majority of the countries around the world existing commercial building.
Hi.
Still live bike fluorescent light.
The <unk> latest estimate that night in 2017, only 11% of the country's bogged down 1.1 billion in the near lighting fixtures well live with it.
Today, the penetration right, you've likely could still be well below 20%.
And the percentage of lighting fixtures with controls that even lower.
That represents 10.
<unk> dollar go opportunities in coming years upgrade these pictures.
And connected lighting.
In the United States.
Yes in focus is designed for universal electrical setting to replace for rest of labs.
Switches. It is also well position to enter the international markets.
Well it several times larger than the U.S. pockets.
Welcome to them that building owners and occupancy worldwide well be much more motivated to come but we'd be lighting.
Yes, it can that's kind of human benefits such as they mean, that's because the <unk> outside of energy efficiency available and affordable.
What's the focus we end to maximize the financial environmental and she'll then.
Or triple bottom line benefit.
Yeah, we'd be lighting and capture a meaningful share.
The coming retrofit opportunities.
He'd be writing move onto the next phase of accelerating adoption.
Or even by humans century.
Turning to the results for the first quarter after its only slightly less sales of $20.8 million exceeded the high end of our revenue guidance of 3.5 to 3.6, maybe.
Grew 19% year over year in 7% sequentially.
Increases over prior periods.
Were primarily driven by our expanding number of wins.
Every country.
Over the past six month.
We also completed and grow our commercial.
Well the network, adding several new college at that school districts, its customers and sales <unk> patented emergency picked up 80 to rectify continue to grow and that's just the best quarter sales there as well.
As we mentioned you know people might think annual earnings call.
Our military wins over the past six months, including over $2.5 million go up like.
$3.4 million for military Intellitube.
And $1.7 million membership lighting fixtures or a foreign allies.
Well, it's several other smaller ones.
Well I think all encouraging as we were able to compete with all these through engineering innovation to reduce our product called while maintaining our superior product quality again.
Okay.
Well, we have a combination of better products I've got a call.
Wish it when most if not all of the block.
In the meantime.
Oh Navy ship benefit from our continuing innovation.
Hey, good these because that's going when it's we expect military sales remained strong throughout 2020, and we look forward to winning more Neil Navy up there where do you think contracts one thing lurch.
For our commercial business ugly warm in our lives where earnings call.
You do called me lighting and the continuing shutdown also not essential economic activities across most of the country. We had cleared it seems sales fall.
Starting in March.
Like most businesses have been experiencing.
As we mentioned in the earnings release. This morning at this point barring an extreme economics freeze that last beyond the next few months, we do not expect such self stuff that's technician to remain.
For a prolonged period.
Okay, that's sort of to yourself out of pocket customers.
I'm in healthcare and education industrial sectors.
Oh still going to be most of the occupied.
Meanwhile, we have been taking this call to introduce the Infocus lighting control platform, which officially launched.
This past Monday.
Existing and new customers.
We have received an overwhelmingly positive reception in focus so far.
Net interest the inquiries about this product family Ali it's already growing twice a day.
We continue to believe that you focus is not just the better lightning platform control platform also a unique offering for the retrofit market, where affordable simple and secure lighting controls have not been available before.
And we expect it will take us to a much broader metwox Oh distribution channel partners that we had not tap into people.
[noise] Accordingly, we recently took important steps to strengthen our organizational readiness to propel in focus into our most significant growth engine.
Over the next few quarters.
First.
Now with three spending business.
You got a month seemed to reach out to national distributors Escos original I'm truck doesn't distributors and small to medium.
Yes.
That could buy directly from our inside sales team as well as our online how about flipside.
In conjunction with though you felt was launched we roll out Neil modified to your pricing.
That's to be both the both reinforce how Brent image of high quality at great betting, but also to ensure a fair pricing pick our channel partners MAGEC and avoid potential channel conflict I believe starting pitching with multiple layers of distribution partners.
