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oesx-10q_20211231.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-33887

Orion Energy Systems, Inc.

(Exact name of Registrant as specified in its charter)

Wisconsin

39-1847269

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification number)

2210 Woodland Drive, Manitowoc, Wisconsin		54220
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (920) 892-9340

Securities registered pursuant to Section 12(b) of the act:

Title of Each Class

Trading Symbol (s)

Name of Each Exchange on Which Registered

Common stock, no par value

OESX

The Nasdaq Stock Market LLC

(NASDAQ Capital Market)

Common stock purchase rights

The Nasdaq Stock Market LLC

(NASDAQ Capital Market)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an "emerging growth company". See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 31,092,433 shares of the Registrant’s common stock outstanding on February 7, 2022.

ORION ENERGY SYSTEMS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 31, 2021

TABLE OF CONTENTS

		Page(s)
PART I FINANCIAL INFORMATION		3
ITEM 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of December 31, 2021 and March 31, 2021	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2021 and December 31, 2020	4
	Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended December 31, 2021 and December 31, 2020	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2021 and December 31, 2020	7
	Notes to the Condensed Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	30
ITEM 4.	Controls and Procedures	30
PART II OTHER INFORMATION		31
ITEM 1.	Legal Proceedings	31
ITEM 1A.	Risk Factors	31
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
ITEM 5.	Other Information	31
ITEM 6.	Exhibits	32
SIGNATURE		33

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	December 31, 2021			March 31, 2021
Assets
Cash and cash equivalents	$	17,264		$	19,393
Accounts receivable, net		12,287			13,572
Revenue earned but not billed		3,859			2,930
Inventories, net		18,722			19,554
Prepaid expenses and other current assets		2,308			1,082
Total current assets		54,440			56,531
Property and equipment, net		10,832			11,369
Other intangible assets, net		1,774			1,952
Deferred tax assets		17,445			19,785
Other long-term assets		7,407			3,184
Total assets	$	91,898		$	92,821
Liabilities and Shareholders’ Equity
Accounts payable	$	11,771		$	17,045
Accrued expenses and other		10,502			13,226
Deferred revenue, current		175			87
Current maturities of long-term debt		15			14
Total current liabilities		22,463			30,372
Revolving credit facility		—			—
Long-term debt, less current maturities		23			35
Deferred revenue, long-term		583			640
Other long-term liabilities		2,774			3,700
Total liabilities		25,843			34,747
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $0.01 par value: Shares authorized: 30,000,000 at December 31, 2021 and March 31, 2021; no shares issued and outstanding at December 31, 2021 and March 31, 2021		—			—
Common stock, no par value: Shares authorized: 200,000,000 at December 31, 2021 and March 31, 2021; shares issued: 40,573,654 at December 31, 2021 and 40,279,050 at March 31, 2021; shares outstanding: 31,097,433 at December 31, 2021 and 30,805,300 at March 31, 2021		—			—
Additional paid-in capital		158,197			157,485
Treasury stock, common shares: 9,476,221 at December 31, 2021 and 9,473,750 at March 31, 2021		(36,242	)		(36,240	)
Retained deficit		(55,900	)		(63,171	)
Total shareholders’ equity		66,055			58,074
Total liabilities and shareholders’ equity	$	91,898		$	92,821

The accompanying notes are an integral part of these Condensed Consolidated Statements.

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

	Three Months Ended December 31,						Nine Months Ended December 31,
	2021			2020			2021			2020
Product revenue	$	22,203		$	31,929		$	78,260		$	61,890
Service revenue		8,511			12,322			24,065			19,453
Total revenue		30,714			44,251			102,325			81,343
Cost of product revenue		16,427			23,203			54,724			44,834
Cost of service revenue		6,646			10,042			18,942			15,605
Total cost of revenue		23,073			33,245			73,666			60,439
Gross profit		7,641			11,006			28,659			20,904
Operating expenses:
General and administrative		2,873			3,030			8,737			8,079
Acquisition costs		178			—			178			—
Sales and marketing		2,862			3,120			8,794			7,306
Research and development		396			391			1,169			1,230
Total operating expenses		6,309			6,541			18,878			16,615
Income from operations		1,332			4,465			9,781			4,289
Other income (expense):
Other income		—			12			1			56
Interest expense		(26	)		(1	)		(59	)		(51	)
Amortization of debt issue costs		(15	)		(20	)		(46	)		(142	)
Loss on debt extinguishment		—			(90	)		—			(90	)
Total other expense		(41	)		(99	)		(104	)		(227	)
Income before income tax		1,291			4,366			9,677			4,062
Income tax expense		189			51			2,406			52
Net income	$	1,102		$	4,315		$	7,271		$	4,010
Basic net income per share attributable to common shareholders	$	0.04		$	0.14		$	0.23		$	0.13
Weighted-average common shares outstanding		31,084,710			30,735,722			30,992,475			30,586,196
Diluted net income per share	$	0.04		$	0.14		$	0.23		$	0.13
Weighted-average common shares and share equivalents outstanding		31,234,925			31,320,427			31,273,703			31,289,359

The accompanying notes are an integral part of these Condensed Consolidated Statements.

