Orion Energy Systems Reports Q1 Revenue of $17.9M, Reflecting Customer Delays on Large LED Lighting Projects
MANITOWOC, Wis., Aug. 03, 2022 (GLOBE NEWSWIRE) -- Orion Energy Systems, Inc. (NASDAQ: OESX) (Orion Lighting), a provider of energy-efficient LED lighting and control systems and electrical maintenance services, today reported results for its fiscal 2023 first quarter ended June 30, 2022 (Q1’23). Orion also announced separately today its CEO Transition Plan. Orion will hold an investor call and webcast to review these announcements today at 10:00 a.m. ET – online pre-registration is required to receive the call-in number, details below.
|Q1 Financial Summary||Prior Three Quarters|
|$ in millions except
per share figures
|Gross Profit %||19.8%||29.1%||(930bps)||23.8%||24.9%||29.5%|
|Net Income (Loss)||($2.8)||$2.5||($5.3)||($1.2)||$1.1||$3.7|
|Adjusted EBITDA (2)||($2.9)||$4.0||($6.9)||($0.4)||$2.1||$4.0|
|Cash & Equivalents||$9.4||$15.9||($6.5)||$14.5||$17.3||$14.7|
|(1) Results include a $1.6M employee retention payroll tax credit, under the American Rescue Plan Act of 2021. The credit increased gross profit in the period by $0.8M and reduced operating expense by $0.8M.
(2) See Adjusted EBITDA reconciliation below.
Q1 Financial Highlights
- Q1’23 revenue was $17.9M versus $35.1M in Q1’22, reflecting the impact of completing a significant project in Q4'22, ongoing customer delays on the commencement of large LED lighting projects, as well as a slowdown in the approval of projects by new and existing customers, likely due to current and anticipated economic conditions.
- Q1’23 gross profit percentage was 19.8% vs. 29.1% in Q1’22 and 23.8% in Q4’22, primarily due to the impact of lower fixed cost absorption on reduced business volume.
- Q1'23 net income declined to a loss of $2.8M, or ($0.09) per share, compared to net income of $2.5M, or $0.08 per share, in Q1’22.
- Adjusted EBITDA was ($2.9M) vs. $4.0M in Q1’22 and ($0.4M) in Q4’22.
- Orion ended Q1'23 with $29.5M in working capital, including inventory of $18.8M. Orion had approximately $25M of liquidity at the close of Q1’23, comprised of $9.4M of cash and cash equivalents and $15.8M of availability on its working capital credit facility.
Mike Altschaefl, Orion’s CEO and Board Chair, commented, “In Q1’23 we saw a continuation of customer project delays that also impacted our results in the second half of last year, along with some slowing of our sales cycle as new and existing customers work through current economic conditions. Despite the slow start to this year, we believe Orion has a robust pipeline of opportunities that should commence in the second half of our fiscal year. We continue to view all our paths to market including national accounts, ESCOs and distribution – as important to Orion’s growth and development, as we build and diversify our revenue sources in FY 2023 and beyond.
“Importantly, the growing scale and complexity of LED lighting and controls, alternative energy strategies and ongoing maintenance requirements creates an ideal backdrop for our unique turnkey capabilities with one point of contact and accountability. Orion’s energy efficiency and sustainability service and capabilities and our ‘customer for life’ commitment position us well to grow our penetration of the substantial LED lighting and maintenance services opportunities we are targeting. We continue to expand our active major national account base as these customers are best positioned to benefit from our turnkey design-build-install-maintain capabilities.
“The high quality, energy efficient design, and reliability and of our LED lighting solutions are also well-suited and gaining traction in the Energy Service Company (ESCO) market. Given our alignment with ESCOs’ mandate to deliver energy efficiency solutions, we are focusing additional resources on this path to market, which we believe can deliver substantial future growth. We are also building on our distribution channel, where we recently added three new sales agents to expand our national footprint.
“Rounding out our ‘customer for life’ solutions offering is our growing lighting and electrical maintenance services business which we expanded with the acquisition of Stay-Lite Lighting, a nationwide lighting and electrical maintenance provider, in January 2022. We are building a growing base of recurring maintenance services revenue to complement our LED lighting solutions and turnkey project business. Our maintenance business remains on track to generate meaningful growth in fiscal 2023 and in future periods, as we expand our ability to support our customers in meeting their operational, financial and environmental sustainability goals.
