Q3 2020 Energy Focus Inc Earnings Call
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This time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation, if anyone should require operator.
During the conference. Please press Star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Rob Moskow paid or not thank you Brad you may begin.
Thank you operator, and good morning, everyone. Joining me on call today is James to Executive Chairman and Chief Executive Officer, and Todd Nester Press.
Chief Financial Officer before we begin todays call like to remind you that we will make certain forward looking statements. These statements are based on information that represents the companys current expectations or beliefs.
The results realized may differ materially from those stated for a discussion of these risks that could affect our results. Please refer to the discussion under the heading risk factors on our most recent 10-K as well.
Well as forward looking statements in our most recently filed 10-Q with the SEC. The 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 accompanying press releases certain financial metrics are presented on both GAAP and non-GAAP adjusted.
Basis reconciliations of adjusted results to the GAAP results are available in the tables attached to the earnings release, which is posted on our corporate web site at energy focus Dot com in the Investor Relations section of the site I will now turn the call over and James James The floor is yours.
Thank you Brad good morning, everyone and thank you for joining our third quarter.
2000 plenty earnings conference call.
During the third quarter, we continued to execute our strategic growth and operational plan. Despite the business and economic challenges we are facing.
As a result, the global pandemic.
Added by our strong military sales our revenue.
I mean, we didn't the forecasted range, even as we continue to experience covert related challenges in the commercial lighting retrofit market.
Where most facility managers and building owners were with holding or postponing capital spending decisions on upgrading the lighting of existing buildings.
Due to extreme uncertainty on occupancy and budget outlook.
The pandemic also continue to cause disruptions and delays and supply chain logistics for select components.
And caused some revenue to be deferred.
That said despite of the impressive than the challenges.
Our commercial lighting business things much this year.
Our sales for the first nine months of 2020.
Gross 42.6% from the same period a year ago people.
While we reduced our operating loss from 5.8 million to 3.2 million.
The significant financial performance improvement.
Well, primarily due to our strength and positioning and increased contract win.
In our military and maritime business as we develop more competitive products.
And the financial progress was made despite that.
Once in a century.
And then make that you emptied most building as much this year.
And on top of our strong R&D and engineering accomplishments.
Well, they developing and launching the groundbreaking award winning Infocus lighting control platform in the second quarter of this year.
Furthermore.
Well I think the beginning of this year, we devoted significant amount of engineering and product management resources to.
To develop a whole new portfolio of you'll be disinfection products now.
No we just announced in October.
Clearly our restructuring and re launch plan that were put in place since.
Second quarter of 2019 have transformed the company into a high performing enter premium will innovate and fast moving organization that can achieve exciting growth despite of an extremely challenging external environment.
Most of the specific on the third quarter.
Our sales, which grew 104.6% from a year ago were driven by continuing growth above mean at three sales, including the military intended to shipment from the 3.4 million dollar contract award we received even beginning of the year.
Our positioning in the Navy lighting.
Market continue to strengthen and sales and quoting activity has remained much stronger than a year ago.
With nine month year to date military sales up 165.5% over the prior period.
Wow, a shortened basis, we expect normal seasonal.
No pattern in a military sales to persist with our fourth quarter sales military sales declining sequentially. After the high watermarks third quarter aligning with the end of the federal fiscal year, we continue to make progress in growing our military sales and increasing our market share.
During the quarter as we announced in the press release dated September 15, we were awarded another exclusive U.S. Navy contract valued at up to $4.8 million over five years to supply the Navy our large LCD grope lights.
Which use approximately.
80% less energy than legacy incandescent lights that the ships that.
Have been using.
In addition, we received an initial contract to supply outlining products to new lending credit for.
Our new Us Army ship platform.
And in October.
We won the first award of a new idea to contract to supply our birth life products to the navy value add more than $800000.
These significant win in the new ship construction market demos.
Demonstrated that energy focus into it.
Coming to go to led lighting supplier for the broader us military ecosystem.
