ORION ENERGY SYSTEMS, INC. | Q2 Financial Highlights | Prior Three Quarters | |||||||
| $ in millions except per share figures | Q2’22 (1) | Q2’21 | Change | Q1’22 | Q4'21 (2) | Q3’21 | ||
| Revenue | $36.5 | +$10.2 | ||||||
| Gross Profit | $10.8 | +$3.5 | ||||||
| Gross Profit % | 29.5% | 27.6% | +191bps | 29.1% | 26.0% | 24.9% | ||
| Net Income | $3.7 | +$1.7 | ||||||
| EPS | $0.12 | +$0.06 | ||||||
| EBITDA (3) | $5.4 | +$3.1 | ||||||
| Cash & Equivalents | $14.7 | +$2.6 | ||||||
| (1) Q2’22 period results include a (2) Q4’21 Net Income and EPS include a non-cash income tax benefit of (3) EBITDA reconciliation table follows this earnings release. | ||||||||
Q2’22 Financial Highlights
- Q2’22 revenue increased to
$36.5M reflecting strong national account activity, versus$26.3M in Q2’21, which was impacted by COVID-19 project delays, and$35.1M in Q1’22. - Gross profit improved to
$10.8M in Q2’22, including an$0.8M employee retention payroll tax credit, compared to$7.3M in Q2’21. - Gross profit percentage improved to 29.5%, inclusive of the payroll tax credit, compared to 27.6% In Q2'21.
- Q2'22 net income improved to
$3.7M , or$0.12 per share, including the$1.6M payroll tax credit, compared to net income of$1.9M , or$0.06 per share, in Q2’21. - Q2'22 EBITDA improved to
$5.4M vs.$2.3M in Q2’21, primarily due to earnings flow through on higher revenue, ongoing operating cost management and the benefit of the payroll tax credit. - Orion ended Q2'22 with nearly
$40M of liquidity, including$14.7M of cash and cash equivalents and full availability on its$25M credit facility.
CEO Commentary
“We continue to see significant opportunities with our major national accounts; however, there has been some slippage in the timing and pace of projects as our customers react to changing business conditions. Our team has been able to deliver solid results year-to-date despite increasing supply chain challenges related to shipping and logistics issues, component availability, generally rising input costs and a tight labor market. Through proactive planning and management, including expanded component and raw materials sourcing, we have so far been successful in meeting the needs of our customers. Additionally, as a domestic manufacturer of LED lighting fixtures, we have been able to move more quickly to respond to customer needs relative to competitors facing significant delays sourcing fixtures from
“To keep abreast of some inflationary cost pressures, we recently implemented our second price increase of the year, which should gradually benefit our results as we progress into calendar 2022. We believe our price move is in-line with industry trends, keeping us competitive on a relative value basis. We expect supply chain issues will continue to affect many companies, including our business and our customers, but we feel confident in our ability to remain nimble and actively manage our business to mitigate these challenges.
“We are also encouraged by progress in our lighting maintenance services business where our monthly activity continues to build. This business leverages our expertise, turnkey project management strengths, and national reach to serve both new and existing accounts, while also providing recurring revenue, regular customer touchpoints and meaningful growth potential.
“While business and economic turbulence related to supply chain issues is impacting customer project timelines in the near term, we remain confident in the strong industry position we have built for Orion to achieve our long-term growth goals. With our cash position and untapped access to our
Business Outlook
Orion expects to achieve FY 2022 revenue of at least
Orion cautions investors that its business outlook is subject to a range of factors that are difficult to predict, including but not limited to supply chain disruptions, shipping and logistics issues, component availability, rising input costs, labor supply challenges, the COVID-19 pandemic, and other potential business and economic impacts.
Financial Results
Orion’s Q2’22 revenue improved by
Gross profit percentage increased 191 bps to 29.5% in Q2’22 from 27.6% in Q2’21. The increase is principally attributable to a
Total operating expenses were
Net income improved by
Q2’22 net income included an income tax provision of
Cash Flow & Balance Sheet
Orion used
Orion ended Q2'22 with
Webcast/Call Detail
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About
Orion provides innovative LED lighting systems and turnkey project implementation including installation and commissioning of fixtures, controls and IoT systems, as well as ongoing system maintenance and program management. We help our customers achieve energy savings with healthy, safe and sustainable solutions, enabling them to reduce their carbon footprint and digitize their business.
