Expediting LED Lighting Adoption For Businesses

Transcription

1 Expediting LED Lighting Adoption For Businesses 1

2 Safe Harbor Statement This presentation may contain some statements that may be considered forward-looking statements. These forward-looking statements may include statements relating to financial projections or other statements relating to the company s plans, objectives, expectations or intentions. These matters involve risks and uncertainties, and actual results may differ materially from those projected or implied in the forward-looking statements. Factors that could cause actual results to materially differ from the forward-looking statements in this presentation are set forth in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, and include our ability to gain market share in the LED lighting retrofit market and grow our sales; the ability to realize the anticipated benefits of recent changes to the structure of the business; our ability to manage expenses and unforeseen adverse competitive, economic or other factors that may impact our cash position; our ability to establish and maintain a competitive advantage in the LED lighting retrofit market and respond effectively as new lighting technologies and market trends emerge; our ability to ship orders in our backlog; among others. 2

3 Three Decades of Advanced Lighting Development Extensive understanding in electronics, optical design and thermal management that are key to LED lighting systems $53 million in development contracts from U.S. government agencies since 2002 A Leading, Disruptive LED Lighting Solutions Provider For Government and Businesses Design, develop and manufacture the only approved LED fluorescent replacement lamps for the U.S. Navy Highlights Leading the estimated ~$3B maritime market(1) with proven know-how in developing marine LED applications Provide an industry leading, high-performance (130 lumen per watt) and low-cost LED fluorescent replacement lamps for commercial and industrial markets Estimated 1.8 billion socket(2) ($26B(1)) replacement market in the U.S. and well over $100B(1) worldwide Direct sales, supported by distribution networks, provides cost and service advantages Provide high performance, low cost, client centric (HPLC) LED lighting retrofit solutions Path to Profitability 2013 restructuring included divestiture of non-core assets, new leadership and LED tube focus Return to growth, expanding margins, projected to be EBITDA positive for 2H 2014 (1) (2) Company estimate US Department of Energy (DOE) 3

4 LED Lighting Retrofit Creates Significant Energy Savings in Buildings Source: U.S. Department of Energy, Advanced Energy Retrofit Guide, Office Buildings,

5 C&I Accounts for 70% of Lighting Energy Use & Produces 90% of The Lumens Residential Commercial Industrial Number of Lamps Energy Use Lumen Production Source: LED Lighting in Buildings: , Memoori. 5

6 TLED Products Have Potential To Reduce >3% Energy Use Today Percentage of U.S. Energy Production/Consumption 14.0% 12.0% 10.0% 8.0% TLEDs Can Reduce 50-75% of Energy Used in FL and HID The investment for substituting incandescent or fluorescent lighting with LED is a fifth of the investment for installing solar power based on CO2 reduced* 6.0% 12.0% 8.4% 4.0% 6.3% 2.0% 0.0% 0.2% Solar 1.2% Wind FL & HID C&I Lighting Source: Smil, V The long slow rise of solar and wind. Scientific American 282 (1):52-57; EIA 2013 Energy Book; Lighting The Way 2013, McKinsey Inc. 6

7 Technology Leadership Energy Focus has a long heritage in lighting technology & LED lighting development capabilities LED lighting R&D since 2002 with Navy funded and approved lighting research lab 79 lighting related patents awarded or in application Complete and advanced LED lighting design and testing capabilities, including lighting system engineering, photometry testing, electronic design & testing and electrical engineering 7

8 Leading & Proven LED Product Lines Three decades of advanced lighting development Military & Maritime Products Military IntelliTube Military Globe Lights Military Berth Light HazGlobe Lights 100% of our military LED lighting systems are still running after 7 years Commercial & Industrial Products LED Tubes or T-Lamps Vapor Tight Lighting High-Bay Lighting Retrofit Kit Dock Light 99.8% of our LED lighting systems are still running after 4+ years 8

9 LED Lighting s Disruptive Growth Path* 150 LPW 130 LPW 100 LPW Source: eia Annual Energy Outlook * Energy Focus internal analysis 9 9

10 Large and Growing Addressable Markets Targeting the estimated $25 billion1 US C&I market for retrofits of troffers, high-bay and parking luminaires Outdoor Luminaires Indoor Lamps A-Type Directional Decorative MR16 Down lights Troffers HighBay Parking Streetlight Parking: $1.9 Billion High Bay: $5.5 Billion Troffer: $18.4 Billion (1) Adoption of Light-Emitting Diodes in Common Lighting Applications, DOE, May 2013; Long term average lamp and fixture prices estimated by Energy Focus. 10

11 Estimated Global Fluorescent Retrofit Market >$100 B Commercial Industrial Outdoor Residential Total Global Sockets 4.3 Billion 1.1 Billion 500 Million 2.6 Billion 8.5 Billion Percentage 51% 13% 5% 31% 100% Commercial and Industrial Opportunity : 5.4 Billion Sockets or 64% of All Sockets Source: DOE Report: Adoption of Light-Emitting Diodes in Common Lighting Applications, 2013, Long term average lamp and fixture prices estimated by Energy Focus 11

12 Global LED Lighting Penetration Accelerating LED lighting growth rates entering projected steep growth curve LED Lighting Penetration Source: NPD DisplaySearch LED Lighting Market and Forecast Report, Oct

13 LED Lighting Penetration Remains Negligible Troffer Light Sources 2010 Troffer Light Sources 2013 <1% LED 1% LED LFL LFL LED LED 99% LFL 100% LFL High Bay Light Sources 2010 High Bay Light Sources % LFL 41% LFL 59% HID 57% HID <1% LED LFL LED HID 2% LED LFL LED HID Source: US DOE Adoption of Light-Emitting Diodes in Common Lighting Applications April 2013, Revised May Data provided through 2012 and estimated by EFOI for

