Rebound in LED Lighting Retrofit Activity Leads Orion’s Q3 Revenue Rise to $44.3M and Net Income Increase to $4.3M, or $0.14 per share; Investor Call Today at 10am ET
|Q3 Financial Highlights||Prior Three Quarters|
|$ in millions except
per share figures
|Gross Profit %||24.9%||24.2%||+70 bps||27.6%||24.4%||22.3%|
|Net Income (Loss)||$4.3||(
|Cash & Equivalents||$12.3||-
|*EBITDA reconciliation table below.|
- Q3’21 revenue grew to
$44.3Mfrom $34.2Min Q3’20, demonstrating a rapid rebound in major account activity, and also exceeded Q2’21 revenue of $26.3M. The Q3’21 performance improvement reflects a full quarter of business activity following COVID-19-related disruptions that commenced in March 2020and continued primarily through August 2020.
- Q3’21 revenue included previously delayed turnkey LED lighting retrofit activity for a major national account project that resumed in early August, in addition to significant contribution from a national retrofit project for a specialty retail customer.
- Q3’21 gross profit percentage increased to 24.9% from 24.2% in Q3’20, primarily because of improvement in product margin partially offset by increased service revenues which have lower margins, but declined sequentially from 27.6% in Q2’21primarily because of a change in customer mix and start-up costs related to the national specialty retail customer project.
- Q3’21 operating expenses increased to
$6.5Mversus $5.8Min Q3’20 and $5.4Min Q2’21, principally reflecting higher sales commissions on increased revenue, incremental costs required to support higher revenues, as well as start-up costs associated with the Company’s new maintenance services business.
- Orion’s EBITDA improved to
$4.9Min Q3’21, compared to $2.8Min Q3’20 and $2.3Min Q2’21.
- Orion ended the quarter with
$23.3Min working capital, including $12.3Mof cash and had no amounts drawn on its credit facility. In December, Orion secured a new five-year $25.0 million revolving credit facility with Bank of America. The facility provides a 25% increase in financing capacity and liquidity to support the execution of the Company’s strategic growth plans.
- Excluding any significant COVID-19 business impacts, Orion continues to anticipate FY ’21 revenue of at least
$117Mand FY ’22 revenue that should at least match its record results achieved in FY ’20.
“Product development continues to play an important role in Orion’s success as we are experiencing very solid demand for new product lines introduced over the past year. Our new
“A growing number of large national account customers are recognizing the value of Orion’s unique, customized, turnkey LED lighting capabilities and our proven track record in executing large national installation programs with efficient, high-quality service. Our sales team is very active in leveraging this capability to develop new large customer prospects for our lighting systems and services. Though the sales cycles can be longer for such large opportunities, we feel confident in the broad array of benefits our systems can deliver, ranging from improved illumination, enhanced work environments and greater safety, along with the environmental and cost benefits delivered by state-of-the-art LED lighting and controls. Building off this value proposition we are also excited by the potential of products incorporating UV and violet light technologies to help our customers address environmental safety concerns around germs, bacteria and viruses.
“Reflecting these and other factors, we are confident in our business outlook going forward, tempered only by the real potential for COVID-19 concerns to impact our customers’ plans and our operations. Although we have put in place rigorous safety protocols to reduce the risks of COVID-19 impacts to our business, there are many circumstances that are outside our control and so COVID-19 remains a significant risk to our future performance.”
Orion expects to achieve FY ’21 annual revenue of at least
- Orion anticipates significant additional product and service revenue from an existing large national retail customer for the retrofit of additional locations, new construction, outdoor lighting and other projects.
- Orion expects to generate significant revenue from custom-designed luminaires for a global online retailer’s new facilities.
- Orion has completed several initial facilities for a global logistics industry customer that is expected to be a significant source of additional revenue, on a project-by-project basis.
- Orion has been selected by another leading global logistics provider to be their primary LED lighting supplier and project manager in
North America, also on a project basis. This relationship is expected to be a meaningful source of new revenue.
- Orion expects to continue the LED lighting retrofits for a national specialty retailer.