Notably the deal de announced in September it's aggressive modernization plan to grow the naval fleet by more than 20%.
So on a 90 ships today.
To approximately 355 ships in the next 10 to 15 years.
And we look forward to being a key led lighting partner for the Navy in these major military initiatives.
Outside of the military markets. We also made progress in the government space.
By moving forward with tapping into the government market with our guests a contract that we received in September.
We are expecting our product to be available online on the GSK website in December or Federal agency.
Which together occupy over 361.
I wasn't building.
To view and the purchase.
We believe that these incremental we have significant opportunities come.
Coupled with our growing line of by American products will continue to expand our reach.
Contributing to our growth and as that bridge our leadership in the lighting.
[laughter] bucket in the broader government sector.
It is also important to note that despite of the stroke impact when we encounter in our commercial business. The company continued to move forward in laying the foundation for long term growth through our expanding R&D effort.
[noise] during the.
A quarter, we continue to expand our human centric lighting product portfolio that we expect to be the core engine of our growth in the years to come.
Oh, the lighting technologies.
Many of which.
Energy focus is dedicated to developing are poised to make significant and growing impact on human safe.
Safety.
Health and productivity.
In addition to environmental sustainability.
In addition to continuing development efforts on expanding our in poker platform capabilities and product offerings.
Thats completed subsequent to quarter end, we launched our event also.
Lets you VC.
This infection portfolio of products.
Which are designed to destroy 9.9% or more of.
Various pathogens, including influenza in Colorado versus in the air or our services to improve indoor hygiene and send the patient.
The initial product Incruse three complimentary products first above an integrated circadian lighting and you'll be paired disinfection troffer second movil, an air disinfection power.
And third no and autonomous disinfection robot.
These products meet the various means of air and surface disinfection for commercial industrial and residential indoor environments.
We are working on other offerings in the portfolio as well now we will follow and further strengthen what we believe is one of the most compelling you'll be CB solution offer.
Offering.
On the market.
This portfolio of products, which we believe are highly competitive and affordable with the potential to help facilities have all kinds of.
Establish this infection routine in the post cobot world.
Exemplifies our ability to innovate and move.
Quickly to address.
Happily emerging mean.
More impactful reliable and affordable disinfection products.
Both businesses and homes.
Since the product launch we have received enthusiastic feedback from both our existing and new channel partners and we are working aggressively.
Build and expand our distribution networks for that Youll BCD products.
Which are scheduled to start deliveries in the first quarter of 2021.
Importantly, we believe that the ABCD product line opens up a whole new disinfection market for us.
Which credit.
Credit Suisse recently estimated at $35 billion in the us alone.
Based on an average of $70000 of addressable opportunities per commercial building.
While Italy is still a little early to make tradition.
The magnitude of potential revenues from that you receive.
The product line we've.
We believe it could be a meaningful revenue booster in offsetting the temporary demand weakness from the lighting retrofit market and a key contributor to our growth and enhanced profitability in 2021.
And strategically speaking with these products we have.
We expanded from general lighting to address the broader healthy building market.
Building additional needs for our customers.
Significantly increasing our total addressable market and positioning anish focused at the forefront of what is likely to be effective a wave of demand and quality.
And affordable space and surface disinfection.
In the commercial lighting market space as we mentioned in both our second and third quarter earnings releases demand weakness persists prime.
Primarily due to unprecedentedly low occupancy in commercial building.
And universities in two co benighting and the overall slowdown in what might be considered non residential building improvements upgrades and retrofits during a global pandemic.
However, we remain cautiously optimistic that once that returned to commercial spaces accelerate.
And capital spending resumes, particularly when effective vaccine.
Our widely available we are well positioned with a portfolio of innovative and compelling product.
Now will enable us to capture a meaningful share of that pent up demand.
Led by our Infocus platform.
We continue to receive positive feedback as well as early older our focus lighting control products, though the media demand obviously isn't at the level, we would like to see due to the generally muted activities in lighting retrofits and new lighting product adoption is particularly challenging with remote working.
