MANITOWOC, Wis. — Orion Energy Systems, Inc. reported results for its FY 2019 fourth quarter (Q4’19) and fiscal year ended March 31, 2019 (FY’19).
Highlights
- Q4’19 revenue rose 49% to $22.4M and FY’19 revenue rose 9% to $65.8M
- Q4’19 net loss improved 40% to $(0.9M) and FY’19 net loss improved 49% to $(6.7M)
- Q4’19 adjusted EBITDA* improved to $(49,000) compared to $(0.6M) in Q4’18
- Secured $110M in turnkey LED retrofit projects from a national customer with completion anticipated by the end of FY 2020. The project includes $11M in initial orders that were substantially completed in Q4’19
- FY 2019 benefitted from more than $6.0M in annual overhead reductions completed in FY 2018
CEO Commentary
Mike Altschaefl, Orion’s CEO and Board Chair, commented, “Orion’s fourth quarter and full year FY 2019 operational improvements reflected solid execution in our national accounts channel, continued efforts building our energy service company (ESCO) and agent driven distribution channels along with realizing the benefits of cost discipline and significant operating expense reductions implemented in FY 2018.
“Orion’s primary market differentiation is our ability to provide a single source solution whereby we manage and are responsible for an entire project, from initial site surveys and energy audits through to installation and controls integration. Our ability to offer such comprehensive turnkey project management services, coupled with best-in-class customer service, allows us to deliver energy reductions and cost savings to our customers in timely, orderly and planned multi-facility roll-outs nationwide.
“We are dedicating increasing resources to capitalize on our unique capabilities for large national accounts. This focus enabled us to achieve some very significant contracts that contributed to a strong finish to FY 2019 and provides good visibility for substantially increased FY 2020 revenues.
“Looking ahead, our sales growth is rooted in a few key strategic initiatives:
- Focus on marketing Orion’s turnkey LED retrofit capabilities to large national account customers – Orion’s strongest competitive advantage is our ability to deliver full turnkey, single source of accountability, combined LED lighting and controls project capabilities. Starting with energy audits and site assessments, our comprehensive turnkey solution includes custom engineering and manufacturing to fully managed installations. This coupled with our superior customer service, high quality designs, and unmatchable delivery responsiveness will lead our growth momentum for FY 2020 and beyond.
- Support success of our ESCOs and agent driven distribution sales channels – Orion continues to focus on building its relationships and product and sales support for its ESCO and agent driven distribution sales channels. These efforts include an array of product and sales training efforts, as well as the development of new products to cater to the unique needs of these sales channels. Reflecting our progress, Orion’s sales from its ESCO channel grew 24% in FY 2019 versus FY 2018.
- Continued product innovation – Orion continues to innovate, developing lighting fixtures and features that address specific customer requirements, while also working to maintain a leadership position in energy efficiency, smart product design and installation benefits. We also continue to deepen our capabilities in the integration of smart lighting controls. Our goal is to provide state-of-the-art lighting products with modular plug-and-play designs to enable lighting system customization from basic controls to advanced Internet of Things (IoT) capabilities.
- Leveraging of Orion’s smart lighting systems to support Internet of Things applications – Orion is ideally positioned to help customers to efficiently deploy new Internet of Things (IoT) controls and applications by leveraging the “Smart Ceiling” capabilities of the Orion solid state lighting system. IoT capabilities can include the management and tracking of facilities, personnel, resources and customer behavior, driving both sales and lowering costs. As a result, these added capabilities provide customers an even greater return on investment from their lighting system and make Orion an even more attractive partner.”
FY ‘20 Outlook
Based on current revenue visibility, resulting from our recently announced $110 million national account retrofit and growth expectations for the ESCO and agent driven distribution channels, Orion has set an initial FY 2020 revenue goal of $135M to $145M, representing growth of 100% to 120% over FY 2019. Orion expects to achieve an EBITDA margin of at least 10%, as well as positive net income and EPS, for the full year FY 2020.
Orion believes it has sufficient available capital and liquidity resources to execute its growth plans in FY 2020. Orion reminds investors that its financial objectives are targets not implied guidance, and performance may vary materially on a sequential and year-over-year basis due to the challenge of estimating the size, the timing and terms of customer order activity.
Q4’19 Results
Orion’s Q4’19 revenue rose 49% to $22.4M compared to $15.1M in Q4’18 primarily due to a contract from a national account customer.
Gross profit rose 36% to $4.4M in Q4’19 compared to $3.2M in Q4’18. Gross margin decreased to 20% in Q4’19 compared to 21% in Q4’18, primarily due to product mix and certain large customer project start-up costs.
Total operating expenses increased 5% to $5.1M in Q4’19 compared to $4.8M in Q4’18, which benefitted from a $1.4M non-recurring contingencies reserve adjustment. Excluding the prior year reserve benefit, Q4’19 total operating expenses demonstrated substantial improvement over Q4’18 due to cost reduction initiatives enacted by Orion during FY2018, as well as the Company’s continued cost management discipline.
Orion’s Q4’19 net loss improved to $(0.9M), or $(0.03) per basic share, compared with a net loss of ($1.5M), or ($0.05) per basic share in Q4’18.
Q4’19 adjusted EBITDA* loss was $(49,000) compared to adjusted EBITDA loss of $(0.6M) in Q4’18.
FY 2019 Results
Orion’s FY 2019 revenue rose 9% to $65.8M from $60.3M in FY 2018, primarily due to increased sales to major national account customers. Service revenue increased 102% to $9.5M in FY 2019 compared with $4.7M in FY 2018, primarily due to increased installation project activity in FY2019.
Gross profit was roughly flat at $14.6M in FY 2019 compared to $14.7M in FY 2018. Gross margin declined to 22% in FY 2019 compared to 24% in FY 2018, principally due to the impact of product mix in Q4’19 and certain large customer project start-up costs.
Total operating expenses decreased 25% to $20.7M in FY 2019 compared to $27.7M in FY 2018, benefitting from FY2018 cost reduction initiatives and continued cost management discipline.
Orion’s FY 2019 net loss was $(6.7M), or $(0.23) per basic share, compared to FY 2018 net loss of $(13.1M), or $(0.46) per basic share.
Orion’s FY2019 adjusted EBITDA* loss was $(3.5M) compared to adjusted EBITDA loss of $(9.6M) in FY 2018.
Balance Sheet
Orion had net working capital of $14.0M, including $8.7M of cash and cash equivalents at the close of FY 2019. In addition, the company had additional borrowing capacity of $1.4M under its revolving credit facility.
On June 3, 2019, we amended our credit agreement to increase the maximum borrowing available, subject to certain conditions. The amendment provides for additional availability under our credit agreement; the impact of which, as of March 31, 2019, would have been to increase availability by $4.0 million, bringing unused borrowing capacity to $5.4M.
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