- Orion’s existing automotive customers are likely to provide a number of project opportunities.
- Orion is seeing significant opportunities in the healthcare market.
- Orion anticipates continued steady demand from long-standing public sector customers, including the
U.S.Military, the Veterans Administrationand the U.S. Postal Service.
- Orion is experiencing a solid rebound in interest and business activity within its energy service company (ESCO) and electrical contractor distribution channels, where its new products are resonating, and more companies appear willing to proceed with retrofit and new construction projects.
- Companies are increasingly engaged in pursuing green, cost saving projects that exhibit strong ROI, many of which had been on hold due to COVID-19.
- Orion has recently launched new LED lighting products, including outdoor fixtures and linear products that have been designed to deliver superior quality and energy efficiency at attractive pricing. These products are expected to support revenue growth opportunities in FY ’22 and beyond.
Orion cautions investors that this outlook involves uncertainty due to the COVID-19 pandemic and possible business and other economic impacts.
Orion’s Q3’21 revenue improved to
Gross profit percentage increased to 24.9% in Q3’21 from 24.2% in Q3’20, primarily because of improvement in product margin partially offset by increased service revenues which have lower margins, but decreased sequentially from Q2 ’21 because of a change in customer mix and higher costs related to the start of a national account project during the quarter.
Total operating expenses increased to
Orion generated EBITDA of
Cash Flow & Balance Sheet
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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.
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). 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 EBITDA 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
The COVID-19 pandemic has disrupted business, trade, commerce, financial and credit markets, in the
Safe Harbor Statement
Certain matters discussed in this press release, including under the headings “Highlights”, “CEO Commentary”, and "Business 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 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 achieve our expected revenue and other financial objectives in FY ’21 and beyond, particularly as a result of the COVID-19 pandemic; (ii) our recent and expected continued reliance on revenue generated from the retrofit of a single or few national account projects; (iii) our ability to achieve profitability and positive cash flows; (iv) our levels of cash and our borrowing capacity under our revolving line of credit; (v) the availability of additional debt financing and/or equity capital; (vi) our lack of major sources of recurring revenue, 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; (vii) our risk of potential loss related to single or focused exposure within the current customer base and product offerings; (viii) 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; (ix) our ability to differentiate our products in a highly competitive market, expand our customer base and gain market share; (x) our ability to manage our inventory and avoid inventory obsolescence in a rapidly evolving LED market; (xi) our ability to adapt to increasing convergence in the LED market; (xii) the reduction or elimination of investments in, or incentives to adopt, LED lighting technologies; (xiii) our increasing ongoing attempts to sell 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; (xiv) our ability to develop and participate in new product and technology offerings or applications in a cost effective and timely manner; (xv) the potential 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 the implementation of tariffs; (xvi) our increasing reliance on third parties for the manufacture and development of products and product components; (xvii) our ability to maintain safe and secure information technology systems; (xviii) our failure to comply with the covenants in our revolving credit agreement; (xix) our fluctuating quarterly results of operations; (xx) our ability to recruit, hire and retain talented individuals in all disciplines of our company; (xxi) our ability to balance customer demand and production capacity; (xxii) our ability to maintain an effective system of internal control over financial reporting; (xxiii) price fluctuations (including as a result of tariffs), shortages or interruptions of component supplies and raw materials used to manufacture our products; (xxiv) our ability to defend our patent portfolio; (xxv) a reduction in the price of electricity; (xxvi) the cost to comply with, and the effects of, any current and future industry and government regulations, laws and policies; (xxvii) the sale of our corporate office building which will likely result in a non-cash impairment charge; and (xxviii) potential warranty claims in excess of our reserve estimates and (xxviii) the other risks described in our filings with the