As economic activity resumes in the coming months within focus annuity products. We now can bring broader financial environmental and human impacts of the company and become a more substantial partner for our customers by providing both cutting edge led lighting and you'll be lighting disinfection.
Solutions.
Looking ahead in the near term there is a significant amount of uncertainty and volatility on order flows as well as supply chain logistics. Therefore, as we lay out in the earnings release. This morning, while we are still expecting to grow continue to grow year over year for the fourth quarter.
2020, we are spending our quarterly financial guidance for now and we will resume forecasting once they need these external factors are more stable and predictable.
As the visibility improves we will revisit and potentially region specific financial guidance.
We ended the spend.
And then not being able to provide short term financial visibility could be frustrating from investors perspective.
That said, it's simply would not be prudent for us to provide specific guidance on our topline sales when they are still subject to multiple.
Significant and uncontrollable courses horses.
Yes, I do hope that if you're like me as a long term investor in energy focus will be more optimistic and excited than ever about the companys prospects given the stabilization transformation and renewed growth. The company has demonstrated so far over the past 12 months.
Well thanks.
Exciting groundbreaking new products, we launched this year alone.
But I will significantly expand our addressable us and global markets.
And elevate our growth momentum in the quarters and years to come.
With that I will turn the call to talk to review our financial performance during the quarter.
Quarter Todd.
Thank you James.
Net sales for the third quarter of 2020 were $6 million compared with 2019 third quarter net sales and $2.9 million.
An increase of 104.6% year over year.
The year over year increase in net sales was primarily.
And by an increase in military sales, which included both higher volumes and a shift in the timing of a portion of a certain military order shipment from the second quarter to the third quarter of 2020, which we discussed during our second quarter earnings call.
When compared to $3.3 million in the second quarter of 2000.
20.
Net sales were up 78.8% on a sequential basis due in large part to timing between the second and third quarters too.
To provide clear contacts on a timing impact second and third 2000, Twentys aggregate military sales were $6.8 million compared to $2.1 million for the combined second and third quarters.
During the 2019, a 218.1% increase so you can see the third quarter increase was a military sales are not solely the result of timing.
Sales to our top 10 customers for the total company increased 128.6% and sales to our top 20 customers increased.
There's 117.2% each compared to the third quarter last year.
From a mix perspective in the third quarter military sales were $4.5 million, representing 75.6% of total net sales compared to $1.2 million or 40, 40.5% of total net sales for.
In the third quarter of 2019.
The year over year increase in military sales was primarily due to increased sales to four of our top 10 customers compared to the third quarter of last year and with one particular customer and military supplier representing most of the increase.
Sales to commercial customers were 1.5 million.
Million dollars in the third quarter, representing 24.4% of total net sales for the quarter.
Down from $1.7 million or 59% of total net sales during the third quarter of 2019.
The year over year decrease in commercial sales was mainly due to overall softness in the commercial market that began at the onset.
Set of the COVID-19 crisis and as James mentioned previously, we really being deferred to a future date foreign occupants returned to buildings.
Sequentially Mat sales to commercial customers increased 37.6% up from $1.1 million in the second quarter of 2020. This.
This increase was.
Rarely driven by sales from three of our top 10 customers overall sales to our top 10 commercial customers increased 5% year over year and sales to our top 20 commercial customers increased 9.6%.
Likewise sales to our top 10 military customers increased 276.2%.
Prime in sales to our top 20 military customers increased 251.7% on a sequential basis for the second to third quarter of 2020.
Gross profit for the third quarter of 2020 was $1.4 million compared with $1 million in the year ago quarter, an increase of 30.
3.9% year over year that was driven by favorable pricing and nueces variances from material and labor and changes in inventory reserves, which was more offs more than offset by supply chain challenges that led to unexpected additional manufacturing costs related primarily to our military and maritime products and higher out.
Bound freight costs.
On a sequential basis gross profit was up marginally by $33000 compared to $1.3 million in the second quarter of 2020.