We believe that with a broader distribution strategy and focus won't be taking and let you focus to another level of industry leadership not only on product innovation, but also the market presence and the time list.
That's part of our official launch I mean focus we have started to provide family and initiate discussions about project opportunities without customers or focus over the past few weeks and we plan to stop providing put that trend samples later this month and shipping in focus probably the customers in order to Q.
If the broader economy opens and promotional activity start to recover over the past the amount of effective we look forward to having meaningful sales contribution.
I mean focus from Q4.
Now I'd like to provide some highlights on our engineering efforts and initiative.
One of the most important initiatives, we have they allow it to southern lighting company launch is developing impactful and differentiated product based on that we need I didn't pick monitoring in telcos, well bore and developed under such overarching goal.
During the last quarter. In addition to finalize it can focus design and bolstering our patents so wrong thing this control platform.
We have also started to move onto the next generation infill rational I will expand to provide autonomous and wireless lighting control capability, that's where they put energy efficiency optimize the pay them redone lighting and provide a whole suite assumption that are these surrounding building automation and building management.
Equally important I'm, probably an even more urgent priority for us since the beginning of the year, it's our initiatives.
He's got a movie disinfection applications built the foundation focus platform.
We believe that you might have thought disinfection technologies and product, which in the past had been a niche market. Most people hospital uses is emerging very rapidly and broadly literally all endorsed basis. They are opening up.
Addressable market opportunities for effective and affordable disinfection problem.
In addition to the fact that Corona virus.
Impacting countries across the world it might not be going away anytime soon a world often.
Awareness I realize nation that the risk often pandemics, it's yet to say well likely push the men for it and surface inspection products to impress it then.
Right and stay permanent.
And universal through a logical.
Going forward.
And you will be disinfection technologies and products we have.
I've been developing follow our consistent philosophy, youre, making innovative high quality, an impactful lighting products.
Oh, I, you'll be disinfection lighting fixture, but it seems like a qualified both general lighting and you can be disinfection capabilities based on the impact of lighting control platform.
Well be a powerful and timely offering.
Well then additions across all enterprise sector, I think the minute minimize virus infection risks.
I'm pleased to announce that we have achieved several design milestones and we have also filed provisional patents surrounding our you'll be disinfection technologies or what the petsmart.
Kinda leeway on schedule to finalize all prototype design within the next month or so and launch that's first and it'd be products by early Q4.
I'm very excited about the timely and significant impact we could make.
Our customers daily lives without that you'll be disinfection technology some problems.
We plan to continue to build and expand our intellectual property core competency and operations surrounding that you'll be didn't catch everything.
I'm sure we'll have much more to share with you all pockets in the UK picture market in the coming months.
Now I'd like to try and do the impact of coffee lighting hour.
As we mentioned from the last earnings call in the beginning of this call we move rapidly to protect employees and sure because that's kind of people cut the new what's.
Minimize the infection risk so far employees and their social unprofessional contact reactivated our called me Nitin contingency plans.
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While our employees that could work on remotely to do so while implementing strict.
Sorry, and disinfection mattress and procedures for our production facility in Solon, Ohio.
Well it doesn't let it essentially so with proper safeguard our team members at the production facility I Love to continue working.
And we expect that all factory will continue to operate in full capacity and the cold midnight.
Meanwhile, our commercial sales across nearly all that pockets or verticals are being impacted due to facilitate these closures and slow economic activities.
The other hadn't although we are seeing lighting retrofit projects being put on hold or postpone wouldn't mopping up there will be slow.
Two called me my team again, while economic reopening remains a challenging and somewhat unpredictable exercise, we do believe that the slow down would be temporary and we are also hopeful that some older I wish as my actually start to take on retrofit projects. During this period.
When building how much those occupied.
With regards to all business outlook, although we have started to grow from Q4 2019.
Still early in our long term growth trajectory.
Watch accounts out, but certainly could still sway all financials to stick it makes it simply.
