Orion Energy Systems, Inc. (NASDAQ: OESX) (Orion Lighting), a provider of enterprise-grade LED lighting and energy project solutions, today reported results for its fiscal 2019 second quarter (Q2’19) and six months ended September 30, 2018. Orion will hold an investor call today at 10:00 a.m. ET (9:00 a.m. CT) to review its results and its business outlook – call details below.
- Q2’19 revenue decreased to $13.2M in Q2'19 vs. $15.4M in Q2’18 and $13.8M in Q1'19, principally due to lower sales through the distribution channel and delays of certain projects into the second half of fiscal 2019.
- Gross margin declined to 19.3% in Q2'19 versus 23.5% in Q2'18 due primarily to the impact of fixed cost absorption on lower revenue.
- Total operating expenses declined to $4.8M in Q2'19 versus $7.2M in Q2'18, reflecting the benefit of last year’s cost reductions, continued cost discipline and non-recurring, non-cash charges incurred in Q2'18.
- EBITDA loss narrowed to ($1.8M) in Q2'19 from ($3.0M) in Q2'18 and ($2.1M) in Q1'19.
- Orion is making significant progress with national accounts, particularly with automotive, retail and public sector customers.
- Through the six months ended September 30th, fiscal 2019 order bookings rose approximately 18% compared to the comparable fiscal 2018 period.
- Orion has revised its FY 2019 revenue growth goal to 5-10% from 10%, reflecting the 3.4% revenue decrease in the first six months of FY 2019, partially offset by solid growth in order bookings and a favorable outlook for national account activity over the balance of FY 2019 and into FY 2020.
- Orion secured a new $20.15 million revolving credit facility with Western Alliance Bank in late October. The new facility increased Orion’s borrowing potential over the prior $15 million facility, while also providing it with an additional $2.4 million in current borrowing capacity.
Mike Altschaefl, Orion CEO, commented, "Principally due to lower sales through the distribution channel and customer-driven delays on a few projects, our Q2’19 revenue fell below expectations, however, our ongoing cost disciplines enabled us to deliver improved bottom line results. Importantly, Orion made significant strides in advancing our pipeline of revenue opportunities for the balance of fiscal 2019 and into fiscal 2020. As a result, we now have even greater confidence in Orion’s ability to deliver improved revenue performance in the second half of fiscal 2019 and beyond.
“Driving our sales momentum is Orion’s unique ability to offer customized, high energy-efficiency, turnkey LED lighting solutions, starting with energy audits, custom design and prototyping and U.S. manufacturing through to full project management and installation at any number of sites. This suite of services is proving attractive to certain national account prospects that are looking to upgrade their locations across the U.S. These large customers appreciate our nimbleness and senior management attention in promptly addressing their needs with just one phone call, as well as our ability to develop specialized designs within a rapid time frame, and our ability to manufacture and ship product generally within 10 days."
Fiscal 2019 Outlook
Orion’s order bookings were $18.0M in Q2'19 and $32.1M for the first six months of fiscal 2019, an increase of 18% over the first six months of fiscal 2018. The Company’s strong order activity yielded an order backlog of $8.4M at the close of Q2’19, compared to $3.6M at the close of Q1’19. Based on its FY 2019 year to-date revenue decrease of 3.4%, partially offset by expected strength in the pace of business activity in the FY 2019 second half, Orion has revised its FY 2019 revenue growth goal to 5-10%, from its initial goal of 10% revenue growth.
Due to the variability in size and timing of contracts, along with difficulty in forecasting impacts from global economic events, international trade, and industry forces, Orion does not provide quarterly guidance. However, management will continue to evaluate the performance of the business and its outlook and update investors quarterly on its goals for the full fiscal year.
Orion’s Q2’19 revenue declined 14.4% to $13.2M from $15.4M in Q2’18, principally reflecting lower sales volume through the distribution channel and delayed customer deployments that are now expected to occur in the third and fourth quarters of fiscal 2019.
Gross margin declined to 19.3% in Q2’19 versus 23.5% in Q2'18, due to reduced overhead absorption resulting from lower revenue, costs related to the development of larger projects and slightly higher input costs for certain materials.
Total operating expenses decreased to $4.8M in Q2'19 compared to $7.2M in Q2'18, reflecting the full quarterly benefit of $6M of annual cost reduction initiatives implemented in fiscal 2018, $0.7M in a non-recurring, non-cash intangible asset impairment recorded in Q2'18 and continued cost control efforts.
Orion’s Q2’19 net loss decreased to $2.4M, or $0.08 per basic share, from $3.7M, or $0.13 per basic share, in Q2’18. The lower net loss was principally due to lower operating costs, which more than offset a decrease in gross profit.
Orion’s Q2’19 EBITDA loss improved to ($1.8M) compared to ($3.0M) in Q2’18 and ($2.1M) in Q1’19.
Balance Sheet & Cash Flow
Orion used $1.1M in cash from operating activities in the first six months of fiscal 2019 as its net loss was partially offset by active working capital management efforts, including a $3.2M reduction in accounts receivable and $0.4M reduction in inventory. Orion paid down approximately $2.5M in borrowings under its revolving credit facility during the first six months of fiscal 2019. At quarter end, Orion had $5.7M in cash and cash equivalents and $1.6M of debt, principally borrowings under its revolving credit facility.
As of September 30, 2018, net working capital was $7.0M and shareholder's equity totaled $19.1M.
On October 26, 2018, Orion secured a new $20.15 million revolving credit facility with Western Alliance Bank to help increase its financing capacity and to provide liquidity to fund operations and growth plans. The new two-year credit facility replaced a $15 million revolving credit facility, subject to a borrowing base requirement based on eligible receivables and inventory. Orion’s new facility provides an expanded current borrowing base of $4.0 million compared to $1.6 million under the prior facility.