(GLOBE NEWSWIRE) — Orion Energy Systems, Inc., a leading designer and U.S. manufacturer of high-performance, energy-efficient LED lighting products, reported results for its fiscal 2018 second quarter (Q2’18) and six months ended September 30, 2017.
- Q2’18 revenue improved sequentially to $15.4M vs. $12.6M in Q1’18.
- Approximately $1.1M of revenue was delayed by storm related events but is expected in the balance of FY 2018.
- Orion is experiencing increased requests for proposals as well as awarded business from large national accounts.
- Orion increased its previously announced estimated annual cost reductions to $4.0M to $4.5M from the initial estimate of $3.5M to $4.0M.
- Positive Q2’18 cash flow from operating activities of $1.1M.
- $3.4M of revenue came from two of Orion’s long standing automotive industry customers in Q2’18 and Orion is now expecting approximately $13M in revenue in fiscal 2018 from these two automotive customers, up from Orion’s previously announced $10M. Additionally, Orion expects revenue of at least $10M from these customers in fiscal 2019.
- Orion’s agent-driven distribution model continues to make steady progress, representing 44 % of product sales in Q2’18. While Orion is advancing this effort, it is taking longer than anticipated for new agencies to achieve revenue generation expectations.
- Q2 ’18 backlog of $6.5M was flat compared to Q1 ’18.
Mike Altschaefl, Orion CEO, commented, “We made progress during Q2 2018, achieving sequential quarterly revenue growth of 22.2% and achieving positive cash flow from operations. While we are seeing steady progress in this effort, it is taking longer than we had planned for new agencies to ramp revenue generation with Orion solutions. At the same time, we are becoming better versed in the opportunities and challenges in building out this sales channel. Through a variety of new strategies and products designed to support the needs of our agents we believe we are positioning Orion to accelerate its future penetration of a much broader base of sales opportunities for both retrofit and new construction projects across North America.”
“Under our new Senior Vice President for Channel Sales, Kevin Grayson, we now better understand the sales cycle and specific dynamics of this channel and are tailoring our product offerings and marketing efforts to best support our agents. While the agent channel continues to develop, our national accounts group is doing an excellent job of sourcing more and larger projects from key accounts, as well as new opportunities for the agent base.”
“In August, we stated that we expected approximately $10M of business in fiscal 2018 and approximately $10M in fiscal 2019 from two of our long standing automotive customers. Demand from these customers during our first six months of fiscal 2018 was stronger than expected, driving $5.5M of revenue. As a result, we now expect at least $13.0M in revenue during fiscal year 2018. We continue to expect revenues of at least $10M in fiscal 2019.”
“We have recently launched a number of products centered around three main objectives:
- Increasing our competitive product footprint with the agent driven distribution channel and entry-level focused buyers
- Leveraging existing platforms and expanding options to increase our market opportunity
- Leveraging our experience in controls and IoT solution adaptability through new modular plug and play solutions”
“The summer launch of our lower-cost Patriot™ LED lighting fixture line is an example of this effort. It is a high quality, US-made product with industry-leading components, streamlined design and an upgradable modular feature that competes very effectively with offshore products. With Patriot™ LED fixtures, customers can make the move into energy-saving LED lighting at an attractive price, while preserving the ability to quickly and easily upgrade this system with plug-in sensors, light engines or other features of our higher performing lines.”
“Our core value proposition remains unchanged and is centered around four pillars of commitment that we believe differentiate us from our competition:
- Industry leading product performance, energy efficiency, and thought leadership – delivering more rapid ROI and future proof lighting options
- Genuine, high-quality and high-touch customer service
- Flexibility and nimbleness in responding to customer needs, including specialty design, development, prototyping, and production – which larger competitors cannot match, and
- Rapid response local-to-local production operations delivering the quality and reliability our customers expect – typically in 10 days or less”
Updated Fiscal 2018 Outlook
Mr. Altschaefl added, “While the outlook for growth in the LED lighting industry remains difficult to predict, we remain confident in the value, performance and ROI of our lighting products and believe we are on the right path for growth and improved bottom line results. Given our first half performance, we are reducing our fiscal 2018 revenue goals as discussed below. However, we remain firmly committed to our previous profitability goals.”
Orion’s quarterly performance can and likely will vary materially from period to period, often based on macroeconomic and industry forces. Orion therefore reminds investors that its stated financial goals are targets and goals – not implied guidance, forecasts or projections. Based on progress to date with major and national accounts, supported by the ongoing implementation of its agent driven distribution model, Orion has revised its fiscal 2018 revenue goal to flat versus FY17, as compared to its prior goal of 10-15% growth.
Additionally, Orion continues to make solid progress in trimming its annual operating expenses, with annualized reductions now estimated at $4.0 to $4.5M versus FY17 levels, compared to an initial estimate of $3.5 to $4.0M.
Further, Orion continues to believe it will be able to achieve its goal of breakeven earnings before interest, taxes, depreciation and amortization (EBITDA), before non-recurring items, and gross margins of 30%, by its fiscal 2018 fourth quarter.
Mr. Altschaefl concluded, “While our performance is not yet where it needs to be, we believe we are taking the right steps to position Orion for success. We have strong design and production capabilities, high quality products, a respected brand portfolio and a refined go-to-market strategy that should differentiate us within the LED lighting industry. We have taken prudent steps regarding our cost structure to increase profitability even at lower revenues. This cost structure should not change once modest revenue growth is realized. In other words, we are scaling the business effectively. We believe the second half of fiscal 2018 will provide a great opportunity for investors to judge the success of our efforts.”
Orion’s Q2’18 revenue declined 17.4% from Q2 ‘17 to $15.4M, reflecting $1.1M of hurricane-related project delays in Texas and Florida and a predicted decline in fluorescent lighting products, which decreased $2.0M year-over-year. Partially offsetting these declines was strength in national accounts, including $3.4M of automotive retrofit revenue and modest progress from the Company’s agent driven distribution model, now representing 44% of product revenue. LED lighting product revenue was $12.7M in Q2’18 or 91% of total lighting product revenue versus $14.1M or 81% of total lighting product revenue in Q2’17.
Despite a solid performance in raw gross margins from lighting product sales, total gross margin declined to 23.5% in Q2’18, as a result of lower overhead absorption on lower revenue, combined with lower service revenue margins.
Orion’s Q2’18 net loss increased to $3.7M, or $0.13 per basic share, from $1.0M, or $0.03 per basic share, in Q2’17. The higher net loss was principally due to the impact of lower revenues on Orion’s fixed cost structure, partially offset by a $0.9M reduction in operating expenses (excluding one-time items), a direct result of the Company’s cost reduction efforts. Orion’s Q2’18 results included a $0.7M non-cash impairment charge related to an indefinite lived intangible asset.
Orion has recognized $0.1M and $2.0M of total restructuring expense during the three and six months ended September 30, 2017, respectively.
Orion’s Q2’18 EBITDA loss was $3.0M compared to $0.3M in Q2’17.
Balance Sheet & Cash Flow
Orion generated $1.1 M in cash from operating activities in Q2’18 as its net loss was more than offset by active working capital management efforts, including a $3.0M reduction in product inventories. At the end of Q2’18, Orion had $8.7M in cash and cash equivalents and $3.1M in borrowings under its revolving credit facility.
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