As a percentage of revenue gross profit margin was 23.1% in the third quarter of 2020 compared to 35.3% in the third quarter of 2000.
2019, and 40.3% in the second quarter of 2020.
The declines were primarily due to stop the supply chain challenges I, just mentioned, which degraded our gross margin by approximately 410 basis points in the quarter in the current quarter as well as product sales mix.
Adjusted gross.
Gross profit margins for excess and obsolete in transit in net realizable value inventory reserve resulted in a non-GAAP.
Adjusted gross margins of 24.6% for the third quarter of 2020 compared to 23.6% in the third quarter of 2019 and 33% in the second quarter.
In 2020, we.
We continue to expect our gross margins to be in the mid twentys in the near term and begin to approach the high Twentys percentage range as we introduced new products and made further improvements to our supply chain and depending on our sales mix and inventory valuations, we may see some fluctuations quarter to quarter.
Operating expenses in the aggregate in the third quarter of 2020 or $2.4 million or 40% to 40% of sales compared to $1.9 million or 63.8% of sales in the year ago quarter, an increase of $520000 or 28.3% growth year over year.
Which was more than offset by higher net sales.
The increase was primarily driven by increased payroll for head count to support our growth initiatives in the sales and R&D functions.
As we discussed last quarter, we have shifted to a targeted approach to reducing expenses within our SDMA line focus on various strategic sourcing and.
Sourcing initiatives.
One of the first was our legal expense and we have added a new in house General counsel to our executive team, which we announced during the third quarter and more recently completed a strategic sourcing project for legal services, which over the next year should help us reduce and better manage our legal expenses.
Loss from our.
Operations during the third quarter of 2020 was $1 million compared to a loss from operations of $833000 in the third quarter of 2019 and a loss from operations of 929000 in the second quarter of 2020.
The increase in the operating loss in the third quarter 2020 was primarily.
In his office supply chain challenges that James and I discussed earlier as well as additional head count as.
Aside from these temporary supply chains challenges our core operating business continues to improve and we expect this improvement to be more apparent in our operating results moving forward.
Below the operating line interest expense was 100.
The 24000, compared with 60060 $7000 in the year ago quarter and $80000 in the second quarter of 2020.
This increase was the result of an increase in borrowings under our new increase short term credit facilities, which substantially increased the company's borrowing capacity and reduces blended interest expense.
Interest rate.
Also below the operating line, we had nonrecurring expenses of $159000 for the extinguishment extinguishment of our formal revolving line of credit, which included $100000 cash termination fee and the write offs of the remaining related noncash to acquisition cost.
$59000.
These expenses were essentially offset by a positive noncash adjustment to the fair value of outstanding warrants of $153000.
Net loss for the third quarter of 2020 was $1.2 million or 35 cents per share loss per basic and diluted share compared.
The fourth a loss of $946000 or 38 cents loss per basic and diluted share in the year ago quarter.
Adjusted EBITDA, which excludes depreciation and amortization interest expense stock based and other incentive compensation a loss of $150000 related to extinguish.
Impairment of debt and a gain of $150000 related at fair value of warrants was a loss of $918000 for the third quarter of 2020, compared with a loss of $780000 in the third quarter of 20019, and a loss of $746000 from the second quarter of 2020.
I wish.
Now I would like to turn to the balance sheet.
As of September Thirtyth, 2020, we had cash of $2.6 million compared to $350000 at the end of 2019.
The increase in cash was primarily due to the issuance of new capital through the sale of equity in the fourth first quarter as well as increased by.
Thanks.
Total debt, excluding the warranty liability as of September Thirtyth 2020 included short term credit line borrowings of $2 million outstanding notes payable of 192000, and the PPP loan for $795000 for total debt outstanding of $3 million.
Yeah.
We had cash of 2.6 million as of September Thirtyth 2020, resulting in net debt of approximately $400000 at the end of the third quarter.
This compares to $3.4 million in total debt as of December 32019, which was comprised of a short term credit line borrowings of 750.