“In terms of M&A, we have developed a strong pipeline of potential targets that we continue to evaluate as to their valuation, fit with our business, creation of new opportunities, and potential synergies. We remain disciplined and prudently cautious in this effort and believe that the current market environment could present some attractive opportunities to build and diversify our business. We believe our liquidity, capital position and borrowing capacity provide solid support for both our ongoing business and our M&A process and expect our cash position and borrowing base to strengthen as we advance through the year.”
FY 2023 is starting more slowly than expected due primarily to ongoing customer project delays and a slowing sales cycle that seems related to current and future economic uncertainties. As a result, Orion now expects a modest sequential revenue improvement in Q2'23 over Q1'23 and full-year FY 2023 revenue of between $90M and $110M. This range principally reflects potential variability in the timing of large customer projects. This updated FY 2023 revenue outlook implies double digit organic growth in business outside of its largest customer.
Key factors expected to influence Orion’s FY 2023 performance include:
- Large national customers moving forward with delayed projects.
- Growth in Orion’s maintenance services business revenue.
- Successfully closing several in-process large commercial and public-sector project opportunities.
- An expected rebound in Orion's automotive sector business.
- Revenue of approximately $20M from the Company’s largest customer via a mix of projects for new facilities, exterior LED lighting, other lighting and electrical projects and maintenance services.
- Additional revenue from new customers as a result of enhanced sales and marketing activities.
Orion cautions investors that its business outlook is subject to a range of factors that are difficult to predict, including but not limited to those listed above, as well as supply chain disruptions, including shipping and logistics issues, component availability, rising input costs, labor supply challenges, the COVID-19 pandemic, and other potential business and economic environment impacts.
Q1 Financial Results
Orion’s Q1’23 revenue was $17.9M compared to $35.1M in Q1’22. The prior-year quarter benefitted from several large projects, including for a large national retail customer and a global online retailer, which did not recur in Q1’23.
Q1’23 gross profit percentage was 19.8% compared to 29.1% in Q1’22 and 23.8% in Q4’22 – primarily due to lower fixed cost absorption on lower revenues. Orion’s past price increases have been effective in mitigating higher input costs.
Total operating expenses grew 5.3% to $7.2M in Q1’23 from $6.8M in Q1’22, due to higher G&A expenses, partially offset by lower sales and marketing costs. The Q1’23 period included a full quarter of expenses related to Stay-Lite operations, which were not included in the prior-year period. These Stay-Lite expenses accounted for most of the increase in overall G&A expense.
Orion reported a Q1’23 net loss of ($2.8M), or ($0.09) per share, as compared to Q1’22 net income of $2.5M, or $0.08 per share, principally due to lower revenues and gross profit percentage in Q1’23. Likewise, Orion generated negative Adjusted EBITDA of ($2.9M) in Q1’23 versus Adjusted EBITDA of $4.0M in Q1’22.
Orion ended Q1'23 with $29.5M in working capital, including inventory of $18.8M. Orion had approximately $25M of liquidity at the close of Q1’23, including cash and cash equivalents of $9.4M and $15.8M available on its working capital credit facility.
|Date / Time:||Wednesday, August 3rd at 10:00 a.m. ET|
|Live Call Registration:||https://register.vevent.com/register/BIc912b5aa1ca143a89e9702680a8dc3cf Participants for the live call must pre-register using the URL above to receive the dial-in number and a unique PIN to access the call. If you lose your PIN or the dial-in (and the back-up email), simply re-register for a new PIN.|
|Webcast / Replay:||https://edge.media-server.com/mmc/p/t6ch62d6|
About Orion Energy Systems (www.orionlighting.com)
Orion provides innovative LED lighting systems and turnkey project implementation including installation and commissioning of fixtures, controls and IoT systems, as well as ongoing system maintenance and program management. We help our customers achieve energy savings with healthy, safe and sustainable solutions, enabling them to reduce their carbon footprint and digitize their business. Orion is committed to operating responsibly throughout all areas of our organization.
Learn more about Orion’s ESG priorities, goals and progress here or visit Orion’s website.
