Orion Energy Systems Reports Strong LED Growth in Latest Financial Report

Orion Energy Systems, a leading designer and manufacturer of high-performance, energy-efficient lighting platforms, today announced financial results for its fiscal 2015 fourth quarter and year ended March 31, 2015, highlighted by higher revenues driven by accelerating LED sales and gross margin expansion.

Operating and Financial Highlights

  • Total revenue for the fiscal 2015 fourth quarter was US $19.4 million, an increase of 53.9% compared to $12.6 million in the prior-year period.
  • LED lighting product sales increased to $10.4 million in the fiscal 2015 fourth quarter from $1.3 million in the prior year period, accounting for 53.6% of total sales and 60.8% of total lighting product revenues.
  • As of March 31, 2015, Orion had a lighting backlog of $6.9 million in LED and high-intensity fluorescent (HIF) lighting orders, compared to a lighting backlog of $7.1 million as of December 31, 2014.
  • During the fourth quarter, the Company secured large sales commitments from Ford Motor Company, Cardinal Health, Cincinnati Zoo, Trinity Plastics, US Post Offices, VA Hospitals, and other hospitals and school districts.
  • The Company increased its network of active buying key regional resellers to 102 at March 31, 2015, up from 30 at March 31, 2014.

Management Comments

On Sales Drivers

John Scribante, Chief Executive Officer, stated, “We accomplished significant momentum as evidenced in Orion’s year-over-year increase in fourth quarter product sales and margin improvement. On the sales front, improvement was driven by favorable trends in larger orders coupled with the continued adoption of the Company’s retrofit LED lighting solutions by our customers. Orion’s sales approach, which includes targeting larger accounts and a general expansion of our reseller network, has reached an inflection point. We have worked diligently to relay our value proposition, which includes an expanded LED product line with superior, modular technology and customizable options that specifically address each of Orion’s target markets at a wide variety of price points. We believe that Orion is the best positioned company to take advantage of the transition in this lighting cycle to LED, as our hyper-focus on retrofit ease of installation leads to lower labor costs, less maintenance and a lower total cost of ownership for our customers. In addition, the Company won several projects in the fourth quarter due to an industry leading product delivery lead time, as Orion can deliver fully-assembled, out of the box lighting solutions in 1-2 weeks, which is far superior to our competitors. These lead times have helped the Company grow and retain its reseller base, and as we began to fully roll-out new LED products have begun to rationalize into a strong sales pipeline heading into fiscal 2016.”

On Margin Improvement

Scribante continued, “We are now seeing the margin turn as discussed in prior quarters, both in gross and operational margin improvements. Historically, Orion has achieved gross margins in the 28-30% range in the sale of its fluorescent products. Orion improved by 70 basis points in the fourth quarter on a quarter over quarter basis, and we expect this to expand quickly as we increase sales in the coming year. Now that the legacy inventory issues and adjustment to addressing the rapid LED sales transition are well behind the Company, we believe margins will begin to return to historical levels. Further, the changes in our operating infrastructure that were implemented earlier this year are expected to reduce approximately $10 million in expenses. While we continue to re-invest in improving our products and capabilities, these initiatives are expected to drive a more rapid return to profitability.”

Financial Review

Fiscal 2015 Fourth Quarter

Revenue: Total revenue was $19.4 million for the fiscal 2015 fourth quarter, an increase of 53.9% compared to $12.6 million in the prior-year period. Total lighting sales for the fiscal 2015 fourth quarter were $19.3 million, compared to $11.6 million in the prior year period. Total lighting revenues increased year-over-year as a result of higher LED lighting sales during the period, particularly sales of the Company’s ISON LED high bay and LED Door Retrofit (LDR) products.

LED Lighting Revenue: Product revenue from Orion’s LED products increased to $10.4 million during the fiscal 2015 fourth quarter, compared to $1.3 million in the prior-year period. LED sales during the period were 53.6% of total revenue and 60.8% total lighting product revenue, marking the first full quarter where LED sales were over 50% of the Company’s total revenue.

Gross Margin: Total gross margin improved to 15.4% during the fiscal 2015 fourth quarter, compared to 10.2% for the prior-year period. The Company’s margin improvements were largely due to increased material cost stability, and achieving a scale in LED that is allowing Orion to better achieve leverage in managing overall COGS.

Net Income / Loss: The Company reported a net loss for the fiscal 2015 fourth quarter of $(4.7) million, or $(0.19) per share, compared to net loss of $(8.8) million, or $(0.41) per diluted share, in the prior year period.

Fiscal 2015 Year-end

Revenue: Total revenue was $72.2 million for fiscal year 2015, compared to $88.6 million in the prior-year period. Orion reported a $20.2 million decrease in revenues year over year as a result of the expected lower revenues from the Company's phased out non-core solar energy business and a $3.8 million increase in lighting revenues from the Company’s ongoing transition to an LED-driven sales platform.

LED Lighting Revenue: Product revenue from Orion’s LED products increased to $30.8 million during fiscal 2015, compared to $4.7 million in the prior-year. LED sales during the year were 42.7% of total revenue and 47.8% of total lighting product revenue.

Gross Margin: Gross margin for the year ended March 31, 2015 was impacted by a non-cash impairment charge to its long-term wireless controls inventory of approximately $12.1 million and a $0.6 million warranty reserve charge. Total gross margin was (1.6)% for fiscal 2015, compared to 25.9% for the prior-year period, largely as a result of the decline in the Company's HIF lighting product revenue and the related impact of the Company's fixed expenses associated with its manufacturing facility on the Company's reduced sales volume. The Company’s gross margin excluding the non-cash impairment and warranty charge was 16.1% for fiscal 2015.

Net Income / Loss: The Company reported a net loss for the fiscal 2015 of $(32.1) million, or $(1.43) per share. In the prior year, Orion reported a net loss of $(6.2) million, or $(0.30) per diluted share.

Balance Sheet Review

Cash and Investments: Orion had approximately $20.0 million in cash and cash equivalents as of March 31, 2015, compared to $17.6 million and $0.5 million in short-term investments, respectively, at March 31, 2014. The Company had $2.5 million in borrowings outstanding against its $15.0 million line of credit with Wells Fargo N.A.

Working Capital: The Company’s working capital as of March 31, 2015 was $36.7 million, consisting of $55.0 million in current assets and $18.3 million in current liabilities, compared to $33.1 million, consisting of $50.3 million in current assets and $17.2 million in current liabilities, at March 31, 2014.

Net Cash from Operations: The Company reported $12.8 million of net cash used in operations during fiscal 2015, compared to a $9.9 million of net cash provided by operations in the prior-year period.

Total Debt: Orion’s total debt decreased $1.5 million to $5.1 million at March 31, 2015, compared to $6.6 million at March 31, 2014.

Management Outlook for 2016

Mr. Scribante continued, “As a result of the sales and operational changes implemented during fiscal 2015, we are confident that the measures established and in place will lead us to profitability. Following the Company’s capital raise in February and signing of its new credit facility, we have utilized the strength of our balance sheet to enable Orion to grow its pipeline of larger orders while also leveraging our sales channels to produce a consistent flow of LED sales. Orion launched several new products at Lightfair in May, and in addition to garnering favorable feedback, received numerous orders at the event. We are now seeing accelerating sales in each of our core target markets for LED retrofit products, including industrial, commercial and exterior applications.”

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