$15000 convertible notes outstanding of $1.7 million and notes payable of $1 million netted against cash of $350000. We had a net debt position of $3.8 million at the end of the year 2019.
As a reminder, total available.
Mobility is a measurement of our access to cash at any given point in time, and we believe is a much more relevant metric than simply looking at the cash balance or even net debt on the balance sheet, while excess borrowing availability under our credit facility represents the difference between the maximum borrowing capacity of the credit facility and our actual borrowings under the credit facility.
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We increased our total availability from the third quarter of 2019 to the end of the third quarter of 2020 from $1.8 million to $4.9 million respectively.
Primarily as a result of additional capacity gained through our new credit facilities. The pp alone we obtained in the equity offering.
Yeah.
As of September Thirtyth 2020, we had total availability of $4.9 million, which consisted of 2.5 $2.6 million of cash in $2.3 million of excess borrowing availability on our credit facilities.
Subset subsequent to the ended the third quarter we.
Submitted the required application documents to request loan forgiveness for the PPP loan of $795000 on.
On October Twentyth, we submitted the loan forgiveness application to our corporate bank, which forwarded to the FDA for small business administration for approval yes.
The FDA has a 90 day review period.
Good and we are now waiting on the Sps decision.
During the third quarter, we closed two new credit facilities with new lenders. The facilities consists of two year inventory financing facility for up to $3 million and a two years receivable facility for up to two and a half million dollars. So.
The net result is a significant increase.
Based on our current borrowing capacity with access to additional capital as we continue to grow our business.
Importantly, we secured this added capacity, while simultaneously improving our credit terms and lowering our all in blended borrowing costs in.
In addition, one of the key benefits of refinancing our credit agreements was increasing the total.
Total availability under the new lines of credit.
Total availability for energy focus as of September Thirtyth, 2020 was $4.9 million versus $3.9 million at Q2 fiscal 2020 and $1.9 million at the end of fiscal 2019. This.
This increased borrowing capacity is crystal clear.
Vertical to funding our future growth for our new as well as popular high turnover products and inventories such as unfocused tubes, and switches are popular red kap product and the UBI disinfection products, we will start selling in the first quarter of 2021.
Accounts receivable were $3.4 million at the end of the third.
Third quarter of 2020 compared to $2.3 million at the end of 2019, an increase of more than $1 million on higher net sales, reflecting large shipments that occurred during September.
Net inventories declined to 5.3 million as of September Thirtyth 2020, compared to $6.2 million at.
The end of 2019 the.
The decrease was due to our continued efforts to reducing slow moving inventory as well as prudence in ordering inventory needed for future sales and the conversion of components to finished and ship goods for the military.
Accounts payable increased to 3.1 million as of September Thirtyth 2020 up from.
1.3 million as of the end of 2019. This increase was driven in large part to buying inventory to support the sales growth.
Cash used in operations was $1.6 million for the first nine months of 2020.
The net loss was $6 million excludes inclusive of non cash items.
Words, such as depreciation stock based comp and a 2.3 million charge change in fair value of warrants, we generated cash from working capital of $4.5 million.
1.8 million was generated from accounts payable and $1.1 million from inventories, both driven by timing of inventory receipts.
Cash used in investing was 171000 as our capital spending requirements are not significant overall.
Net net cash provided by the financing activities was $4 million driven by primarily driven by the equity raise in January.
Our product warranty liability continues to remain manageable.
And not material the combination of low failure rates of our troops that allowed us to continue to experience minimal cost for our warranties and still be able to afford to offer valuable tenure and five year warranties to our customers.
As mentioned in previous quarters energy focus is hallmark quality remains a strong selling point for our products.
Products.
And is reflected in our ability to offer these warranties.
In the current environment I would like to provide updates of the impact on COVID-19 on our business. We continue to operate under our customized COVID-19 contingency plan at the company with employees that can alternatively work from.
Plant or from their homes.
James and I have already discussed the impact of silver 19 on our current commercial business, which we continue to experience.
