Nexxus Lighting Reports Significantly Higher Second Quarter 2011 Results

CHARLOTTE, N.C., Aug. 12, 2011 /PRNewswire/ -- Nexxus Lighting, Inc. (NASDAQ Capital Market: NEXS) today reported its second quarter 2011 results.  Highlights include:

• Revenue for the quarter increased 206% over Q2 2010 to $4.1 million
• Sales of Array® LED replacement light bulbs increased 647% to $3.2 million
• Launch of Array® to 1,100 Lowe's Home Improvement ("Lowe's") stores completed ahead of schedule
• Expansion of our patent portfolio to 37 patents issued and 30 patents pending

Second Quarter 2011 Performance

Revenue

Total revenue for the three months ended June 30, 2011 increased 206%, or approximately $2,739,000, to approximately $4,066,000 as compared to approximately $1,327,000 for the three months ended June 30, 2010.  

Sales of Array products in the second quarter of 2011 grew more than six-fold or approximately $2,786,000 over the comparable period in 2010.  This growth represents the launch of our Array products for sale through the consumer market channel.  We completed the initial shipments of our Array products to approximately 1,100 Lowe's stores across the United States in the second quarter of 2011.  Lowe's offers seventeen different Array products, including our PAR 38, R30, R16, MR16 and GU10 lamps that have qualified for the Energy Star rating.  The ramp of sales to the consumer market may have adversely affected our ability to service other commercial market customers. Sales to commercial market customers declined as a result.   Sales of Lumificient products decreased 5% from approximately $897,000 in the second quarter of 2010 to approximately $850,000 in the second quarter of 2011 as market conditions softened as compared to the first quarter of 2011.

"Our record Array results for the quarter reflect the expansion of our market strategy into the consumer market channel," stated Mike Bauer, President and Chief Executive Officer.  "While we incurred some unexpected freight and installation costs, we were able to deliver 100% of the product on time to each of the approximate 1,100 stores.  This performance demonstrates our ability to cost-effectively ramp our capacity and profitably service this new channel.  There were challenges faced in this effort, but we overcame them with a team effort that included the support from certain strategic vendors."

"Our attention now turns to supporting the sell-through process of the Array product and expanding this channel," added Mr. Bauer.  "Point-of-sale educational displays and graphics are being created, along with other consumer marketing materials, that highlight the benefits of LED lighting and our Array products in particular.  We will be conducting training sessions with Lowe's commercial sales professionals over the next few months.  Finally, we are working with Lowe's representatives and utilities to pursue rebates for consumer purchases."

Gross Profit

Gross profit for the quarter ended June 30, 2011 was approximately $1,004,000, or 25% of revenue, as compared to approximately $433,000, or 33% of revenue, for the comparable period of 2010.   Direct gross margin, which is revenue less material cost, decreased from 46% in the second quarter of 2010 to 35% in the second quarter of 2011.  This decrease reflects a shift in sales mix to Array products and the impact of launching the Array product line into the consumer market channel.  We do not expect that we will be able to command our historical margins for sales through the consumer market channel.  However, the additional unit volume generated by sales through this channel has allowed us to significantly lower our costs and compete more effectively across all market channels.

In the second quarter of 2011, distribution costs, which include some light assembly costs, increased to approximately $439,000, or 11% of revenue, as compared to approximately $177,000, or 13% of revenue, in the second quarter of 2010.  We were able to leverage the sales growth across our supply chain assets.  In particular, depreciation expense decreased from 11% of Array sales in the second quarter of 2010 to 2% of Array sales in the second quarter of 2011.  Offsetting this improvement were higher freight expenses of approximately $151,000 and an increase in the inventory reserve for Array products of approximately $43,000 over the comparable period of 2010.  As part of the introduction of Array products into the consumer market channel, we agreed to pay certain freight expenses.  

Operating Expenses  

Selling, general and administrative (SG&A) expenses were approximately $1,628,000 for the quarter ended June 30, 2011 as compared to approximately $1,758,000 for the same period in 2010, a decrease of approximately $130,000, or 7%. Selling expenses decreased due to lower payroll expenses of approximately $66,000; lower tradeshow expenses of approximately $46,000; and lower travel expenses of approximately $36,000.

Research and development costs were approximately $214,000 during the three months ended June 30, 2011 as compared to approximately $273,000 during the same period in 2010.  This decrease of approximately $59,000 was primarily due to lower payroll expenses of approximately $14,000 and lower project-related costs of approximately $42,000 in the second quarter of 2011, as compared to the same period of 2010.

Net Loss

Net loss for the three months ended June 30, 2011 and 2010 was approximately $868,000 and $1,884,000, respectively, including a loss from discontinued operations related to the Legacy Commercial and Pool Lighting Businesses of approximately $2,000 in 2011 and approximately $259,000 in 2010.  Basic and diluted loss per common share was $0.05 and $0.12 for the three months ended June 30, 2011 and 2010, respectively. Basic and diluted loss per common share from continuing operations was $0.05 and $0.10 for the three months ended June 30, 2011 and 2010, respectively. Basic and diluted loss per common share from discontinued operations was $0.00 and $0.02 for the three months ended June 30, 2011 and 2010, respectively.

