Orion Energy Systems, Inc. (NASDAQ:OESX) (Orion), a leading
designer and U.S. manufacturer of high-performance,
energy-efficient LED lighting products, today reported results for
its fiscal 2018 first quarter (Q1’18) ended June 30, 2017. Orion
will hold an investor call today at 10:00 a.m. ET (9:00 a.m. CT) to
review its results and plans to drive growth and accelerate its
path to profitability. Call details below.
Highlights
- Orion’s agent driven distribution channel delivered on-plan
revenue performance in Q1’18, however total revenue in the period
was lower than expected due to delays in closing a few larger
national account orders, which we still expect to close in fiscal
2018. Q1’18 performance also reflected a $2.3 million
decrease in Fluorescent lighting product sales versus Q1’17.
- LED lighting product revenue continued to grow as a percentage
of total lighting product revenue, rising 1,283 basis points to
89.7% in Q1’18 from 76.9% in Q1’17.
- Orion implemented the majority of its identified cost reduction
initiatives during Q1’18 and remains on track to reduce overall
operating expenses by $3.5-$4.0 million on an annualized
basis.
- Including one-time employee separation costs of $1.8 million
related to the cost reduction initiatives, general and
administrative expenses increased to $5.3 million in Q1’18 from
$3.9 million in Q1’17. Excluding these costs, general and
administrative expenses would have decreased by 9% over Q1’17.
(in millions except %) |
Q1’18 |
Q4’17 |
Q3’17 |
Q2’17 |
Q1’17 |
Q4’16 |
Q3’16 |
Q2’16 |
Revenue |
$ |
12.6 |
|
$ |
15.3 |
|
$ |
20.6 |
|
$ |
18.7 |
|
$ |
15.6 |
|
$ |
18.6 |
|
$ |
16.8 |
|
$ |
15.7 |
|
Gross Margin |
|
21.6 |
% |
|
6.0 |
% |
|
29.9 |
% |
|
33.4 |
% |
|
25.8 |
% |
|
24.9 |
% |
|
28.1 |
% |
|
18.5 |
% |
Cash & equivalents |
$ |
8.5 |
|
$ |
17.3 |
|
$ |
19.1 |
|
$ |
18.7 |
|
$ |
14.2 |
|
$ |
15.5 |
|
$ |
17.5 |
|
$ |
13.4 |
|
CEO CommentaryOrion CEO Mike
Altschaefl, commented, “While Q1 was challenging from a revenue
standpoint, we believe our performance was principally a reflection
of the normal variability of our business on a quarterly basis
driven by the timing and size of larger orders. We expect to see
the positive side of this variability in the future, and are also
very pleased with the solid execution in our expanding agent driven
distribution channel. Given its far broader and deeper reach, this
channel offers Orion strong mid and long-term growth potential.
“In support of that effort, we recently appointed Kevin Grayson
as Senior Vice President for Channel Sales. Kevin brings to
Orion over 20 years of lighting industry sales management
experience with several industry-leading manufacturers and
manufacturer’s rep agencies. He has particular expertise
managing an agent driven distribution model and will be responsible
for overseeing this channel for Orion.
“We are optimistic about our opportunity to generate significant
revenue performance from our national accounts over the full fiscal
year.
“We are also focusing on our bottom-line, making solid progress
in our efforts to trim $3.5 to $4.0 million in costs from our
annual operating expenses. These cuts reach across the entire
organization, including management and board compensation, and will
be substantially implemented by the end of Q2’18. Thereafter, we
expect that the full benefit of these actions combined with
expected progress in our expanded sales efforts to enable Orion to
reach our goal of achieving break-even EBITDA, before non-recurring
items, by Q4'18.
“We are seeing many potential customers reengage in their review
of LED lighting opportunities. The performance and value
proposition of our product lines are being very well received by
both our agent driven distribution channel and our national
accounts. Together, these dynamics support our confidence in our
competitive position in this very large and evolving industry, and
we remain excited and optimistic regarding Orion’s business
performance in fiscal 2018.
“We also have some new and exciting products that we are
launching this month, focusing on three main objectives:
- Increasing our competitive product footprint with the agent
driven distribution channel and entry-level focused buyers
- Leveraging existing platforms and expanding options to increase
our market opportunity
- Leveraging our experience in control and IoT solution
adaptability through new modular plug and play solutions
“Part of our new product launch includes a new modular sensor
platform that expands our ability to adapt to a wide range of
available control options, from basic controls to advanced IoT
solutions, all in a modular plug and play fashion. This
technology and approach allows the customer to deploy sensor
technology exactly where and when they want in their facility.”