Non-GAAP Measures
In addition to the GAAP results included in this presentation, Orion has also included the non-GAAP measures, EBITDA (earnings before interest, taxes, depreciation and amortization), net income excluding the income tax benefit and diluted earnings per share excluding the tax benefit. The Company has provided these non-GAAP measures to help investors better understand its core operating performance, enhance comparisons of core operating performance from period to period and allow better comparisons of operating performance to its competitors. Among other things, management uses these non-GAAP measures to evaluate performance of the business and believes this measurement enables it to make better period-to-period evaluations of the financial performance of core business operations. The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and Orion compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurement. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with generally accepted accounting principles.
Consistent with Regulation G under the
COVID-19 Impacts
The COVID-19 pandemic has disrupted business, trade, commerce, financial and credit markets, in the
Safe Harbor Statement
Certain matters discussed in this press release, including under the headings “Financial Highlights”, “CEO Commentary”, "Business Outlook", and "Tax Provision" are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may generally be identified as such because the context of such statements will include words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "will," "would" or words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause results to differ materially from those expected, including, but not limited to, the following: (i) our ability to manage general economic, business and geopolitical conditions, including the impacts of natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as the COVID-19 pandemic; (ii) the deterioration of market conditions, including our dependence on customers' capital budgets for sales of products and services, and adverse impacts on costs and the demand for our products as a result of factors such as the COVID-19 pandemic and the implementation of tariffs; (iii) our ability to adapt and respond to supply chain challenges, especially related to shipping and logistics issues, component availability, rising input costs, and a tight labor market; (iv) our ability to recruit, hire and retain talented individuals in all disciplines of our company; (v)our ability to successfully launch, manage and maintain our refocused business strategy to successfully bring to market new and innovative product and service offerings; (vi) our recent and continued reliance on significant revenue to be generated in fiscal 2022 from the lighting and controls retrofit projects for two major global logistics companies; (vii) our dependence on a limited number of key customers, and the potential consequences of the loss of one or more key customers or suppliers, including key contacts at such customers; (viii) our ability to identify and successfully complete transactions with suitable acquisition candidates in the future as part of our growth strategy; (ix) the availability of additional debt financing and/or equity capital to pursue our evolving strategy and sustain our growth initiatives; (x) our risk of potential loss related to single or focused exposure within the current customer base and product offerings; (xi) our ability to sustain our profitability and positive cash flows; (xii) our ability to differentiate our products in a highly competitive and converging market, expand our customer base and gain market share; (xiii) our ability to manage and mitigate downward pressure on the average selling prices of our products as a result of competitive pressures in the light emitting diode ("LED") market; (xix) our ability to manage our inventory and avoid inventory obsolescence in a rapidly evolving LED market; (xx) our increasing reliance on third parties for the manufacture and development of products, product components, as well as the provision of certain services; (xxi) our increasing emphasis on selling more of our products through third party distributors and sales agents, including our ability to attract and retain effective third party distributors and sales