The Neal fall they are all economic uncertainty, resulting from called the nice thing makes it even harder to protect our business several several quarters out, especially on our commercial business.
Therefore, we are still not in a position to provide annual I'll look at this point. However, we will continue to provide quarterly full pets and the best way weekend.
Regarding our second quarter 2020.
We stayed in the press release.
Net sales to be in the range of 4.5 million to 4.8 meeting.
Representing sequential growth of 18% to 26% compared with the first quarter after its own 20 and.
And a 46% to 56% growth over the second quarter of 2000 lighting.
Well I mean ways through the second quarter, we have already more than 70% of the full cuts in sales.
Mostly from our me what business and therefore, we are the.
The relatively confident of our Q2 sales hitting its hockey Lynch.
As we stated in the fourth quarter on full year 2019 earnings call Dumont back we believe that after the restructuring would be launch efforts. During 2019, we had turned the corner and started growing in Q4, we continue to grow up on Q4 selecting into Q1 2020.
Despite the Marriott chopped Marriott challenges posed by the plant they make we expect depending of the growth from Q1 to appeal to build upon the first arrow, our reach or when they that growth.
From our military business, where we now are more competitive than ever.
With the recent long dropping focus over the total having to second Aero OCF growth well pair all commercial business as well as our overall sales.
Got path.
And that's especially fourth quarter.
With that I'll turn the call to talk to review our financial performance during the quarter pop.
Thank you James I'm not sell for first quarter up 2020 were 3.8 million compared with 2019 first quarter that sales of 3.2 million.
An increase of 19.1% year over year.
Year over year increase and that's sales was driven by timing a military sales.
Compared to 3.5 million in the fourth quarter 2019, net sales were up 7.1% on a sequential basis.
Sales to our top 10 customers increased 10% compared to the first quarter last year and sales to our top 20 customers increased 16% compared to the first quarter last year.
From a mix perspective in the first quarter military sales were 2 million, representing 54.1% of total net sales compared to 1.2 million or 37.6, I'm told that sale for the first quarter of 2019.
The year over year increase and military sales was primarily due to timing of sales to one customer, which increased 113% compared to the first quarter last year.
We also had a new military customer on our top 10 customers with a six figure order not present last year.
Sales to commercial customers were 1.7 million, representing approximately 45.9% I'm told a lot sales from first quarter of 2020 down from $2 million for 62.4% of total net sales for the first quarter of 2019.
The year over year decrease in commercial sales was mainly due to some delayed orders due to covert 19, which specifically impacted our largest commercial customer partially offset by increases from several other top 10 customers.
Overall sales to our top 10 commercial customers declined 35% year over year and sales to our top 20 commercial customers declined 21%.
This was more than offset by our military segment.
Sell through our top 10 military customers increased 81% and sales through our top 20 military customers increased 74%.
Gross profit for the first quarter of 2020 was $1 million compared with $98000 than a year ago quarter, a significant increase mainly driven by higher military fare sale and a reduction in cost of sales.
On a sequential basis gross profit was slightly higher compared to $957000 in the fourth quarter 2019.
As a percentage of revenue gross profit margin was 27.3% in the first quarter of 2020 compared to 3.1% and the first quarter of 2019.
And 27.1% into fourth quarter of 2019.
Adjusted gross margins for excess and obsolete in transit and not realize value inventory. It was old resulted in adjusted gross margin of 25.2% for the first quarter over 2020 compared to 5.5% and the first quarter 2019, and 29.2% in the fourth quarter of 20.
2019.
We continue to expect our gross margins to be in the mid 20, he's in the near term and begin to purchase the high twentys or low thirtys percentage range as we introduce new products and make further improvements parts supply chain, depending on our sales mix and inventory valuations, we may see some fluctuations.
Operating expenses in the first quarter of 2020 were 2.3 million or 60.7% sales compared to 2.9 million or 91.3% and the year ago corridor, a decrease of $606000 or 20.9% year over year, which was driven by lower payroll and stock based.