Mr. Altschaefl added, “Our core value proposition remains
unchanged and is centered around four pillars of commitment that
differentiate Orion from the competition:
- Industry leading product performance, energy efficiency, and
thought leadership – delivering more rapid ROI and future proof
lighting options
- Genuine, high-quality, high-touch customer service
- Flexibility and nimbleness in responding to customer needs,
including specialty design, development, prototyping, and
production – which larger competitors cannot match
- Rapid response local-to-local production operations delivering
the quality and reliability our customers expect – typically in 10
days or less
“Our entire organization is dedicated to achieving these
standards each and every day, and we have a strong track record of
achievement that we proudly post on our website in real time
(www.orionlighting.com/quality-and-reliability). While
price always plays a role, knowing that you can rely on Orion to be
there with solid solutions, service and high touch interaction and
support will always be a major competitive advantage and one that
we believe will lead to success.”
Q1 2018 OverviewOrion initiated a companywide
realignment during Q1’18 which included the appointment of Mike
Altschaefl as CEO and an initiative to cut $3.5 - $4.0 million in
annualized operating expenses versus fiscal 2017. Orion continued
to build out its agent driven distribution channel which delivered
on-plan revenue performance in Q1’18, with revenue of $5.5 million
or 47% of total product revenue. However, due to delays in the
closing of a few larger contracts that are still anticipated for
later this year, combined with one-time expenses related to the
cost and management realignment, Orion’s Q1’18 financial
performance did not meet the Company’s growth or profitability
expectations.
Revenue: Orion’s Q1’18 revenue declined 19.7% to $12.6 million,
principally reflecting lower national account activity,
particularly due to the timing of a few large customer
opportunities that offset the as expected performance in the
Company’s agent driven distribution channel. Revenue from
fluorescent lighting products decreased $2.3 million
year-over-year, representing 75% of the $3.1 million revenue
decline.
LED Revenue: LED lighting product revenue was $10.4 million in
Q1’18 or 90% of total lighting product revenue versus $11.6 million
or 77% of total lighting product revenue in Q1’17.
Gross Margin: Despite a solid improvement in raw lighting
product gross margin, total gross margin declined to 21.6% in
Q1’18, driven by lower volume and the inability to leverage our
overhead costs.
Net loss: Orion’s Q1’18 net loss increased to $6.6 million, from
$2.9 million in Q1'17, principally due to the impact of reduced
revenue on Orion’s fixed cost structure, along with one-time
severance and other costs totaling $1.9 million in Q1’18, as well
as approximately $0.4 million in additional sales and marketing
expenses to support Orion’s revenue growth goals for fiscal
2018.
EBITDA: Orion’s EBITDA loss was $6.0 million in Q1’18 reflecting
the above factors, compared to its Q1’17 EBITDA loss of $2.5
million.
Cash Flow: Orion used $5.8 million in cash from operating
activities in Q1’18, principally reflecting its net loss, including
$1.3 million of cash payments for employee separations related to
the reorganization and cost savings initiatives. In addition, Orion
paid down approximately $2.8 million of its revolving credit
facility during the quarter.
Balance Sheet: At the close of Q1’18 Orion had $8.5 million in
cash and cash equivalents and $3.9 million in borrowings under its
revolving credit facility. Net working capital was $16.9 million,
and Orion’s shareholder equity was $29.2 million or $1.02 per
outstanding share (calculated by dividing shareholder’s equity by
common shares outstanding at the end of the quarter.)
Fiscal 2018 OutlookBecause
Orion management does not believe there is sufficient visibility
into the timing of future industry demand trends, the Company is
not providing specific financial guidance for fiscal 2018. However,
management does remain optimistic about the Company’s business
prospects and is reaffirming its earlier directional outlook and
goals for fiscal 2018 as follows:
Orion continues to believe that its agent driven
distribution model, combined with improved performance in its
national account sales activities, should enable the Company to
achieve its revenue growth goal of 10-15% for full year fiscal
2018.
Based on this revenue growth range, combined
with the cost reduction initiatives, Orion continues to target
goals of achieving a 30% gross profit margin and breakeven earnings
before interest, taxes, depreciation and amortization (EBITDA),
before non-recurring items, by its fiscal 2018 fourth quarter.