In addition to the GAAP results included in this presentation, Orion has also included the non-GAAP measures, EBITDA (earnings before interest, taxes, depreciation and amortization), and Adjusted EBITDA (EBITDA adjusted for stock-based compensation, payroll tax credit, and acquisition expenses). The Company has provided these non-GAAP measures 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 these non-GAAP measures to evaluate performance of the business 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 Orion compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurement. 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.
Consistent with Regulation G under the U.S. federal securities laws, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measures, and this reconciliation is located under the heading “Unaudited EBITDA Reconciliation” and “Unaudited Earnings Per Share Reconciliation” following the Condensed Consolidated Statements of Cash Flows included in this press release.
Safe Harbor Statement
Certain matters discussed in this press release, including under the headings “Q1 Financial Highlights”, “CEO Commentary”, "Business Outlook", and "Financial Results" 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 our 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 manage general economic, business and geopolitical conditions, including the impacts of natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as the COVID-19 pandemic; (ii) the deterioration of market conditions, including our dependence on customers' capital budgets for sales of products and services, and adverse impacts on costs and the demand for our products as a result of factors such as the COVID-19 pandemic and the implementation of tariffs; (iii) our ability to adapt and respond to supply chain challenges, especially related to shipping and logistics issues, component availability, rising input costs, and a tight labor market; (iv) our ability to recruit, hire and retain talented individuals in all disciplines of our company; (v) our ability to successfully launch, manage and maintain our refocused business strategy to successfully bring to market new and innovative product and service offerings; (vi) our recent and continued reliance on significant revenue to be generated in fiscal 2023 from the lighting and controls retrofit projects for two major global logistics companies; (vii) our dependence on a limited number of key customers, and the potential consequences of the loss of one or more key customers or suppliers, including key contacts at such customers; (viii) our ability to identify and successfully complete transactions with suitable acquisition candidates in the future as part of our growth strategy; (ix) the availability of additional debt financing and/or equity capital to pursue our evolving strategy and sustain our growth initiatives; (x) our risk of potential loss related to single or focused exposure within the current customer base and product offerings; (xi) our ability to sustain our profitability and positive cash flows; (xii) our ability to differentiate our products in a highly competitive and converging market, expand our customer base and gain market share; (xiii) our ability to manage and mitigate downward pressure on the average selling prices of our products as a result of competitive pressures in the light emitting diode ("LED") market; (xiv) our ability to manage our inventory and avoid inventory obsolescence in a rapidly evolving LED market; (xv) our increasing reliance on third parties for the manufacture and development of products, product components, as well as the provision of certain services; (xvi) 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; (xvii) our ability to develop and participate in new product and technology offerings or applications in a cost effective and timely manner; (xviii) our ability to maintain safe and secure information technology systems; (xix) our failure to comply with the covenants in our credit agreement; (xx) our ability to balance customer demand and production capacity; (xxi) our ability to maintain an effective system of internal control over financial reporting; (xxii) price fluctuations (including as a result of tariffs), shortages or interruptions of component supplies and raw materials used to manufacture our products; (xxiii) our ability to defend our patent portfolio and license technology from third parties; (xxiv) a reduction in the price of electricity; (xxv) the reduction or elimination of investments in, or incentives to adopt, LED lighting or the elimination of, or changes in, policies, incentives or rebates in certain states or countries that encourage the use of LEDs over some traditional lighting technologies; (xxvi) the cost to comply with, and the effects of, any current and future industry and government regulations, laws and policies; (xxvii) potential warranty claims in excess of our reserve estimates; and (xxviii) the other risks described in our filings with the Securities and Exchange Commission. 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 we undertake 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 our Website.