agents to execute our sales model; (xxii) our ability to develop and participate in new product and technology offerings or applications in a cost effective and timely manner; (xxiii) our ability to maintain safe and secure information technology systems; (xxiv) our failure to comply with the covenants in our credit agreement; (xxv) our ability to balance customer demand and production capacity; (xxvi) our ability to maintain an effective system of internal control over financial reporting; (xxvii) price fluctuations (including as a result of tariffs), shortages or interruptions of component supplies and raw materials used to manufacture our products; (xxviii) our ability to defend our patent portfolio and license technology from third parties; (xxix) a reduction in the price of electricity; (xxx) the reduction or elimination of investments in, or incentives to adopt, LED lighting or the elimination of, or changes in, policies, incentives or rebates in certain states or countries that encourage the use of LEDs over some traditional lighting technologies; (xxxi) the cost to comply with, and the effects of, any current and future industry and government regulations, laws and policies; (xxxii) potential warranty claims in excess of our reserve estimates, and (xxxiii) the other risks described in our filings with the
Twitter: @OrionLighting and @OrionLightingIR
Investor Relations Contacts
| Per Brodin, CFO | |
| Catalyst IR | |
| pbrodin@oesx.com | (212) 924-9800 or OESX@catalyst-ir.com |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
| Assets | ||||||||
| Cash and cash equivalents | $ | 14,740 | $ | 19,393 | ||||
| Accounts receivable, net | 23,536 | 13,572 | ||||||
| Revenue earned but not billed | 2,208 | 2,930 | ||||||
| Inventories, net | 19,714 | 19,554 | ||||||
| Prepaid expenses and other current assets | 2,359 | 1,082 | ||||||
| Total current assets | 62,557 | 56,531 | ||||||
| Property and equipment, net | 11,085 | 11,369 | ||||||
| Other intangible assets, net | 1,846 | 1,952 | ||||||
| Deferred tax assets | 17,710 | 19,785 | ||||||
| Other long-term assets | 3,395 | 3,184 | ||||||
| Total assets | $ | 96,593 | $ | 92,821 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Accounts payable | $ | 16,417 | $ | 17,045 | ||||
| Accrued expenses and other | 11,306 | 13,226 | ||||||
| Deferred revenue, current | 81 | 87 | ||||||
| Current maturities of long-term debt | 15 | 14 | ||||||
| Total current liabilities | 27,819 | 30,372 | ||||||
| Revolving credit facility | — | — | ||||||
| Long-term debt, less current maturities | 27 | 35 | ||||||
| Deferred revenue, long-term | 602 | 640 | ||||||
| Other long-term liabilities | 3,413 | 3,700 | ||||||
| Total liabilities | 31,861 | 34,747 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, | — | — | ||||||
| Common stock, no par value: Shares authorized: 200,000,000 at and 40,279,050 at | — | — | ||||||
| Additional paid-in capital | 157,975 | 157,485 | ||||||
| (36,241 | ) | (36,240 | ) | |||||
| Retained deficit | (57,002 | ) | (63,171 | ) | ||||
| Total shareholders’ equity | 64,732 | 58,074 | ||||||
| Total liabilities and shareholders’ equity | $ | 96,593 | $ | 92,821 | ||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
| Three Months Ended | Six Months Ended | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Product revenue | $ | 27,811 | $ | 20,260 | $ | 56,057 | $ | 29,961 | ||||||||
| Service revenue | 8,699 | 6,021 | 15,554 | 7,131 | ||||||||||||
| Total revenue | 36,510 | 26,281 | 71,611 | 37,092 | ||||||||||||
| Cost of product revenue | 18,864 | 14,402 | 38,297 | 21,631 | ||||||||||||
| Cost of service revenue | 6,858 | 4,616 | 12,296 | 5,563 | ||||||||||||
| Total cost of revenue | 25,722 | 19,018 | 50,593 | 27,194 | ||||||||||||
| Gross profit | 10,788 | 7,263 | 21,018 | 9,898 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 2,753 | 2,638 | 5,864 | 5,049 | ||||||||||||
| Sales and marketing | 2,687 | 2,332 | 5,932 | 4,186 | ||||||||||||
| Research and development | 317 | 424 | 773 | 839 | ||||||||||||
| Total operating expenses | 5,757 | 5,394 | 12,569 | 10,074 | ||||||||||||
| Income (loss) from operations | 5,031 | 1,869 | 8,449 | (176 | ) | |||||||||||
| Other income (expense): | ||||||||||||||||
| Other income | — | 35 | 1 | 44 | ||||||||||||
| Interest expense | (14 | ) | (1 | ) | (33 | ) | (50 | ) | ||||||||