Because the Company’s quarterly performance can
and likely will vary materially from period to period, Orion
reminds investors that its full-year financial goals are targets –
not implied guidance. Orion will revisit its fiscal 2018
directional outlook and financial goals each quarter and update
them as appropriate.
Conference Call
Details: |
|
|
|
|
Date /
Time: |
|
|
|
Today, Friday, August
4, 2017 at 10:00 a.m. ET (9:00 a.m. CT) |
Call
Dial-In: |
|
|
|
(877) 754-5294 or (678)
894-3013 for international |
Live
Webcast/Replay: |
|
|
|
http://investor.oriones.com/events.cfm |
Audio Replay:
|
|
|
|
(855) 859-2056,
conference ID: 53589551 (available shortly after the call
through 08/11/2017) |
About Orion Energy SystemsOrion
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.
Non-GAAP MeasuresIn addition to
the GAAP results included in this presentation, Orion has also
included the non-GAAP measure, EBITDA (earnings before
interest, taxes, depreciation and amortization) as a measure of its
quarterly performance. The company has provided this
non-GAAP measure to help investors better understand its core
operating performance, enhance comparisons of core operating
performance from period to period and allow better comparisons of
operating performance to its competitors. Among other things,
management uses EBITDA to evaluate performance of the businesses
and believes this measurement enables it to make
better period-to-period evaluations of the financial
performance of core business operations.
The non-GAAP measurements are intended only as a
supplement to the comparable GAAP measurements and the company
compensates for the limitations inherent in the use
of non-GAAP measurements by using GAAP measures in
conjunction with the non-GAAP measurements. As a result,
investors should consider these non-GAAP measurements in
addition to, and not in substitution for or as superior to,
measurements of financial performance prepared in accordance with
generally accepted accounting principles.
Safe Harbor Statement
Certain matters discussed in this press release, including under
“CEO Commentary”, “Q1 2018 Overview,”, and “Fiscal 2018 Outlook”
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 growth, gross margin and EBITDA objectives in fiscal 2018
and beyond; (ii) our ability to achieve profitability and positive
cash flows; (iii) our levels of cash and our limited borrowing
capacity under our revolving line of credit; (iv) the availability
of additional debt financing and/or equity capital; (v) our
increasing emphasis on selling more of our products through third
party distributors and sales agents, including our ability to
attract and retain effective third party distributors and sales
agents to execute our sales model; (vi) our ability to develop and
participate in new product and technology offerings or applications
in a cost effective and timely manner; (vii) our ability to manage
the ongoing decreases in the average selling prices of our products
as a result of competitive pressures in the evolving LED market;
(viii) our ability to manage our inventory and avoid inventory
obsolescence in a rapidly evolving LED market; (ix) our lack of
major sources of recurring revenue and the potential consequences
of the loss of one or more key customers or suppliers, including
key contacts at such customers; (x) our ability to adapt to
increasing convergence in the LED market; (xi) our ability to
differentiate our products in a highly competitive market; (xii)
the deterioration of market conditions, including our dependence on
customers' capital budgets for sales of products and services;
(xiii) our ability to complete and execute our strategy in a highly
competitive market and our ability to respond successfully to
market competition; (xiv) our increasing reliance on third parties
for the manufacture and development of products and product
components; (xv) our ability to successfully implement our strategy
of focusing mainly on lighting solutions using LED technologies;
(xvi) the market acceptance of our products and services; (xvii)
our ability to realize expected cost savings on the timetable and
amounts expected from our cost reduction initiatives; (xviii)
adverse developments with respect to litigation and other legal
matters pursuant to which we are subject, including the ongoing
litigation initiated against us by our former chief executive
officer; (xix) our failure to comply with the covenants in our
revolving credit agreement; (xx) our fluctuating quarterly results
of operations as we focus on new LED technologies and continue to
focus investing in our third party distribution sales channel;
(xxi) our ability to recruit, hire and retain talented individuals
in all disciplines of our company; (xxii) price fluctuations,
shortages or interruptions of component supplies and raw materials
used to manufacture our products; (xxiii) our ability to defend our
patent portfolio; (xxiv) a reduction in the price of electricity;
(xxv) the cost to comply with, and the effects of, any current and
future government regulations, laws and policies; (xxvi) potential
warranty claims in excess of our reserve estimates; (xxvii) our
inability to timely and effectively remediate any material
weaknesses in our internal control of financial reporting and/or
our failure to maintain an effective system of internal control
over financial reporting and (xxviii) 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://investor.oriones.com/ in the Investor Relations section of
the Company's Web site.