|Investor Relations Contacts|
|Per Brodin, CFO||William Jones; David Collins|
|Orion Energy Systems, Inc.||Catalyst IR|
|firstname.lastname@example.org||(212) 924-9800 or OESX@catalyst-ir.com|
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
|June 30, 2022||March 31, 2022|
|Cash and cash equivalents||$||9,424||$||14,466|
|Accounts receivable, net||11,735||11,899|
|Revenue earned but not billed||1,894||2,421|
|Prepaid expenses and other current assets||2,624||2,631|
|Total current assets||44,430||51,249|
|Property and equipment, net||11,061||11,466|
|Other intangible assets, net||2,330||2,404|
|Deferred tax assets||18,783||17,805|
|Other long-term assets||3,375||3,543|
|Liabilities and Shareholders’ Equity|
|Accrued expenses and other||7,362||8,427|
|Deferred revenue, current||127||76|
|Current maturities of long-term debt||16||16|
|Total current liabilities||14,916||18,374|
|Revolving credit facility||—||—|
|Long-term debt, less current maturities||15||19|
|Deferred revenue, long-term||545||564|
|Other long-term liabilities||2,553||2,760|
|Commitments and contingencies|
|Preferred stock, $0.01 par value: Shares authorized: 30,000,000 at
June 30, 2022 and March 31, 2022; no shares issued and outstanding at
June 30, 2022 and March 31, 2022
|Common stock, no par value: Shares authorized: 200,000,000 at June 30, 2022
and March 31, 2022; shares issued: 40,723,299 at June 30, 2022 and
40,570,909 at March 31, 2022; shares outstanding: 31,250,071 at
June 30, 2022 and 31,097,872 at March 31, 2022
|Additional paid-in capital||158,727||158,419|
|Treasury stock, common shares: 9,476,228 at June 30, 2022 and 9,473,037 at
March 31, 2022
|Total shareholders’ equity||62,572||65,100|
|Total liabilities and shareholders’ equity||$||80,601||$||86,817|
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
|Three Months Ended June 30,|
|Cost of product revenue||10,385||19,433|
|Cost of service revenue||3,967||5,438|
|Total cost of revenue||14,352||24,871|
|General and administrative||3,754||3,111|
|Sales and marketing||2,889||3,245|
|Research and development||514||456|
|Total operating expenses||7,171||6,812|
|Income from operations||(3,617||)||3,418|
|Other income (expense):|
|Other (expense) income||(1||)||1|
|Amortization of debt issue costs||(15||)||(16||)|
|Total other expense||(33||)||(34||)|
|Loss (income) before income tax||(3,650||)||3,384|
|Income tax (benefit) expense||(815||)||874|
|Net (loss) income||$||(2,835||)||$||2,510|
|Basic net (loss) income per share attributable to
|Weighted-average common shares outstanding||31,138,398||30,860,178|
|Diluted net (loss) income per share||$||(0.09||)||$||0.08|
|Weighted-average common shares and share
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|Three Months Ended June 30,|
|Net (loss) income||$||(2,835||)||$||2,510|
|Adjustments to reconcile net (loss) income to net cash provided by (used in)
|Amortization of intangible assets||52||67|
|Amortization of debt issue costs||15||16|
|Deferred income tax||(978||)||872|
|Gain on sale of property and equipment||(1||)||—|
|Provision for inventory reserves||100||134|
|Changes in operating assets and liabilities:|
|Revenue earned but not billed||527||1,886|
|Prepaid expenses and other assets||160||251|
|Accrued expenses and other||(1,273||)||(3,550||)|
|Deferred revenue, current and long-term||32||98|
|Net cash used in operating activities||(5,005||)||(2,966||)|
|Cash to fund acquisition||55||—|
|Cash paid for investment||—||(500||)|
|Purchases of property and equipment||(139||)||(152||)|
|Additions to patents and licenses||(1||)||(4||)|
|Net cash used in investing activities||(85||)||(656||)|
|Payment of long-term debt||(4||)||(4||)|
|Proceeds from revolving credit facility||—||—|
|Payments of revolving credit facility||—||—|
|Payments to settle employee tax withholdings on stock-based compensation||(2||)||(4||)|
|Deferred financing costs||—||(4||)|
|Net proceeds from employee equity exercises||54||104|
|Net cash provided by financing activities||48||92|
|Net decrease in cash and cash equivalents||(5,042||)||(3,530||)|
|Cash and cash equivalents at beginning of period||14,466||19,393|
|Cash and cash equivalents at end of period||$||9,424||$||15,863|
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED EBITDA RECONCILIATION
|Three Months Ended|
|June 30, 2022||March 31,
|June 30, 2021|
|Net (loss) income||$||(2,835||)||$||(1,180||)||$||1,102||$||3,659||$||2,510|
|Amortization of intangible assets||52||69||45||46||67|
|Amortization of debt issue costs||15||16||15||15||16|
|Loss on debt extinguishment||—||—||—||—||—|
|Payroll tax credit||—||—||—||(1,587||)||—|