Importantly, we have developed solutions and workarounds for the challenges posed by the pandemic that impact our supply chain. However, as we outlined during the quarter energy.
From focuses entrepreneurial spirit and ability to act quickly has allowed us to develop and offer a compelling new CD portfolio products with more to come which will result in what we expect to be growth with new customers and new and emerging sector of the human centric lighting market.
The combination of our unfocused platform and you received.
The portfolio is a compelling value proposition for any commercial and industrial healthcare and education provider in the United States and frankly for that matter the world.
While there is no doubt that COVID-19 presents a lot of uncertainty for many businesses right now energy focus is DNA continues to be entrepreneurial and we continue to.
Innovate quickly and offer affordable effective and easy to install and use products that customers demand.
Human health and safety are two key objectives, we are very focused on delivering our customers in the short medium and long term. Despite the challenges Cove in 19.
With that we would like to open the call to questions.
And.
Thank you we will now be conducting a question and answer session. If you would like to ask your question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May press star two if you're like turbo of your questions in the queue.
For participants using speaker equipment and may be necessary to pick up your hand.
So before pressing the star.
One moment, please while we poll for questions.
Thank.
Our first question comes from Amir dial with H.C. Wainwright. Please proceed with your question.
Thank you and good morning, everyone. I appreciate you taking revenue how are you.
Hey, good morning, good morning, good morning.
Just.
Understandable that you are sort of moving.
Good Riddance Murphy, ma'am Burton per underneath that James.
Can you talk a little bit about how your commercial sales pipeline is shaping up.
We were the products and the technology behind the U.S.
I feel very promising.
I'm, just trying to get a sense or.
Great.
What sort of capitalism, preventing larger orders really materializing for some of these products.
Yes, I think.
As we mentioned the.
Mitchell lighting, which will be marketed is especially hard hit because that's where.
Project could be calls or.
Or delayed.
As opposed to say new construction, where if you already have a very large projects ongoing you'd probably want to push to finish it anyway.
But I think the new construction market will probably be issued the mix right by most immediately people can build don't have.
Upgrade their lighting play it's not a emergency.
Urgent item, especially when they are handling truly urgent matters such as you know.
The sort of the safety and also a very often unpredictable.
Returns the level, so I think our overall commercial lighting.
Business.
Such as impacted by this very very soft and unpredictable demand right at this point.
And it is true the Infocus is very well received and we continue to be more and more optimistic that it will be the next generation.
Lighting control platform.
For them.
Definitely for retrofit market.
As a potential the OCO for that new contracts or market, because it's just so much simpler and environmental friendly.
But remember this is a new product it needs to be introduced to the market people are our agencies distributors. They're excited about the product they are specifying our products into new products.
Hi Tech that you.
Sure with new projects are not.
Not necessarily their right to be.
In terms of having a clear timeline.
I think that that's the challenge right confronting being a new product and especially knowing that most people are working remotely now it's very hard to actually.
Introduced the product face to face.
Mhm lumber lighting product new machines, you, you'll see how them.
How the product works.
I will be looking and feeling it and we've been trying to do that through our redeem them.
Coals and all that.
But for people to make decisions moving forward.
But it's it's it's a particularly.
Challenging for new products.
But this is why we said that the UBI product is important for us to to feel that the gap.
Temporary basis when.
Lighting retrofit market is still pretty.
Pretty uncertain.
Were already cloudy at the moment.
So so.
We are definitely seeing the demand there and as we've said in offers.
Orders offering focus have been shipped and we continue to receive really good feedback.
About the products and.
It all depends on when the commercial lighting.
In retrofit market could really start.
Coming back.
We are hoping the next stage three to six months.
When people are starting to resume back to more normal activity.
Right and this part of the reason why we are expanding the revenue guidance.
All these pipelines.
As we have seen today.
There's just not enough certainty for us to say yet this is going to come this quarter.
But that's the kind of loose we're running right.
Going into that.
The third quarter, we would expect that we definitely hit the range of $6 million to $7 million, even though.