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share amounts)

	Shareholders’ Equity
	Common Stock
	Shares			Additional Paid-in Capital		Treasury Stock			Retained Deficit			Total Shareholders’ Equity
Balance, March 31, 2021		30,805,300		$	157,485	$	(36,240	)	$	(63,171	)	$	58,074
Exercise of stock options for cash		24,045			101		—			—			101
Shares issued under Employee Stock Purchase Plan		496			—		3			—			3
Stock-based compensation		171,470			160		—			—			160
Employee tax withholdings on stock-based compensation		(610	)		—		(4	)		—			(4	)
Net income		—			—		—			2,510			2,510
Balance, June 30, 2021		31,000,701		$	157,746	$	(36,241	)	$	(60,661	)	$	60,844
Exercise of stock options for cash		7,000			18		—			—			18
Shares issued under Employee Stock Purchase Plan		327			—		1			—			1
Stock-based compensation		55,896			211		—			—			211
Employee tax withholdings on stock-based compensation		(294	)		—		(1	)		—			(1	)
Net income		—			—		—			3,659			3,659
Balance, September 30, 2021		31,063,630		$	157,975	$	(36,241	)	$	(57,002	)	$	64,732
Exercise of stock options for cash		800			2		—			—			2
Shares issued under Employee Stock Purchase Plan		355			—		1			—			1
Stock-based compensation		32,648			220		—			—			220
Employee tax withholdings on stock-based compensation		(2,745	)		—		(2	)		—			(2	)
Net income		—			—		—			1,102			1,102
Balance, December 31, 2021		31,094,688		$	158,197	$	(36,242	)	$	(55,900	)	$	66,055

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share amounts)

	Shareholders’ Equity
	Common Stock
	Shares			Additional Paid-in Capital		Treasury Stock			Retained Deficit			Total Shareholders’ Equity
Balance, March 31, 2020		30,265,997		$	156,503	$	(36,163	)	$	(89,305	)	$	31,035
Exercise of stock options for cash		20,000			41		—			—			41
Shares issued under Employee Stock Purchase Plan		458			—		2			—			2
Stock-based compensation		342,780			208		—			—			208
Employee tax withholdings on stock-based compensation		(4,346	)		—		(18	)		—			(18	)
Net loss		—			—		—			(2,219	)		(2,219	)
Balance, June 30, 2020		30,624,889		$	156,752	$	(36,179	)	$	(91,524	)	$	29,049
Exercise of stock options for cash		9,000			28		—			—			28
Shares issued under Employee Stock Purchase Plan		151			—		1			—			1
Stock-based compensation		76,351			251		—			—			251
Employee tax withholdings on stock-based compensation		(581	)		—		(3	)		—			(3	)
Net income		—			—		—			1,914			1,914
Balance, September 30, 2020		30,709,810		$	157,031	$	(36,181	)	$	(89,610	)	$	31,240
Exercise of stock options for cash		38,000			79		—			—			79
Shares issued under Employee Stock Purchase Plan		178			—		2			—			2
Stock-based compensation		12,200			152		—			—			152
Employee tax withholdings on stock-based compensation		(235	)		—		(2	)		—			(2	)
Net income		—			—		—			4,315			4,315
Balance, December 31, 2020		30,759,953		$	157,262	$	(36,181	)	$	(85,295	)	$	35,786

The accompanying notes are an integral part of these Condensed Consolidated Statements.

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended December 31,
	2021			2020
Operating activities
Net income	$	7,271		$	4,010
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		936			889
Amortization of intangible assets		158			225
Stock-based compensation		591			611
Amortization of debt issue costs		46			142
Loss on debt extinguishment		—			90
Deferred income tax		2,340			—
(Gain) loss on sale of property and equipment		(77	)		6
Provision for inventory reserves		426			185
Provision for bad debts		8			—
Other		30			9
Changes in operating assets and liabilities:
Accounts receivable