Orion Energy Systems, Inc. (NASDAQ: OESX) (Orion
Lighting), a leading designer and manufacturer of
high-performance, energy-efficient LED lighting products, today
announced preliminary, unaudited financial results for its fourth
quarter (Q4 ’17) and fiscal year ended March 31, 2017.
Preliminary, Unaudited Q4 & FY 2017
Performance
Orion CEO, John Scribante, commented, "Despite overall revenue
growth of 12% and a 27% increase in LED product sales in the first
nine months of fiscal 2017, both Orion and the lighting industry
hit an ‘air pocket’ of lower than anticipated order activity in
Orion’s fourth quarter ended March 31st. This slowdown limited our
FY 2017 revenue growth to 3.5%-4%, or approximately $70.0-$70.4
million, compared to revenue of $67.6 million in fiscal 2016, and
our previously communicated guidance of 10-15% growth.”
Orion’s Q4’17 preliminary, unaudited revenue declined 17-19% to
approximately $15.1-$15.5 million, compared to $18.6 million in Q4
’16. The Q4 ‘17 revenue shortfall was principally the result of the
far slower pace of lighting sales early during the period. Orion’s
FY 2017 performance reflected approximately 17% growth in
energy-saving LED lighting product sales. LED sales rose to
approximately 81% of total lighting product sales in FY 2017, up
from 71% in FY 2016 and increased to approximately 89% of total
lighting product sales in Q4’17, up from 76% in Q4’16.
Orion is not seeing any structural alterations or changes in the
competitive landscape within the industrial LED lighting retrofit
market. In fact, during fiscal 2017, Orion grew its new order
bookings by approximately 15% year over year. Orion’s fiscal 2017
revenue grew despite the expected ongoing decline in its legacy
fluorescent business, which contracted by approximately $6 million;
as well as a year-over-year decline in LED component pricing, which
negatively impacted average selling prices and Orion’s FY 2017
revenue. Looking past these factors, the solid underlying growth in
LED product sales underscores strong confidence in Orion’s market
position and growth prospects.
As others in the LED retrofit industry also experienced, new
order activity decelerated early in Orion’s fourth quarter, as many
customers reevaluated capital spending plans while they assessed
the economic, business, and market sentiment impact of the new U.S.
Government administration and its policies. Orion started to see
budgets begin to be released later in its fourth quarter, but the
pace of rebound proved more measured than expected, leading to the
Q4 ‘17 revenue shortfall. Fortunately, the market is moving towards
a more normal pace of business, and Orion continues to see its
energy-efficiency value proposition resonating with customers, as
confirmed by last week’s announcement of $1.9M in new orders with
the U.S. Navy.
Preliminary Addition to Inventory
Reserves
Given the heightened deceleration in fluorescent lighting and
prior generation LED product sales as a result of more energy
efficient and price-competitive LED alternatives, Orion plans to
record a reserve against its slower moving inventory of $1.5 – $2.0
million in Q4 ‘17. This additional reserve will be reflected as a
charge within cost of sales, reducing gross margin. In the future,
Orion will follow a “build-to-order” model for its fluorescent
products business, helping to insulate the Company from future
fluorescent inventory issues.
As a result of the addition to inventory reserves and lower than
anticipated production activity during the quarter, the gross
margin estimate for FY 2017 is expected to be approximately 25%
versus previous guidance of at or near 30%.
Preliminary Balance
Sheet
On a preliminary, unaudited basis, Orion ended FY 2017 with
approximately $17.3 million in cash and cash equivalents, compared
to $15.5 million at March 31, 2016. Long-term obligations under
Orion’s revolving credit facility were approximately $6.6 million
at March 31, 2017 as compared to $3.7 million at March 31,
2016.
Concluding Remarks
Mr. Scribante added, “Our LED product revenue has grown at a
130% compound annual growth rate to $53.3 million over four years.
