Orion Energy Systems Announces Latest Financial Results Show Strong Growth in LED Business

Orion Energy Systems, a leading designer and manufacturer of high-performance, energy-efficient lighting platforms, today announced financial results for its first quarter of fiscal 2017, ended June 30, 2016.

Operating and Financial Highlights

  • LED revenue accounted for 75.2% of lighting product sales in the first quarter of fiscal 2017, up from 60.9% in the first quarter of fiscal 2016.
  • LED product revenue increased by 18.7% from the first quarter of 2016 to the first quarter of 2017.
  • Gross margin was 25.8% in Q1 of fiscal 2017, up from 22.7% in the first quarter of fiscal 2016.
  • Orion shipped over 2,300 customer orders in Q1 of fiscal 2017, including 23 orders over $100,000.
  • As of June 30, 2016, Orion had a backlog of $12.6 million in lighting orders, compared to $5.2 million at the end of Q1 FY16. Backlog represents the amount of revenue that Orion expects to realize in the future as a result of firm, committed orders.

John Scribante, Chief Executive Officer, commented that “the first quarter of our fiscal year started off slowly as we evolved our channel from one that was comprised of over 100 Energy Services Company (ESCO) partners to a traditional industry model. We’ve streamlined our business with ESCOs to emphasize our most successful partnerships and recruited 28 new sales agencies to service the rest of the channel. In particular, these new sales agencies dramatically expand our business into traditional electrical distribution where we now have the potential, and the reach, to sell into a much larger cross section of the lighting market.”

Financial Results Review

The First Quarter of Fiscal 2017

Revenue: Orion reported revenue of $15.6 million in the first quarter. This was down slightly from the first quarter of fiscal 2016 due to a slow start in the month of April. However, the quarter finished strong and ended with a significant build in backlog. Orion’s LED lighting business recorded excellent growth in the first quarter, but total revenue was lower than the year-ago period due to reduced legacy fluorescent sales, consistent with Orion’s strategy.

LED Lighting Revenue: LED product sales were $11.3 million and accounted for 75.2% of lighting product revenue in the quarter. LED product sales increased by 18.7% in the first quarter of fiscal 2017 versus the comparable year-ago quarter. The strong growth in LED lighting products in Q1 FY17 was highlighted by fast growing sales of Orion’s high bay products.

Gross Margin: Orion recorded a gross margin of 25.8% in the first quarter of fiscal 2017. This compares favorably with the first quarter of fiscal 2016, when Orion’s gross margin was 22.7%. A favorable mix of high margin products and strong growth in LED product sales led to the expansion in gross margin in the first quarter of fiscal 2017, when compared to the same quarter of fiscal 2016.

Net Loss: Orion reported a net loss of $2.9 million in Q1 FY17. This compares favorably with a net loss of $3.7 million in Q1 FY16. The improvement versus the year-ago period was due primarily to a higher gross margin, tax benefits from discrete items in the first quarter of fiscal 2017, and recognition of other income from a recently completed licensing agreement for one of Orion’s lighting product patents.

Balance Sheet: Orion finished the first quarter of fiscal 2017 with $14.2 million in cash and cash equivalents. This included $2.6 million cash from the previously announced building sale. Orion also had $3.3 million in short-term and long-term borrowings. Orion’s net working capital was $28.4 million as of June 30, 2016, and its net book value was $43.5 million, or $1.55 per outstanding share (equity divided by shares outstanding at period end).

Management Outlook for the Remainder of Fiscal Year 2017

The Company is revising its expectations for growth in fiscal 2017. Management currently believes that total revenue should grow by 10-20 percent in fiscal 2017 versus the prior fiscal year, rather than previously issued guidance of at least $80 million. This new revenue expectation reflects the uncertainty with regard to timing of revenue, as large orders booked in Q1 move through Orion’s backlog. Furthermore, the Company took longer to on-board some new sales agents in late fiscal 2016 and is therefore being more conservative with its expectations of how much revenue these new agents will contribute in this fiscal year. Management still believes that the company’s gross margin should approach the 30% threshold by the end of this fiscal year, with the primary variables being growth, product mix, and sales channel penetration.

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