Investor Relations Contacts:
Bill Hull, CFOOrion Energy Systems, Inc.(312)
660-3575ir@oesx.com
William Jones; David CollinsCatalyst IR(212) 924-9800 or
oesx@catalyst-ir.com
Twitter:
@OrionLightingIRStockTwits:
@Orion_LED_IR
ORION ENERGY SYSTEMS, INC. AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(in thousands, except
share and per share amounts) |
|
|
|
|
|
Three Months Ended June 30, |
|
|
2017 |
|
2016 |
Product revenue |
|
$ |
11,781 |
|
|
$ |
15,352 |
|
Service revenue |
|
777 |
|
|
282 |
|
Total
revenue |
|
12,558 |
|
|
15,634 |
|
Cost of product
revenue |
|
8,813 |
|
|
11,419 |
|
Cost of service
revenue |
|
1,034 |
|
|
189 |
|
Total
cost of revenue |
|
9,847 |
|
|
11,608 |
|
Gross
profit |
|
2,711 |
|
|
4,026 |
|
Operating
expenses: |
|
|
|
|
General and
administrative |
|
5,335 |
|
|
3,901 |
|
Sales and
marketing |
|
3,354 |
|
|
2,895 |
|
Research and
development |
|
524 |
|
|
481 |
|
Total
operating expenses |
|
9,213 |
|
|
7,277 |
|
Loss from
operations |
|
(6,502 |
) |
|
(3,251 |
) |
Other income
(expense): |
|
|
|
|
Other income |
|
— |
|
|
100 |
|
Interest expense |
|
(67 |
) |
|
(70 |
) |
Interest income |
|
5 |
|
|
10 |
|
Total
other (expense) income |
|
(62 |
) |
|
40 |
|
Loss before income
tax |
|
(6,564 |
) |
|
(3,211 |
) |
Income tax benefit |
|
— |
|
|
(271 |
) |
Net
loss |
|
$ |
(6,564 |
) |
|
$ |
(2,940 |
) |
|
|
|
|
|
Basic net loss per
share attributable to common shareholders |
|
$ |
(0.23 |
) |
|
$ |
(0.11 |
) |
Weighted-average common
shares outstanding |
|
28,455,434 |
|
|
27,885,588 |
|
Diluted net loss per
share |
|
$ |
(0.23 |
) |
|
$ |
(0.11 |
) |
Weighted-average common
shares and share equivalents outstanding |
|
28,455,434 |
|
|
27,885,588 |
|
ORION ENERGY SYSTEMS, INC. AND
SUBSIDIARIES UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands,
except share amounts) |
|
|
|
|
|
June 30, 2017 |
|
March 31, 2017 |
Assets |
|
|
|
Cash and cash
equivalents |
$ |
8,485 |
|
|
$ |
17,307 |
|
Accounts receivable,
net |
7,040 |
|
|
9,171 |
|
Inventories, net |
12,266 |
|
|
13,593 |
|
Deferred contract
costs |
1,704 |
|
|
935 |
|
Prepaid expenses and
other current assets |
3,093 |
|
|
2,877 |
|
Total
current assets |
32,588 |
|
|
43,883 |
|
Property and equipment,
net |
13,638 |
|
|
13,786 |
|
Other intangible
assets, net |
4,065 |
|
|
4,207 |
|
Other long-term
assets |
118 |
|
|
175 |
|
Total
assets |
$ |
50,409 |
|
|
$ |
62,051 |
|
Liabilities and
Shareholders’ Equity |
|
|
|
Accounts payable |
$ |
9,608 |
|
|
$ |
11,635 |
|
Accrued expenses and
other |
5,128 |
|
|
5,988 |
|
Deferred revenue,
current |
823 |
|
|
621 |
|
Current maturities of
long-term debt |
110 |
|
|
152 |
|
Total
current liabilities |
15,669 |
|
|
18,396 |
|
Revolving credit
facility |
3,853 |
|
|
6,629 |
|
Long-term debt, less
current maturities |
164 |
|
|
190 |
|
Deferred revenue,
long-term |
945 |
|
|
944 |
|
Other long-term
liabilities |
560 |
|
|
442 |
|
Total
liabilities |
21,191 |
|
|
26,601 |
|
Commitments and
contingencies |
|
|
|
Shareholders’
equity: |
|
|
|
Preferred stock, $0.01
par value: Shares authorized: 30,000,000 at June 30, 2017 and March
31, 2017; no shares issued and outstanding at June 30, 2017 and
March 31, 2017 |
— |
|
|
— |
|