Cash and Recent Activities

As of June 30, 2011, we had cash and cash equivalents of $3,541,000 and long term debt of $2,272,000, net of an unamortized debt discount of approximately $164,000.  Our long term debt consists of promissory notes issued in exchange for our preferred stock in December 2009.  These notes have a principal amount of $2.4 million, bear interest at 1% per annum, mature three years from the date of issuance and are convertible into shares of common stock at a fixed conversion price of $5.33.

During the week ending on July 8, 2011, we utilized a receivable financing program to sell certain receivables and obtained proceeds of approximately $2,602,000.  In conjunction with this financing, we paid financing fees of approximately $9,000 and used the proceeds to pay approximately $1,638,000 to certain strategic vendors who facilitated our sales growth by providing extended terms.

"The launch of Array into the consumer market channel allowed us to demonstrate our ability to manage our working capital requirements," stated Gary Langford, Chief Financial Officer.  "The financing program made available to us and the steps that we took in early July leave Nexxus well-positioned for future growth."  

"I also would like to congratulate our team and strategic vendors for their assistance in the current quarter's growth," added Mr. Langford.  "Across the supply chain, we were able to avoid a lot of costs through planning and communication."

Year to Date 2011 Performance

Revenue

Total revenue for the six months ended June 30, 2011 more than doubled to approximately $5,619,000 as compared to the six months ended June 30, 2010.  Sales of Lumificient products increased approximately $204,000 from approximately $1,820,000 in the first half of 2010 to $2,024,000 in the first half of 2011.  The increase in revenue from Lumificient products reflects growth in national sign programs and other commercial applications.  

Sales of our Array LED lamps more than tripled to approximately $3,595,000 in the first half of 2011 compared to approximately $932,000 in the first half of 2010.  The sales increase of approximately $2,664,000 represents the launch of Array products for sale through the consumer market channel.  In the second quarter of 2011, we completed our initial shipments of Array products to approximately 1,100 Lowe's stores across the United States. Lowe's offers seventeen different Array products, including our PAR 38, R30, R16, MR16 and GU10 lamps that have qualified for the Energy Star rating.  During 2011, we also began modifying our market strategy to target higher direct sale opportunities, including major Energy Service Companies ("ESCOs").

Gross Profit

Gross profit for the six months ended June 30, 2011 was approximately $1,494,000, or 27% of revenue, as compared to approximately $940,000, or 34% of revenue, for the comparable period of 2010.   Direct gross margin, which is revenue less material cost, decreased from 47% in the first half of 2010 to 39% in the first half of 2011, reflecting a shift in sales mix to Array products and the impact of launching the Array product line into the consumer market channel.  We do not expect that we will be able to command our historical margins for sales through the consumer market channel.  However, the additional unit volume generated by sales through this channel has allowed us to significantly lower our costs and compete more effectively across all market channels.

In the first half of 2011, distribution costs, which include some light assembly costs, increased to approximately $682,000, or 12% of revenue, as compared to approximately $345,000, or 13% of revenue, in the first half of 2010.  We were able to leverage the sales growth across our supply chain assets.  In particular, depreciation expense decreased from 10% of Array sales in the first half of 2010 to 3% of Array sales in the first half of 2011.  Offsetting this improvement were higher freight expenses of approximately $176,000 and an increase in the inventory reserve for Array products of approximately $63,000 over the comparable period of 2010.  

Operating Expenses  

Selling, general and administrative (SG&A) expenses were approximately $3,221,000 for the six months ended June 30, 2011 as compared to approximately $3,398,000 for the same period in 2010, a decrease of approximately $177,000, or 5%. This decrease is primarily the result of approximately $104,000 in lower payroll expenses for sales personnel.

Research and development costs were approximately $418,000 during the six months ended June 30, 2011 as compared to approximately $523,000 during the same period in 2010.  This decrease of approximately $105,000 was primarily due to lower payroll expenses of approximately $48,000 and lower project-related costs of approximately $63,000, in the first half of 2011, as compared to the same period of 2010.

Net Loss

Net loss for the six months ended June 30, 2011 and 2010 was approximately $2,197,000 and $4,350,000, respectively, including income from discontinued operations related to the Legacy Commercial and Pool Lighting Businesses of approximately $4,000 in 2011 and a loss of approximately $741,000 in 2010.  Basic and diluted loss per common share was $0.13 and $0.27 for the six months ended June 30, 2011 and 2010, respectively. Basic and diluted loss per common share from continuing operations was $0.13 and $0.22 for the six months ended June 30, 2011 and 2010, respectively. Basic and diluted loss per common share from discontinued operations was $0.00 and $0.05 for the six months ended June 30, 2011 and 2010, respectively.

Nexxus Lighting, Inc.    Life's Brighter!™

For more information, please visit the new Nexxus Lighting web site at www.nexxuslighting.com

Certain of the above statements contained in this press release are forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Reference is made to Nexxus Lighting's filings under the Securities Exchange Act for factors that could cause actual results to differ materially. Nexxus Lighting undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.  Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements.

SOURCE Nexxus Lighting, Inc.