14 Appealing payback surpassing inflection point LED lighting market expected to continue to follow Haitz law* with lumens/$ falling 20-30%/year Electricity cost expected to rise faster to further shorten LED payback Payback for our TLEDs (tube LED) is now <3 years in most parts of the U.S. and Europe Continuing efficiency gains and price drops Multiple Forces Supporting LED Adoption Coal fire power plants being retired; new generation capacity dwindling in the next 5 years; more expensive renewables generate only minimal capacities Expanding government and business carbon reduction initiatives Stringent EPA rules (cutting 30% carbon emissions by 2030) and aggressive corporate sustainability goals encourage institutions to turn to LEDs to reduce energy use drastically and immediately * Named after and developed by Dr. Ronald Haitz, the Haitz Law states that every decade the cost per lumen falls by a factor of 10, and the amount of light generated per LED package increases by a factor of 20 for a given wavelength of light. 14

15 Electricity Rates Increasing Sustained growth in electricity rates leads to more attractive LED retrofit ROIs 15

16 New Power Generation Capacities Decreasing Efficiency measures expected to be more important tool to meet growing power demand in a capacity constrained market Ex: Electricity rates at FirstEnergy's Pennsylvania utilities were raised 25-50% on June 1st, * Source: Energy Information Administration 2014 Energy Outlook. 16

17 Corporate Sustainability Supports LED Adoption Corporate sustainability viewed as significant driver of adoption above and beyond simple ROI calculations 17

18 Four-Prong Growth Strategy Pursue clearly defined market segments We only focus on market segments where we believe we have the opportunity to produce the highest, profitable growth with overwhelming success. For example we are: continuing to seek to aggressively penetrate the government and military lighting markets through our distribution partners, direct sales force and online presence, and continuing to develop mainstream lighting technologies that directly compete against linear fluorescent general illumination lamps and that lead the TLED retrofit market from quality, reliability and price standpoints. Provide the most compelling value propositions Our products/services seek to bring the highest performance, lowest cost and client centric (HPLCCC) features as we continue to strengthen our services and value added to our customers by providing comprehensive LED solutions capabilities. Sell direct Avoiding multiple layers of distributors, we build our own distribution networks directly with end users to optimize services and prices. We are penetrating the lighting retrofit market of existing buildings by adding sales associates and expanding geographical reaches in both the U.S. and U.K. markets. Inventory availability By focusing only on the government and C&I sectors (80%+ of lighting needs can be served by our TLEDs), we maintain far fewer SKUs that are available and sold quickly 18

19 Specific Target Markets Military & Maritime Commercial & Industrial U.S. Navy Foreign Navies Commercial ocean-liners Hazardous lighting Federal ESCOs GSA contracts Military bases ESCO National Accounts National retailers Regional Accounts Property managers/reits Parking garages SMUSH--States, Municipalities, Universities, Schools & Hospitals Turnkey Solutions: Channel partners for SMBs Financing facility providers Legend Green: leading the markets Orange: expanding successes Blue: early entrance 19

20 Military Growth Opportunity U.S. Navy After 10 years of Navy sponsored development, Energy Focus was awarded a $23 million contract to supply the Navy with its proprietary LED lamps and fixtures, including Intellitube Green Fleet Initiative: U.S. Navy is investing $2 billion to increase energy efficiency by 2016 with LED lighting being a key initiative. Funded R&D: USG has awarded $53 million in R&D contracts to Energy Focus since 2002 First-Mover Advantage: Having been working with the Navy since 2003, EFOI is the only Navy mil-spec qualified LED replacement lamp provider with zero failures since first installation in 2007 Sales Momentum: With a U.S. Naval fleet of 270 large vessels, EFOI has seen orders grow from 10 to over 140 vessels in the past year* * In most instances initial orders represent only a small portion of the potential opportunity per ship 20

21 Maritime Market With its long history of government development contracts and track record with the US Navy, EFOI believes it is uniquely positioned to target the $4 billion estimated maritime market Military & Maritime Mkts Non-Military U.S. Navy MSC Coast Guard Hazardous Lighting M&M Global Market* $2.9 Billion $350 Million $210 Million $70 Million $500 Million * Energy Focus, Inc. market study,

22 Highly Targeted And Direct Sales Strategies C-Suite Selling Targeting corporate key decision makers who understand ROIs and make investment decisions Expanding teams of advisors, directors, channel partners and pleased clients referring leads in both military and commercial markets Focusing on geographic areas with payback below 3 years Northeast, Midwest, West Coast Above average power rates and strong rebate programs in place Seek and lead less contested markets where our TLED offerings are clear choices National Retailers: Directly targeting top 150 national retailer chains in the U.S. with over 1,000 stores each Property Managers (9 billion square feet in the US): Targeting top property management companies as well as REITs Hospitals (~5,700 in the U.S.): 24-hour operations with payback are generally below 2 years Higher education institutions (~4,000 in the U.S.): Sustainability and educational quality emphases 22

23 Direct Sales Network Expediting LED Adoption Price advantages Eliminating 2-3 layers of mark up through traditional distributor networks Enabling us to offer better performance AND lower cost products Motivated and educated sales force Rigorous recruiting and training processes and continuing education to ensure quality sales and services Rapid industry changes accentuate the information edge and adaptability of in-house sales Customization capability Our integrated service model combines product and solution capabilities provide customized services that ensure solution optimization and client satisfaction Financing options Offering financing and innovative power sharing agreement (PSA) that could motivate buying decision or expedite sales process 23