Common stock, no par
value: Shares authorized: 200,000,000 at June 30, 2017 and March
31, 2017; shares issued: 38,161,796 at June 30, 2017 and 37,747,227
at March 31, 2017; shares outstanding: 28,732,979 at June 30, 2017
and 28,317,490 at March 31, 2017 |
— |
|
|
— |
|
Additional paid-in
capital |
154,230 |
|
|
153,901 |
|
Treasury stock, common
shares: 9,428,817 at June 30, 2017 and 9,429,737 at March 31,
2017 |
(36,082 |
) |
|
(36,081 |
) |
Shareholder notes
receivable |
— |
|
|
(4 |
) |
Retained deficit |
(88,930 |
) |
|
(82,366 |
) |
Total
shareholders’ equity |
29,218 |
|
|
35,450 |
|
Total
liabilities and shareholders’ equity |
$ |
50,409 |
|
|
$ |
62,051 |
|
ORION ENERGY SYSTEMS, INC. AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (in
thousands) |
|
|
|
Three Months Ended June 30, |
|
2017 |
|
2016 |
Operating
activities |
|
|
|
Net loss |
$ |
(6,564 |
) |
|
$ |
(2,940 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
Depreciation |
353 |
|
|
389 |
|
Amortization |
162 |
|
|
243 |
|
Stock-based compensation |
320 |
|
|
329 |
|
Provision
for inventory reserves |
130 |
|
|
254 |
|
Provision
for bad debts |
33 |
|
|
(375 |
) |
Other |
12 |
|
|
56 |
|
Changes
in operating assets and liabilities: |
|
|
|
Accounts
receivable, current and long-term |
2,103 |
|
|
(1,805 |
) |
Inventories |
1,196 |
|
|
1,280 |
|
Deferred
contract costs |
(770 |
) |
|
(200 |
) |
Prepaid
expenses and other assets |
(163 |
) |
|
2,203 |
|
Accounts
payable |
(2,028 |
) |
|
(1,516 |
) |
Accrued
expenses and other |
(743 |
) |
|
(285 |
) |
Deferred
revenue, current and long-term |
204 |
|
|
52 |
|
Net cash used in operating activities |
(5,755 |
) |
|
(2,315 |
) |
Investing
activities |
|
|
|
Purchase
of property and equipment |
(204 |
) |
|
(53 |
) |
Additions
to patents and licenses |
(20 |
) |
|
— |
|
Proceeds
from sales of property, plant and equipment |
— |
|
|
2,600 |
|
Net cash (used in) provided by investing
activities |
(224 |
) |
|
2,547 |
|
Financing
activities |
|
|
|
Payment
of long-term debt and capital leases |
(67 |
) |
|
(381 |
) |
Proceeds
from revolving credit facility |
16,307 |
|
|
16,658 |
|
Payment
of revolving credit facility |
(19,083 |
) |
|
(17,889 |
) |
Payments
to settle employee tax withholdings on stock-based
compensation |
— |
|
|
(4 |
) |
Net
proceeds from employee equity exercises |
— |
|
|
2 |
|
Net cash used in financing activities |
(2,843 |
) |
|
(1,614 |
) |
Net decrease in cash
and cash equivalents |
(8,822 |
) |
|
(1,382 |
) |
Cash and cash
equivalents at beginning of period |
17,307 |
|
|
15,542 |
|
Cash and cash
equivalents at end of period |
$ |
8,485 |
|
|
$ |
14,160 |
|
ORION ENERGY SYSTEMS, INC. AND
SUBSIDIARIES |
UNAUDITED EBITDA RECONCILIATION |
(in thousands) |
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
2017 |
|
2016 |
|
|
|
|
Net
loss |
$ |
(6,564 |
) |
|
$ |
(2,940 |
) |
|
|
|
|
Interest |
|
62 |
|
|
|
60 |
|
Taxes |
|
- |
|
|
|
(271 |
) |
Depreciation |
|
353 |
|
|
|
389 |
|
Amortization |
|
162 |
|
|
|
243 |
|
EBITDA |
$ |
(5,987 |
) |
|
$ |
(2,519 |
) |
Orion Energy Systems (NASDAQ:OESX)
Historical Stock Chart
From Mar 2024 to Apr 2024
Orion Energy Systems (NASDAQ:OESX)
Historical Stock Chart
From Apr 2023 to Apr 2024