<unk> expenses offset by slightly higher legal fees and dues.
Product development expenses decreased by $244000 year over year to 200 to $282000 in the first quarter of 2020 as a result of lower product testing expenses due to timing of new product introductions, and lower salaries and related benefits due to the reorganization and realignment of the comp.
I think last year.
Sequentially product development expenses decreased compared to $249000 in the fourth quarter 2019.
After you Gonna expense decreased 9.5% to 2 million in the first quarter of 2020 compared to 2.2 million a year ago corner.
The decrease was a direct result of decrease decreases and stock based compensation, which was partially offset by increases in season dues for various services.
Sequentially asked you know expenses increased slightly compared to 1.9 in the fourth quarter of 2019.
Loss from operations during the first quarter of wanting 21.3 million an improvement of 1.5 million compared to a loss from operations of 2.8 million in the first quarter of 2019.
Sequentially is a lot from mom operations, but it's almost flat from 1.2 million in the fourth quarter in 2019.
Net loss for the first quarter of 2020, $541000 or a worse that loss per basic and diluted share an improvement of 2.3 million compared with a loss of 2.9 million or 25 cents loss per basic and diluted share and a year ago core supply.
Actually this compares to one that loss of 1.3 million or an 11 cents loss per share in fourth quarter of 2019.
Adjusted EBITDA, which excludes depreciation and amortization interest expense stock based another incentive compensation and again of 873000 related to the fair value of warms improved to a loss of 1.1 million for the first quarter of 2020, compared with a loss of 2 million.
And the first quarter 2019, and a loss of 1.1 million and the fourth quarter 2019.
Now I would like to turn to the balance sheet.
As of March 31st 2020, we had a cash balance of 2.9 million compared to 350000 at the end of 2019.
The increase in cash was primarily through the issuance of new capital through a shelf registered sales activity in the first quarter in past generated from operations.
During the first quarter, we issued approximately 3.4 million shares and more common stock and an aftermarket purchase price 67.4 cents per share nonregistered warrants to purchase up to 3.4 million shares of common stock and then exercise price of 67.4 cents per share.
At 12.5 per cent per warrant for gross proceeds of $275 million.
Proceeds from this offering provide short term funding for operations and initiatives initiatives for growth as will also require paydown far earlier note of $275000.
Yes, the warrants were to be exercised at their exercise prices no 67.4 cents to share and 99.8 cents a share for the current warrant holders.
Exercises to provide additional capital of up to $2.3 million from the shareholders and another $430000 from the placement agent for a total of $2.73 million.
Subsequent to quarter I'm on April 17, 2020, the company was granted a long for approximately $795000 as part of the Paycheck protection program under the Corona virus aid relief and economic Securities Act.
We intend to use the entire loan amount for qualifying expenses as defined under they act. However, we can provide no assurance the entire won't be forget it.
We continue to analyze our cash needs considering sales prospects current performance of the business and our targets for continual improvement.
Simultaneously. We also continue exploring consider a variety of financing sources and should the need to rise for additional external financing.
Total that exclude <unk>, excluding the warrant liability as of March 31st 2020, including short term credit line borrowings of 790000 outstanding notes payable of 854000 for total debt outstanding of $1.7 million.
Got it against cash of 2.9 million, we had in that cash position of 1.2 million at the end of the first quarter.
This compares to 3.4 million in total debt as of December 31st 2019, which is comprised of short term credit line borrowings of 715000 convertible notes outstanding of 1.7 million and notes payable of 1 million netted against cash a 350, $350000, we had and not that puzzle.
Question of 3.1 million at yearend.
We increased our total availability from the fourth quarter 2019 to the ended the first quarter of 2020 from $2 million to $4.1 million, respectively, primarily as a result of the increase in our cash balance.
Accordingly as of March 31st 2020, we had total availability of 4.1 million, which consisted of 2.8 million enough cash and 1.2 million of excess borrowing availability under our credit facility.
