MANITOWOC, Wisconsin— Orion Energy Systems, Inc. (Orion Lighting) today reported results for its fiscal 2020 second quarter (Q2’20).
|$ in millions except
per share figures
|Q2 ’20||Q2 ’19||Change||6M ‘20||6M ‘19||Change|
|Net Income (Loss)||$6.7||($2.4)||+$9.2||$10.7||($5.1)||+$15.8|
* EBITDA reconciliation table follows this earnings release
Mike Altschaefl, Orion’s CEO and Board Chair, commented, “Our Q2 and first half of FY’20 performance reflects the continued successful execution of a large turnkey design-build-install project for LED lighting systems and controls in our national accounts business. Importantly, our cost discipline, combined with the operating leverage achieved as our business scales, yielded solid improvements in our Q2 gross margin, net income and EBITDA.
“We are maintaining our FY’20 revenue goal range of $135M to $145M. Given our record first half revenue and sales pipeline development, it is possible we will exceed this range.
“Driving our revenue goals and expectations are a range of actions designed to tap the competitive advantage we have developed as a proven turnkey provider of integrated LED lighting systems, controls and IoT solutions for major national accounts. Our nimble team and streamlined decision making enable Orion to provide a full suite of customized services with high levels of customer service that are unmatched in the marketplace.
“In the past few months, we have added four veteran sales executives to our national accounts team, deepening our industry expertise and broadening our base of large customer relationships. They were eager to join Orion because they believe the quality, value and long-term ROI of our product plus turnkey solutions will resonate with large accounts. Though it can take as much as a year or more for new sales executives to become fully productive, we have already substantially expanded our base of national account engagement.
“We are increasingly seeing lighting controls, sensors and other Internet of Things (IoT) capabilities playing an important role in the decision making process around LED lighting systems. Our lighting systems can serve as a smart ceiling grid, providing both a light source and a network that can host a range of controls and IoT systems to deliver even greater efficiency and business productivity. As a result, controls are becoming an increasingly important component of overall project revenue in more projects we are quoting. Orion’s controls/IoT strategy has been to remain technology agnostic, allowing us to offer a wide range of solutions, as compared to competitors with fewer options or those who committed to a specific technology. We view the incremental value our customers can gain from these solutions as an important differentiator and growth driver for our business.
“In summary, we are very pleased with the state of the business and have a positive outlook. We continue to expect the national account segment to be a primary driver of our business, not only from existing retail, automotive, public sector and other existing accounts, but also from new customer relationships. We also expect improvement from our energy service company (ESCO) and agency driven distribution channels. We have developed solid momentum within the industry, and believe we are positioning the Company to build on recent success in all areas of our business.”
Outlook and Goals
Orion is maintaining its FY’20 revenue goal range of $135M to $145M. Given our record first half revenue and sales pipeline development, it is possible we will exceed this range. Based on achieving this goal, Orion would expect to achieve an EBITDA margin of at least 10%, as well as positive net income and EPS for FY’20. Orion continues to believe it has sufficient available capital and liquidity to execute its growth plans through FY’20 and beyond.
Orion’s Q2’20 revenue rose 266% to $48.3M, compared to $13.2M in Q2’19, almost exclusively due to increased product and services for turnkey LED lighting retrofit solutions provided to a major national account customer. Q2’20 product revenues increased $24M to $35.6M and service revenue increased $11.1M to $12.8M, reflecting installation and services for the national account customer. Similarly, revenue increased by $63.7M to $90.7M for the first six months of FY’20, compared to the first six months of 2019, also related to increases in national account activities.
Gross margin increased to 26.5% in Q2’20 compared to 19.3% in Q2’19 and 24.3% in Q1’20. The Q2’20 margin benefitted from higher revenue levels covering fixed costs, as well as from the Company’s ongoing efforts to optimize service, sourcing and manufacturing efficiencies.
Total operating expenses were $5.9M in Q2’20 compared to $4.8M in Q2’19, well below the pace of revenue growth. The increase primarily reflects incremental investments in sales and marketing activities and expenses.
Q2’20 net income rose to $6.7M, or $0.22 per diluted share, versus a net loss of ($2.4M), or ($0.08) per share, in Q2’19, principally reflecting the significant revenue increase and operating leverage. Likewise, net income improved to $10.7M for the first six months of FY’20, or $0.35 per diluted share, as compared to a loss of ($5.1M), or ($0.18) per share, in the comparable 2019 period.
Orion’s Q2’20 EBITDA increased to $7.3M compared to an EBITDA loss of ($1.8M) in Q2’19, a year-over-year improvement of $9.1M. For the first six months of 2020, Orion generated EBITDA of $11.9M, as compared to an EBITDA loss of ($3.9M) in the first six months of 2019, an improvement of $15.8M.
Cash Flow & Balance Sheet
Orion generated $6.5M of cash from operating activities in Q2’20 versus a use of ($0.1M) in Q2’19. The cash flow improvement was primarily due to higher sales and net income, partially offset by working capital requirements. Year-to-date in FY’20, Orion generated $8.5M of cash from operating activities, versus a use of ($1.1M) in the year-ago period.
As of September 30, 2019, Orion had $11.1M in cash and cash equivalents, up from $8.7M at fiscal year end March 31, 2019. Net working capital increased to $19.7M in Q2’20 up from $14.0M at year-end 2019, and shareholders’ equity increased to $28.9M at September 30, 2019 vs. $18.0M at March 31, 2019. Outstanding debt declined to $3.9M at September 30, 2019, consisting primarily of borrowings under its revolving credit facility, versus $9.4M at March 31, 2019.Tagged with Orion