| Amortization of debt issue costs | (15 | ) | (61 | ) | (31 | ) | (122 | ) | ||||||||
| Total other expense | (29 | ) | (27 | ) | (63 | ) | (128 | ) | ||||||||
| Income (loss) before income tax | 5,002 | 1,842 | 8,386 | (304 | ) | |||||||||||
| Income tax expense (benefit) | 1,343 | (72 | ) | 2,217 | 1 | |||||||||||
| Net income (loss) | $ | 3,659 | $ | 1,914 | $ | 6,169 | $ | (305 | ) | |||||||
| Basic net income (loss) per share attributable to common shareholders | $ | 0.12 | $ | 0.06 | $ | 0.20 | $ | (0.01 | ) | |||||||
| Weighted-average common shares outstanding | 31,031,098 | 30,669,272 | 30,946,105 | 30,511,611 | ||||||||||||
| Diluted net income (loss) per share | $ | 0.12 | $ | 0.06 | $ | 0.20 | $ | (0.01 | ) | |||||||
| Weighted-average common shares and share equivalents outstanding | 31,287,826 | 31,170,139 | 31,310,965 | 30,511,611 | ||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Six Months Ended | ||||||||
| 2021 | 2020 | |||||||
| Operating activities | ||||||||
| Net income (loss) | $ | 6,169 | $ | (305 | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation | 622 | 587 | ||||||
| Amortization of intangible assets | 113 | 152 | ||||||
| Stock-based compensation | 372 | 459 | ||||||
| Amortization of debt issue costs | 31 | 122 | ||||||
| Deferred income tax | 2,075 | — | ||||||
| (Gain) loss on sale of property and equipment | (15 | ) | 6 | |||||
| Provision for inventory reserves | 313 | 112 | ||||||
| Provision for bad debts | 8 | — | ||||||
| Other | — | 4 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (9,972 | ) | (5,909 | ) | ||||
| Revenue earned but not billed | 722 | (2,674 | ) | |||||
| Inventories | (495 | ) | (3,723 | ) | ||||
| Prepaid expenses and other assets | (1,015 | ) | 206 | |||||
| Accounts payable | (633 | ) | (6,305 | ) | ||||
| Accrued expenses and other | (2,208 | ) | 3,058 | |||||
| Deferred revenue, current and long-term | (43 | ) | 72 | |||||
| Net cash used in operating activities | (3,956 | ) | (14,138 | ) | ||||
| Investing activities | ||||||||
| Cash paid for investment | (500 | ) | — | |||||
| Purchases of property and equipment | (312 | ) | (397 | ) | ||||
| Additions to patents and licenses | (7 | ) | (30 | ) | ||||
| Proceeds from sale of property, plant and equipment | 17 | — | ||||||
| Net cash used in investing activities | (802 | ) | (427 | ) | ||||
| Financing activities | ||||||||
| Payment of long-term debt | (7 | ) | (28 | ) | ||||
| Proceeds from revolving credit facility | — | 8,000 | ||||||
| Payments of revolving credit facility | — | (10,085 | ) | |||||
| Payments to settle employee tax withholdings on stock-based compensation | (6 | ) | (20 | ) | ||||
| Deferred financing costs | (5 | ) | — | |||||
| Net proceeds from employee equity exercises | 123 | 71 | ||||||
| Net cash provided by (used in) financing activities | 105 | (2,062 | ) | |||||
| Net decrease in cash and cash equivalents | (4,653 | ) | (16,627 | ) | ||||
| Cash and cash equivalents at beginning of period | 19,393 | 28,751 | ||||||
| Cash and cash equivalents at end of period | $ | 14,740 | $ | 12,124 | ||||
UNAUDITED EBITDA RECONCILIATION
(in thousands)
| Three Months Ended | ||||||||||||||||||||
| Net income (loss) | $ | 3,659 | $ | 2,510 | $ | 22,124 | $ | 4,315 | $ | 1,914 | ||||||||||
| Interest | 14 | 19 | 76 | 1 | 1 | |||||||||||||||
| Taxes | 1,343 | 874 | (19,668 | ) | 51 | (72 | ) | |||||||||||||
| Depreciation | 313 | 309 | 301 | 302 | 295 | |||||||||||||||
| Amortization of intangible assets | 46 | 67 | 65 | 73 | 74 | |||||||||||||||
| Amortization of debt issue costs | 15 | 16 | 15 | 20 | 61 | |||||||||||||||
| Loss on debt extinguishment | — | — | — | 90 | — | |||||||||||||||
| EBITDA | $ | 5,390 | $ | 3,795 | $ | 2,913 | $ | 4,852 | $ | 2,273 | ||||||||||
UNAUDITED EARNINGS PER SHARE RECONCILIATION
| For the Three Months Ended | ||||
| Numerator: (dollars in thousands) | ||||
| Net income | $ | 22,124 | ||
| Impact of tax benefit - valuation allowance release | 20,949 | |||
| Net income excluding tax benefit | $ | 1,175 | ||
| Denominator: | ||||
| Weighted-average common shares and share equivalents outstanding | 31,294,900 | |||
| Net income per common share: | ||||
| Diluted | $ | 0.71 | ||
| Diluted excluding tax benefit | $ | 0.04 | ||
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