As a reminder, total availability is a measurement of our access to cash at any given point in time is much more relevant metrics and simply looking at a cash balance on the balance sheet all access borrowing availability under our credit facility represents the difference between the maximum borrowing capacity of our credit facility and actual bonds on it.
Got it facility.
Accounts receivable were 1.9 million at the under the first quarter of 2020 compared to 2.39 at the end of 2019, a decline of $433000 on higher sales, reflecting more efficient collections.
That inventories declined to $4.7 million as of March 31st 2020, compared to $6.2 million at the end of 2019.
The decrease was due to our continued efforts to reduce slow moving inventory as well prudence in ordering inventory needed for future sales. This reduction in inventory. It was also a tremendous source of operating cash flow for the first quarter 2020.
Accounts payable all declined slightly to 1.2 million as of March 31st 2020 down from 1.3 million as of the under 2019.
Cash generated from operations was $504000 for the first quarter of 2020, which was largely driven by our effective management of inventory throughout the quarter is a continuation of efforts undertaken during the second half of 2019, which included addressing both slow moving inventory.
No more prudent ordering practices for new inventory.
Our warrant liability remains manageable and not mature the combination of low failure rates of our troops has allowed us to continue to experience minimum cost for our warranties and still be I will therefore do offer a valuable tenure in five year warranty used to our customers.
Energy focus is hallmark quality remains a strong selling point for our products and is reflected in our ability to offer these one fees.
Yeah, I briefly parts to the impact of Coca 19 on our supply chain logistics efforts.
While we're not experience any significant disruption in either our supply chain or sales through the from the Corona virus pandemic.
We do periodically update or contains the plan is resolved Myers.
It's James Madison, the virus reduced our commercial sales at the end of Q1, and then the Q2, resulting in some reduced spending on expenses, but we also had been vigilant with suppliers and ensuring they continue to ship components products to us during the shutdown and the United States.
Today, we had been successful working around any challenges we face faced but the risk is then but there is risk in the supply chain.
However, as the U.S. opens back up we expect to see more of a return to normal operations on our suppliers.
Your supply chain hiccups.
Regarding China, we have not experiences nice supply chain disruptions during past month to month and a half as we experienced especially when we had to share some production outside the country.
We've been able to rely who first a majority of our product and as we had prior to the panic from China.
This continues to be a dynamic and changing world that we live in and our plans to update in real time as respond appropriately.
That we'd like to open the call for questions.
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Our first question comes on line of them. It now with H.C. Wainwright. Please proceed with your question.
Thank you good morning, everyone. Appreciate your money Christian.
Hi, Jim So with respect to the guidance just with the second quarter can we assume you are factoring in some little disruption from you know the current market environment.
Yes.
Yeah of course, as we mentioned the commercial sales are still quite uncertain, so or I think the we as I mentioned earlier that we'd have about somebody could stand up that business booked so we try to be conservative.
Reasonable would be conservative you know like certainly conservative but reasonably conservative.
Thank you for that.
So you're at a cost falls really launching some you know really unique and interesting products into the market.
I'm, especially on the inflow for site.
Generally getting their makes deployment et cetera.
And then with in relation to.
The u. relating solutions of disinfection type offerings. So this is sort of a new development.
Both are very exciting, but from a distribution point of view how are you thinking about you know managing.
The sales process and engaging customers demonstrating the effectiveness of these solutions you know when.
There are all sorts of sort of restrictions that the physical evolution going out and typically doing all of this stuff that you do we used to do it.
Yeah, I'd be a I mean, that's a very good point and as I mentioned, Oh, you know both in the press release and also in this earlier well into earnings call bad or a within interest actually focus which is a very unique product platform.
We are up almost the are you not changing I wouldn't say changing like spending hours distribution network.
A lot more aggressively.
