Energy Focus, Inc.

Good day and welcome to the Energy Focus second quarter 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Brett Moss. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Joining me on the call today is James Tu, Executive Chairman, Chief Executive Officer, and Todd Nestor, President and Chief Financial Officer. Before we begin today's call, I'd like to remind everyone that we'll 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 these 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-K. Okay. in addition to the forward-looking statements in our most recently filed 10Q 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 the adjusted results to the GAAP results are available in the tables attached to the earnings release, which is posted on our corporate website at energyfocus.com in the investor relations section of the site. I'll now turn the call over to James. James, the floor is yours.

Thank you, Brad. Good morning, everyone, and thank you for joining our second quarter 2021 earnings conference call. As we lay out in the earnings release, our second quarter results were impacted by the ongoing challenges for our customers in the lighting retrofit markets, particularly for the commercial markets that continue to face highly uncertain building occupancy and suspended or reduced capital budgets. Simultaneously, our military business was also impacted by delay opportunities due to funding availability of the Navy corresponding to the new defense budget and priority under the new administration. Last but not least, conditions of the global logistics continued to be challenging during the quarter and caused not only shipment delays but also significant increases in our freight costs. It has really been a perfect stone that undercut our sales and impacted our margins. That said, we believe we have not lost the key opportunities we have been pursuing, and since beginning of the third quarter, we have received a few commercial orders that were delayed from the first half of 2021. As vaccinations continue to expand and lockdowns become a thing of the past, We are cautiously optimistic that overall lining retrofit demand, particularly in the education and healthcare markets, might start to stabilize and grow again. In the meantime, NHFocus has continued to innovate in order to adapt to and grow under this new market paradigm. The pandemic has likely impacted occupancy level and usage patterns of commercial buildings for extended periods of time. And therefore, the commercial lighting retrofit market could face challenges and uncertainty until economic lives settle into a new normal. We have strategized and moved quickly and in both steps to develop new innovative products, including primarily our UVC disinfection products and the upcoming SunCycle autonomous circadian lighting system that could address both commercial and consumer markets. in this new paradigm. Fast forward to today, while many commercial buildings are still sitting partially, if not largely, empty, and property owners and tenants are temporarily tabling retrofit projects, consumers are now spending more time at home and are therefore actively seeking ways to make their homes safer and more comfortable. Many of us are also converting parts of our houses into offices, and this requires introducing new equipment or technologies. Remote and hybrid work, a tight labor market, high savings rate and low interest rates are all fueling the spending on home improvement, as we have already seen by the buoyant sales of both online and offline retailers. And we believe that our new lines of products surrounding human-centric lighting that we have been developing over the past 12 to 18 months and are entering the market in the next few months can make homes and offices healthier, more joyful, and more productive while providing energy-focused potential and diversified sales growth opportunities. Expected to come into the market first later in September and October are Nuvo Traveler, a personal tumbler-sized UVC air disinfection device for car and personal use, as well as Nuvo Power, a portable freestanding UVC air disinfection device designed for spaces up to 500 square feet. Those devices were designed to uniquely and powerfully intercept virus in real time and to destroy 99.9% plus of pathogens including influenza and coronavirus and its variants, passing through the devices. These products leverage the scientifically proven germicidal power of ultraviolet light, or UVC, our proprietary aerodynamic designs, and our patent-pending UV blocking technology, and are designed to safely capture and eliminate many contagious pathogens. And unlike traditional air purifiers, they do not require frequent filter changes that could be costly and hazardous. We plan to offer these products initially on our own as well as third-party e-commerce platforms through our channel partners such as First Energy Home and First Energy Advisors, 3UV, and our lighting distributors. as well as directly to large businesses in industries such as ride-sharing, hospitality, healthcare, financial service, and retail franchises. In the meantime, we continue to improve the designs of our above human-centric lighting UVC troffer, as well as MOVE disinfection robot, and we expect to start selling these products later in the fourth quarter as well. In addition, Our patented SunCycle lighting system based on our InFocus lighting control platform won Product of the Year Award from E&E, a prestigious and influential environment and energy technology publication. Due to its ease of installation, use, and maintenance in providing energy-efficient, high-quality, and autonomous circadian lighting capabilities. And we are planning to launch SunCycle products in the fourth quarter of 2021 or early 2022. Circadian lighting has proven to significantly improve sleep, productivity, and overall health through human lumen level and color temperature controls that correspond to the 24-hour circadian rhythm cycle. It is therefore particularly powerful to help improve human well-being experience and quality of life when people are staying at home throughout the whole day into the evening. With SunCycle, we look forward to bringing cost-effective and user-friendly human-centric lighting to both homes and workplaces for the first time. To be sure, regardless of the unexpected military funding delays and the commercial order delays or the ongoing pandemic that continues to impact on our overall business. We are not satisfied with the second quarter results we reported today. That said, we believe the new lines of UV and circadian lighting products that are slated to enter the market over the coming months will enable us to both expand our offerings for the commercial markets, but also address a whole new consumer market. And we expect these could meaningfully contribute to our top and bottom lines starting in the fourth quarter of 2021 and beyond. Due to continuing myriad market uncertainties that we lay out in the earnings release and that I described earlier, we're still not in a position to provide specific financial guidance. However, at this point, we anticipate that sales for the third quarter will be better than the first and the second quarter. And as the UVC products gain sales traction, we expect sales for the second half of 2021 to be better than the first half. Schools, hospitals, and government businesses are already leading the recovery of facility utilization, which should accelerate as daily lives gradually resume to the new normal. And we believe that the climate change and building energy efficiency programs to be implemented starting the coming months and quarters by the current administration will also breathe new life to the overall lighting retrofit market. With that, I'll turn the call to Todd to review our financial performance for the quarter. Todd?