At the higher end, but in the end, we we coming in at the low end of the guidance right.
And we don't want to repeat that.
And we say that pretty clearly you've made with the combination of the older uncertainty in terms of timing and and supply chain logistics that though that too.
Factors that will still overhang today.
Understood.
And I know you.
You you started sort of sales will be you'll be products. They recently.
Any color or even start selling we just we only introduced them. We haven't started selling we're starting.
In the first.
Core yeah, only the first quarter that we we obviously all I mean, we just obviously started marketing it right. We started to talk to our customers went or what not taking orders yet.
Understood understood right.
Thank you for that.
And then you know the military sales guidance.
Continue to be sort of a backbone.
Who knows your your revenues.
Yes, looking a little further out and good for anyone.
Are you anticipating sort of year over year growth wasn't military sales and for anyone who knows with the visibility you have I know you're not providing guidance, what's the story sure sure sure Oliver.
Yeah.
Right, obviously still hot tally Ah Tony Tony One thing, we said is that the first quarter of the government's fiscal year right.
But what we can say given the order rate and the contract wins, we have been experiencing and.
Throughout this year we.
There's no reason for us to we expect the military sales not being a strong next year now.
If your question is we cannot be growing from this year. This year, it's is poised to grow up 24% over last year. So.
I've got a detailed but.
Based on.
The order rate and contract wins with the experience I would say that it will be a strong year next year and and as I mentioned in the.
Earlier in their earnings call.
Okay.
The defense spending seems to be improving and this is huge.
Modernization plan by the Navy is going to bring a pretty large opportunities in the coming years.
And.
So from that end market demand side and from our competitiveness side pricing both on the positive side.
So all right yeah.
Yes.
Just.
Hi, James that's all I have thank you so much.
Thank you on it.
Thank you. Our next question comes from Aaron Martin with eight A.J.H. investment partners. Please proceed with your question.
Hi, Good morning, James Maureen and good ones are you planning on doing well.
Can you talk a little bit about obviously need launches in the strategies strategies, there and I sort of want to differentiate between the commercial side of it and the consumer side of it.
Because it really two different products.
And then.
What can you tell us about since launch and obviously you have a pre order.
Capability, which is nice on the working capital side have you seen there from the preorder side of things.
Yeah the.
Yeah, we decided that the preorder might not be.
The way to go.
Because it's that we are not open we're not doing until.
January and so we actually are now focusing on the pre ordering of the product on the other hand, we have started selling to basically.
The customer breast introducing the products throughout.
From a channel partner.
And we are organizing we've been organizing.
I would say for.
For the company.
Major marketing campaign starting in December.
For the consumer product.
The consumer products. So far has got a pretty good response.
This based on our own surveys. So you know context, and all that so and the we believe that as we started launching in December we'll get more quickly.
Indication of the interest.
This is why we had to suffer.
Launch in October just so bad.
The public traded company, we can start talking publicly about these products and with that.
Hope I would say pretty good feedback on the product obviously people want to see the product.
We're going to stop.
Shipping how simple.
December.
Before that that really.
In January so I would say in December we will get more concrete indication about the actual interest so far based on our February received is shaping to be a.
Some exciting product.
And the other thing I have to say.
Say that Youre talking about the difference between the commercial products and.
Residential product from Nuvo is the product in the U.S.
Moving disinfection power and that product was designed for both.
Commercial use for small offices right.
Conference rooms, and all of that.
And.
Individual fiscally prudent.
Personally use at home or essentially.
This is.
The impact to our sales could be faster on the residential repaint.
Okay mentioned right.
You can reach out to these individual customers.
Likely these days through social media and marketing campaigns, while the institutions, who are usually take a bit more time to make that decision. So there is a chance that the product nuvo or will have.
After a contribution to our sales and then the other two products and.
Obviously, we are still excited about that the other two products and.
We when you will stocking symposium.
Production samples and all of the three products in December and our goal is to continue to expand our marketing.
First and.
Expand our channel partnership networks.