No in the past we are known for working with large marquee customers and some you know escos and contractors Oh their projects because it's a fairly competitive pocket right. We have always have a better product, but people are one of my cheaper problem right in the case of in focus it's a it's actually.
The most exciting thing about is that it's a control a platform that is also affordable it's not only high quality. It also affordable and simple and so we don't want to be limited to our own salesforce. So we'll open the up for a very extensive.
Distribution network, which is why I mentioned about the new pricing mechanism that we have now so to your point well leveraging on our agents or distributors, a scope or it goes and contract goes away and talking to a lot of people told me through probably 10 times more people than we had before so and that.
I think that really take us to another stage.
Where we will have a national network off or you know channel partners.
No we didn't have before which is actually extremely exciting obviously from the home sales point of view and it will bring us much more timely sales reached two customers, but also feel the brand awareness or the product awareness in the marketplace or so we are opening up pretty much working with everybody.
No.
As always we have we can avoid the channel conflict. That's all go.
Understood.
Just a one last question on the into Crusade.
Are you taking preorders for this you know you're saying you're going to potentially launch. This denardi cutesy, but are you taking preorders are that didnt building, all you're doing any of that right.
Yeah, we are just not as though we put all the parent studies on Monday, We just launched this officially so I would expect that you know later in second quarter, maybe already you know a third quarter. We will start taking orders. We we I mean I quickly. We can start taking orders were just getting ready to ship or in third quarter.
Early third quarter.
<unk>.
And then one last one on the disinfection liking or from.
No you mentioned you are trying to back.
Oh, some BARDA do solution can you give us some color on what exactly is that you bye bye.
Oh, we're not going to too much detail yet because we're still finalizing all prototype design, it's basically a ah you will be a integrated.
General, writing and you'll be lighting a product.
If you look at the you'll be protection bucket that basically not you know three major titles like disinfection products, one is a pretty much I robotic a.
Cleaner I used you'd be nobody can be in the room right. When you do that you'll be disinfection no because people are not supposed to be exposed on that you.
<unk>.
And then you've got the attracting top disinfection system bodies, but just sitting at the entrance and all the exit the Doc most via truck or systems.
Clean the air filling out of the attract and then you've got the upper room Air Disinfection system that basically shines the oh, you'll be like across the room or when you know above like if they feel like Oh, those different disinfection technology stuff that show Cummings Ah. So that's why we developed the.
The products that could be integrated in talked into running so you can use the existing structures.
The yeah, basically oh spot to retrofit into general lighting up and you'll be lighting under our Infocus control system I. So you. So in this system, you're gonna have oh without going to that these are you gonna have all a dimmable.
General lighting up kind of tenable or if they can read them lighting, plus the UBI infection disinfection and he could be functional you know when people inside.
Got you will definitely be disinfection.
So what do you sold as or.
On a standalone solution or you offered as an add on.
<unk>.
Oh, it's a it's a additional application in focus which is why we're so excited about even focused platform because the neighborhood and existing building at these applications right or be it a booming or color printing what do you need these infection.
Understood that's really interesting. Thank you James that's for sure.
[music].
Once again, if you would like to ask question. Please press star one on your telephone keypad. Once again, if you will not jeffs question. Please press star one on your telephone keypad.
Our next question comes on line one person with G.H. investment partners. Please proceed with your question.
Hi, congratulations on a lot of progress, particularly on the operate more Tonight.
Hi, good morning.
In terms of the military orders what is causing the military come back so strong and it seems like it's not across the <unk> too.
Yes, the military divisions are customers it sounds like.
Based on the statistics.
Yeah, as we mentioned in a in this earnings call and lots of things that we we wonder the things that would be what the youngest to reduce our cost you know, it's through engineering and wed be in the fiscal in doing that and dramatically reducing our cost of protection.
Our products and enable us to beat a much more competitive a in a market that has no no new entrants and so that's why I emphasize that it's basically.
Our overall increase of competitive and that's a product.
In that market.
And well just winning much more than what we did before.
Because of that.