Investor Relations Contacts
|Per Brodin, CFO|
|email@example.com||(212) 924-9800 or OESX@catalyst-ir.com|
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
|Cash and cash equivalents||$||12,279||$||28,751|
|Accounts receivable, net||23,744||10,427|
|Revenue earned but not billed||1,519||560|
|Prepaid expenses and other current assets||607||723|
|Total current assets||56,667||54,968|
|Property and equipment, net||11,410||11,817|
|Other intangible assets, net||2,033||2,216|
|Long-term accounts receivable||652||760|
|Other long-term assets||2,906||2,802|
|Liabilities and Shareholders’ Equity|
|Accrued expenses and other||13,916||7,228|
|Deferred revenue, current||126||107|
|Current maturities of long-term debt||14||35|
|Total current liabilities||33,416||27,204|
|Revolving credit facility||—||10,013|
|Long-term debt, less current maturities||39||50|
|Deferred revenue, long-term||659||715|
|Other long-term liabilities||3,768||3,546|
|Commitments and contingencies|
|Common stock, no par value: Shares authorized: 200,000,000 at
|Additional paid-in capital||157,262||156,503|
|Total shareholders’ equity||35,786||31,035|
|Total liabilities and shareholders’ equity||$||73,668||$||72,563|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
|Three Months Ended
||Nine Months Ended
|Cost of product revenue||23,203||19,075||44,834||68,778|
|Cost of service revenue||10,042||6,900||15,605||24,823|
|Total cost of revenue||33,245||25,975||60,439||93,601|
|General and administrative||3,030||2,662||8,079||8,274|
|Sales and marketing||3,120||2,735||7,306||8,359|
|Research and development||391||439||1,230||1,240|
|Total operating expenses||6,541||5,836||16,615||17,873|
|Income from operations||4,465||2,438||4,289||13,475|
|Other income (expense):|
|Amortization of debt issue costs||(20||)||(61||)||(142||)||(182||)|
|Loss on debt extinguishment||(90||)||—||(90||)||—|
|Total other expense||(99||)||(95||)||(227||)||(416||)|
|Income before income tax||4,366||2,343||4,062||13,059|
|Income tax expense||51||39||52||66|
|Basic net income per share attributable to
|Weighted-average common shares outstanding||30,735,722||30,243,865||30,586,196||30,053,330|
|Diluted net income per share||$||0.14||$||0.07||$||0.13||$||0.42|
|Weighted-average common shares and share
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|Nine Months Ended
|Adjustments to reconcile net income to net cash (used in) provided by
|Amortization of intangible assets||225||282|
|Amortization of debt issue costs||142||182|
|Loss on debt extinguishment||90||—|
|Impairment of intangible assets||—||3|
|Loss on sale of property and equipment||6||—|
|Provision for inventory reserves||185||192|
|Changes in operating assets and liabilities:|
|Accounts receivable, current and long-term||(13,208||)||(420||)|
|Revenue earned but not billed||(959||)||2,957|
|Prepaid expenses and other assets||339||44|
|Accrued expenses and other||6,555||(1,296||)|
|Deferred revenue, current and long-term||(38||)||(95||)|
|Net cash (used in) provided by operating activities||(5,644||)||14,275|
|Purchases of property and equipment||(658||)||(582||)|
|Additions to patents and licenses||(43||)||(73||)|
|Net cash used in investing activities||(701||)||(655||)|
|Payment of long-term debt||(32||)||(68||)|
|Proceeds from revolving credit facility||8,000||63,200|
|Payments of revolving credit facility||(18,013||)||(71,572||)|
|Payments to settle employee tax withholdings on stock-based compensation||(22||)||(76||)|
|Deferred financing costs||(212||)||(91||)|
|Net proceeds from employee equity exercises||152||20|
|Net cash used in financing activities||(10,127||)||(8,587||)|
|Net (decrease) increase in cash and cash equivalents||(16,472||)||5,033|
|Cash and cash equivalents at beginning of period||28,751||8,729|
|Cash and cash equivalents at end of period||$||12,279||$||13,762|
UNAUDITED EBITDA RECONCILIATION
|Three Months Ended
||Nine Months Ended
|Amortization of intangible assets||73||94||225||282|
|Amortization of debt issue costs||20||61||142||182|
|Loss on Debt Extinguishment||90||—||90||—|
Source: Orion Energy Systems, Inc.