Financial Highlights:

Record quarterly net sales of $18.3 million represents year-over-year growth of 151.0 percent

Record quarterly gross margin of 49.8 percent represents 15.6 percentage points of improvement, year-over-year

Record quarterly operating income of $3.7 million represents a $3.4 million year-over-year increase, or 1,076.4 percent, from $318 thousand in the third quarter of 2014

Record quarterly net income of $4.3 million, or $0.40 per diluted share, including net tax benefit of $651 thousand, represents a $4.7 million year-over-year increase from the prior year’s third quarter loss

Net sales of commercial products increased 66.8 percent to $3.3 million compared to $2.0 million in the third quarter of 2014

Ended the quarter with $35 million in cash, reflecting the sale of 1.5 million new shares at a price to the public of $17 per share, raising $23.6 million in net proceeds to the company

Operational Highlights:

Expanded penetration in the healthcare market, including a long-term contract award from one of the largest global healthcare institutions to retrofit its main campus in Northeast Ohio with tubular LEDs ("TLEDs")

Added 5 retail chain operators with over 1,000 combined locations as new customers

Continued to expand our partnership with U.S. Green Building Council and added 15 school districts as customers in four states

Opened new operations center in Taiwan to better leverage and collaborate with the company’s supply chain in the Far East to expedite product development, ensure quality standards and further advance our technology and product leadership position

Disposed of Crescent Lighting Limited, former U.K. subsidiary

"Our continuing rapid year-over-year growth in sales and profits during the third quarter reflect the steadfast focus and tireless dedication of our teams in bringing high quality and customer centric TLED products to targeted industry verticals," said James Tu, Executive Chairman and Chief Executive Officer of Energy Focus, Inc. "In addition to robust sales of products for the U.S. Navy, which has now reached a fleet penetration rate of approximately 30%, during the quarter, we started to register significant year-over-year, as well as quarter-over-quarter, growth in commercial sales, after more than 18 months of persistent and steady account and pipeline building, which is accelerating as we augment our business development and sales force. Our gross margins also grew during the quarter due to increased operational efficiency, as well as strengthened buying power resulting from higher unit volumes."

"Our most exciting sales development during the quarter was the entry into a multi-million-dollar LED retrofit contract by a leading, global healthcare institution with initial product deliveries expected in the fourth quarter this year. This milestone win has ignited considerable interest in our products and helped initiate and expand our pipeline of opportunities from numerous hospital chains across the country. As a result, we believe that we will be able to score more wins, accelerate LED adoption and establish a distinct leadership position in the healthcare industry over the coming quarters and years to markedly improve hospitals’ environments for better sustainability and health wellbeing," Mr. Tu added.

"Also during the third quarter, we successfully closed on a follow-on offering of our common stock, which strengthened our balance sheet further and enabled us to not only fund the working capital for our continuing, exponential growth but also move forward, in the most timely manner, on several strategic growth initiatives, most notably of which include accelerating the build-out of our direct sales force across regions and verticals, expanding our "Made in America" product lines, and making attractive financing alternatives available for qualified customers," continued Mr. Tu.

Mr. Tu concluded, "In addition to record financial performance, we are gratified by the expanding financial and sustainability impacts Energy Focus is facilitating for our customers and for the environment. We have made, and will continue to make, significant and increasing investments in our people, sales and distribution channels, as well as all aspects of our internal infrastructure, to further our goal of creating the most exciting, purposeful, and trusted organization in the rapidly evolving lighting industry to support our ongoing growth, brand building and community transformation."

Financial Results:

During the third quarter of 2015, the Company reclassified the results of its former United Kingdom subsidiary, Crescent Lighting Limited ("CLL"), as well as its former turnkey solutions business, Energy Focus LED Solutions, LLC ("EFLS"), to discontinued operations on its condensed consolidated financial statements. CLL was sold for a nominal amount in August 2015, and we had ceased entering into contracts and all outstanding warranty obligations relating to EFLS expired during the third quarter. Discontinued operations also include legal fees incurred for a dispute between the Company and the party that purchased its pool products business in November 2013. A table summarizing the preliminary, unaudited reclassified results to reflect discontinued operations for prior periods is included at the end of this release. These results may not include additional adjustments that may be made when final audited financial statements are prepared to reflect this reclassification.

Net sales of $18.3 million for the third quarter of 2015 increased 151.0 percent compared to the third quarter of 2014. The increase was due to continued sales of our government products for the U.S. Navy, as well as an increase in commercial product sales. Net sales of our commercial products increased 66.8 percent compared to the third quarter of 2014 as we continued to penetrate the markets we are targeting.

Gross profit was $9.1 million, or 49.8 percent of net sales, for the third quarter of 2015, compared to $2.5 million, or 34.2 percent of net sales for the third quarter of 2014. The increase was due primarily to engaging new suppliers to lower our product costs as we increase sales volumes, performing value analysis/engineering processes, and our continuous development of operating efficiencies.

Operating income was $3.7 million for the quarter compared to $318 thousand in last year’s same period, a $3.3 million improvement. Net income was $4.3 million for the third quarter of 2015, or $0.40 per diluted share, representing 23.3 percent of net sales, compared a net loss of $403 thousand, or a loss of $0.05 per diluted share, for the same period last year. Third quarter 2015 net income included a net tax benefit of $651 thousand that was not present in the prior year’s quarter, which was partially offset by a loss of $142 from discontinued operations, compared with a loss from discontinued operations of $659 in the prior year’s same period.

For the first nine months of 2015, net sales of $47.2 million increased 240.3 percent compared to the first nine months of 2014. Gross profit year-to-date was $21.7 million, or 46.1 percent of net sales, compared to $4.6 million, or 33.1 percent of net sales for the nine months ended September 30, 2014. Net income was $7.5 million for the 2015 first nine months, compared to net loss of $5.1 million for the nine months ended September 30, 2014.

Cash was approximately $35.0 million at September 30, 2015, compared with $7.4 million as of December 31, 2014. Cash provided by operating activities was $2.8 million for the first nine months of 2015. For the first nine months, cash provided by operations was the result of net income earned of $7.5 million, offset by higher trade accounts receivable due to the timing of shipments during the period, as well as purchases of inventory to meet the increased demand for our LED products.

Business Outlook:

While quarterly results will vary and fluctuate due to order and delivery timing, the Company believes it will achieve net sales growth in excess of 100 percent in 2015 over 2014 without taking into account discontinued operations with respect to 2014. Additionally, gross margins are expected to remain above the Company’s targeted 35 percent for 2015.