I will also I I'll add to that this is Todd. In addition, the ER the military in 19 had shifted spending to the wall and so that had suppressed some of the sales last year as well.
Yeah on a comparable level.
That's a that's that's Korea effective.
In terms of the new contract wins to your question Oh, I think our.
The improved Oh engineering and supply chain practices. That's the reason for us to windows that new contract.
Okay, and just again I know you went through this but just.
Trying pinpointed if you can more in terms of some of the new product shipments.
You know it sounded like four or second half and and it's a disinfection nickel systems.
During that timeframe. If you can just reiterate <unk> timeframe.
Oh, I'm, sorry, I Love your second part of your question income stuff or the timing the.
The timing of the new products acute including the one that include that you'd be in the product.
Right. So as a as we mentioned the in focus is always the knowledge and we expect to start generating some sales in Q3 and again because of the economic or slow down right. Now we are not putting too much expectation on the amount of sales for in focus in Q3, we do hope that if.
The economy stuff that we opened in the next few months, we should start seeing the momentum picking up and 14 folks the generally more meaningful sales in Q4, but do you be product. We are ready to launch in Q4, So I would say that there might be some initial sales in Q4, and a really started to pick up in Q1 against all the you'll be.
Well, that's a it's a it's pretty new category. The market is new so we can we cannot you know.
Predict you know, but then what that the men's going to be Oh, we do know that you don't really know process something there you know research and development or we know that the there seem to be a tremendous amount of demand there.
It's all.
The current spending so its too early to tell.
Well, how fast and I thought I could ramp up.
And just taking the time the timing on that you'd be enabled product.
Two for launch before.
Yeah, just one other one of the Carlo product.
Or two follow ups are you capable of manufacturing that product you know.
Of course your existing lines. It's just the variation there off and then you could achieve its nice gross margins on as well.
That's why we expect.
As the.
As I said or the or the the product build the pound infocus platform. So he can be controlled it has to be controlled through the infocus platform. So it was just an extension a new application on publishing focus control system.
So yeah, we're getting into that you're in books, what do we know on scale.
The production based on what we have though.
And finally, just on that you'd be product.
How far the benefits from that you'd be extent.
Meaning to extend the few inches away from the.
From the fixture and our customers to customers or if you've done any customer research already you probably have to do the customers understand where it fits meaning what is the people of accomplishing when it's not capable of accomplishing.
Yeah the.
I think if you look at all that you usually equipment. What we can claim is obviously that you know whatever the air slow through our module, we can kill say, 99.99%. It all of the viruses and micro organisms. It depends on how the you know ER.
Variables on the space.
Depending the impact of the equipment on the space right. If you have a very fast and change for example, oh it didnt <unk> this might reduce the impact but I'm just like every other yeah, you'll be disinfection equipment, they cannot guarantee how much impact you can.
I have in the space unless you have you know those Ah Ah direct you'll be surface disinfection.
Products, which you cannot use when people are present, our goal is to have a system, where you know it's functional when people are in the building a we didn't develop this just for hospitals with we develop this for pretty much all type of institutional buildings from it all hospitals schools.
Offices.
And then all commercial spaces so Ali.
Our desire to achieve certain amount of Ah Ah piece infection.
Capability and it always depends on how customers use them like that's that's the one that we expect to.
The more clinical studies to show that you can you know the extent of improvement the virus Oh accounts reduction in the room over time, but what we can say just like how you buy your air Purifiers at home maybe.
You know they will tell you that they can filter and I I person, but then of the micro organisms, but they cannot tell you exactly how clean your room is gonna be because you don't know how big the movies coffee and you don't always batch back inside right. So.
Those are the things that well take other be longer to to prove the exact effective that's about again every spacing. So you you know the only thing we can say that this unit will be very effective filtering out the air and claiming disinfecting there that go through it and why we tried to design is to make sure.
Even though most condition.
Do you any would be a very effective anything that's a good amount of Oh viruses and Michael over that says that pester trends in the room.