I realize that UBI product why.
Our existing lighting agencies and distributors in electrical distributors for sure per sale that product that also specialty distributors that.
Terry.
We'll be products that were expanding into.
Okay.
Okay. Thanks for that.
I guess when it comes December or do you have a number of us like.
Type units that you think you're going to be able to get into his your customers in terms of number of distributors and stuff like that I can give you.
Your target to get at.
At least the commercial units.
To get their hands on.
Yeah, well, we are we going to have.
Couple of hundreds and both of those and then now.
So that's that's the plan.
Always going up a couple of a robot.
No we are going to be none this interesting how simple but.
Testing and.
Piloting.
Or the use in some.
Yeah.
I'm now going to be happening in December and.
No I mean in terms of the robots is that a surge kind of distribution channel just because it's a different kind of sale, it's a high ticket price.
Item.
Yeah, it's going very smoothly.
Right. Good question. So so the robot is a high priced items and we believe we're actually very excited about that product.
And.
For large facilities they could definitely on my role bump up the vote.
I'll believe autonomous obviously, you want to have people an operator.
That goes with it.
The up the robot will be able to remember you know the lamps and do that.
Cleaning the themes affecting on its own, but we still need somebody to watch right.
So so.
Open lots facilities you probably.
It's probably worthwhile for you to buy the robot.
Well a lot of smaller facilities.
We are planning a robot disinfection services and that's kind of been nothing planned and I will be piloted in the first quarter.
And we'll have more to share.
When you know when you start to the piloting it services.
And then on the commercial you be this replacement and the fluorescent question is due.
Is it targeted at single small offices, you know 200 square foot offices base of specs or does it added.
Where if you've got a large room with multiple large number of.
Light fixtures, you're replacing 20 for the room and Thats, what you secure the entire room was sleeping right. There yeah. When you talk about the above right the lighting fixtures the mining Chopra right.
But we will have both.
Today, you're talking about Nuvo.
I was talking about.
The lighting the commercial lighting types type commercial lighting troffer, yet that we designed to replace it.
Replace all of the Oh, the two by two two by four or within our LCD driver I mean picture.
No.
Oh good aspects for two were just square feet. My question is is it add it is if you were in a larger much larger than that no yeah, yeah yeah.
All of them so.
Well, usually usually the usually the the two by both insurance covers about hundred square feet, So and Thats, how we get the Oh, we expect.
Change every one of your mining picture that that's how you don't have to design.
Hollywood.
One for disinfection divide the work because it's designed to have two air changes.
Our per.
Picture for that Congress square foot right.
[noise].
Okay.
[music].
Moving on to the balance sheet literally a warrant exercises in the quarter.
A path.
Hi, yes, there there were around them barometer cash flow I'm still not Hum financial.
So a portion of.
But there were also hasn't been on the current quarter.
Okay, and then any any in the in the subsequent events.
Since the end of the quarter did report any subsequent events on that.
Not on that now.
Okay.
Thanks, a lot I appreciate the update.
Okay.
Thank you.
Thank you as a reminder, if you would like to ask the question. Please press star one on your telephone keypad, a confirmation tone on the Capex airline. It then the question you May Press Star Tokyo later move your questions in the queue.
One of.
And while we poll for questions.
Thank you. Our next question comes from Charles leaves.
Evan Investor. Please proceed with your question.
Hi, I was wondering if.
You could give some color to the addition of sales and R&D staff and this last quarter.
Yeah. So on the R&D side, we send it to be but we had a higher for digital engineers.
During the quarter.
And we're pretty much a good there for the clamping salespeople we have actually.
Been hiring people during the quarter.
We still have the.
Two three positions to feel but oh.
We are getting to where we need to be.
For the time being.
Okay. Thank you.
Yep.
There.
Further questions at this time I would like to turn the call back over to management for any closing comments.
Okay. Thank you very much thank everyone again for your time and interest in energy focus we look forward to speaking with you in our next earnings call have a good day.
Okay.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation have a greater.