That speaks to the strength of our product mix and the clear ROI
benefits of retrofitting to high quality, energy efficient, and
flexible Orion LED solutions. Further, this growth was achieved
amidst a restructuring of our agent network over the past year. We
believe the outlook for the LED lighting retrofit industry and
Orion remains strong, and we are committed to delivering
results.”
About Orion Energy Systems
Orion is a leading designer and producer of energy efficient
lighting and retrofit lighting solutions for commercial and
industrial buildings. Orion manufactures and markets connected
lighting systems encompassing LED solid-state lighting and
intelligent controls. Orion systems incorporate patented
design elements that deliver significant energy, efficiency,
optical and thermal performance that drive financial,
environmental, and work-space benefits for a wide variety of
customers, including nearly 40% of the Fortune 500.
Safe Harbor Statement
Certain matters discussed in this press release, are
"forward-looking statements" intended to qualify for the safe
harbor from liability established by the Private Securities
Litigation Reform Act of 1995. These forward-looking statements may
generally be identified as such because the context of such
statements will include words such as "anticipate," "believe,"
"could," "estimate," "expect," "intend," "may," "plan,"
"potential," "predict," "project," "should," "will," "would" or
words of similar import. Similarly, statements that describe the
Company's future plans, objectives or goals are also
forward-looking statements. Such forward-looking statements are
subject to certain risks and uncertainties that could cause results
to differ materially from those expected, including, but not
limited to, the following: (i) our ability to achieve our expected
revenue, gross margin, net income and EBITDA objectives in fiscal
2017 and beyond; (ii) our ability to achieve and sustain
profitability and positive cash flows; (iii) the availability of
additional debt financing and/or equity capital, and our limited
borrowing capacity under our bank line of credit; (iv) our
development of, and participation in, new product and technology
offerings or applications, including customer acceptance of our new
light emitting diode product lines; (v) deterioration of market
conditions, including our dependence on customers' capital budgets
for sales of products and services and continuing decreases in
prices of LED products; (vi) our ability to compete and execute our
strategy in a highly competitive and rapidly changing LED market
and our ability to respond successfully to market competition;
(vii) our ability to successfully implement our strategy of
focusing on lighting solutions using new LED technologies in lieu
of traditional HIF lighting upon which our business has
historically relied; (viii) adverse developments with respect to
litigation and other legal matters to which we are subject; (ix)
our failure to comply with the covenants in our revolving credit
agreement; (x) increasing duration of customer sales cycles; (xi)
fluctuating quarterly results of operations as we focus on new LED
technologies; (xii) the market acceptance of our products and
services; (xiii) our ability to recruit and hire sales talent to
increase our in-market sales and our ability to pursue an expanded
third-party sales channel through distribution and sales agents;
(xiv) price fluctuations, shortages or interruptions of component
supplies and raw materials used to manufacture our products; (xv)
loss of one or more key customers or suppliers, including key
contacts at such customers; (xvi) our ability to effectively manage
our product inventory to provide our products to customers on a
timely basis; (xvii) a reduction in the price of electricity;
(xviii) the cost to comply with, and the effects of, any current
and future government regulations, laws and policies; (xix)
increased competition from government subsidies and utility
incentive programs; (xx) potential warranty claims; and (xxi) the
other risks described in our filings with the SEC. Shareholders,
potential investors and other readers are urged to consider these
factors carefully in evaluating the forward-looking statements and
are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements made herein are made
only as of the date of this press release and the Company
undertakes no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events
or otherwise. More detailed information about factors that may
affect our performance may be found in our filings with the
Securities and Exchange Commission, which are available at
http://www.sec.gov or
at http://www.orionlighting.com in the Investor Relations
section of the Company's Web site.
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version on businesswire.com: http://www.businesswire.com/news/home/20170425006934/en/
Investor Relations Contacts:Bill Hull, CFOOrion Energy
Systems, Inc.(312) 660-3575orWilliam Jones; David CollinsCatalyst
Global(212) 924-9800oesx@catalyst-ir.com
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