Thanks, so much.
Sure.
Once again, if you like to ask a question. Please press star one on your telephone keypad. Once you get if you like that's the question. Please press star one on your telephone keypad.
One of them pieces, we pull for questions.
Our next question comes the line of Robert Smith with sensor performance investing. Please proceed with your question.
Hi, Thanks for taking my question a good morning, guys could can you discuss the.
Specifically, the IP protection surrounding the and focus a line and also what you're seeking in the U. V.
<unk>.
As we mentioned that we already filed they Oh, yes, several peptides infocus Oh and as I said, it's an ongoing practice are going to exercise of we've got a mute.
Technologies.
Incorporating in putting focus will continue to file more petsense.
Same thing for Uva movies earlier, Oh, we filed provisional patents on our design.
And we expect to file more in coming months.
As we solidify the design also increased.
The sort of technologies involved.
In the products.
But but James weren't what are the protections are around me and focus one.
Well the protection is that it is a unique application and technology to leverage existing power line.
Or communications.
Mm.
<unk>.
But oh, others can have the ability to have.
Can truly a.
Then dimmer aspect of it.
Oh, Okay. You know we filed the petsense pick what we'd be better people kind of people got wrong, because actually do the same thing.
If anything's possible, but obviously when we file the pets and we tried to exhaust all the options [laughter] there to do this by so there's no guarantee that nobody else could do it but.
We feel pretty good about the protection of our IP.
So inclusive of the them around the colder temperature.
Yes, it's best to me away to come into paid through the Pollo line.
Existing Paul I'd, rather not to reduce because I think we'll need some day later to install the system.
And also you know Brendan picture.
So you're saying that cost reduction.
Yeah, that's the primary through the power one.
Yep.
But also different ways too I mean, I'm wondering you know different type of application field upon that.
Knowledge.
Thanks, very much good luck.
Sure. Thank you.
Our final question comes on line of Edward Gilmore, what the Middle grid. One. Please proceed with your question.
Hi, Jason tiny promoting it.
Good morning are you congratulations to the progress. This this quarter I'm just a quick question can you give comment on sales efforts towards the academic and University segment I'm, just curious if you're starting to see a sales resuming that area. Thank you.
Oh, Yeah <unk>.
Oh, I think you're asking about.
Okay repeat that question, that's supposed to make sure that I.
Can't be fair question at <unk> sure Yeah, I know in the past you've commented on some relationships with universities like Penn State University and somebody right right institution, Yeah, I'm just curious if that school, it's kind of on pause and administrators are thinking about you know when they're going to resumed in the fall are you guys seen any additional opportunities.
In that area.
Yeah, I'm getting at all but you are mentioning be Uh huh.
The only is called that well staying pretty much a slowdown in every commercial vertical like the colleges are the same we do have to say that people are working right people are just not making big decisions are making big orders are.
Now.
Over the past the I guess a week two weeks, we start to see people getting more active and I think schools is one of the verticals that we deal with a we've definitely seen some suspension of activities Oh for now I don't think colleges are exceptional we again.
We got we still get older slump colleges, but I think it's just like one of those commercial sectors, where.
We just we just was less things flow all decision, making process right now although again as I've said you know we have started to see.
Ah activity is picking up over the past probably we two weeks.
It's still too early.
Topic, you have anything to add on this.
No I just think it's no it's really delays on the orders that were saying and behavior. It's it's not a cancellation. So you know so far there's no indication that the people or cancel on anything it's just a delay in timing.
Yeah.
Okay. Thank you guys.
Sure. Thanks.
Ladies and gentlemen reached the end of our question answer session and I would like to turn the floor back over to management for any closing remarks.
Oh, Thanks, everyone again for your participation in today's call a we look forward to talking to you in our second quarter 2020 earnings call have a great day.
This concludes todays teleconference. You may now disconnect your lines at this time. Thank you for your participation have a wonderful day.
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