Orion Reports. Quarterly Sales Drop from $15.3M to $12.6M

MANITOWOC, Wis., Aug. 04, 2017 (GLOBE NEWSWIRE) -- Orion Energy Systems, Inc. (OESX) (Orion), a leading designer and U.S. manufacturer of high-performance, energy-efficient LED lighting products, today reported results for its fiscal 2018 first quarter (Q1’18) ended June 30, 2017. Orion will hold an investor call today at 10:00 a.m. ET (9:00 a.m. CT) to review its results and plans to drive growth and accelerate its path to profitability. Call details below.

Highlights

  • Orion’s agent driven distribution channel delivered on-plan revenue performance in Q1’18, however total revenue in the period was lower than expected due to delays in closing a few larger national account orders, which we still expect to close in fiscal 2018.  Q1’18 performance also reflected a $2.3 million decrease in Fluorescent lighting product sales versus Q1’17.
  • LED lighting product revenue continued to grow as a percentage of total lighting product revenue, rising 1,283 basis points to 89.7% in Q1’18 from 76.9% in Q1’17.
  • Orion implemented the majority of its identified cost reduction initiatives during Q1’18 and remains on track to reduce overall operating expenses by $3.5-$4.0 million on an annualized basis.
  • Including one-time employee separation costs of $1.8 million related to the cost reduction initiatives, general and administrative expenses increased to $5.3 million in Q1’18 from $3.9 million in Q1’17. Excluding these costs, general and administrative expenses would have decreased by 9% over Q1’17.
(in millions except %) Q1’18 Q4’17 Q3’17 Q2’17 Q1’17 Q4’16 Q3’16 Q2’16
Revenue $ 12.6   $ 15.3   $ 20.6   $ 18.7   $ 15.6   $ 18.6   $ 16.8   $ 15.7  
Gross Margin   21.6 %   6.0 %   29.9 %   33.4 %   25.8 %   24.9 %   28.1 %   18.5 %
Cash & equivalents $ 8.5   $ 17.3   $ 19.1   $ 18.7   $ 14.2   $ 15.5   $ 17.5   $ 13.4  

CEO Commentary
Orion CEO Mike Altschaefl, commented, “While Q1 was challenging from a revenue standpoint, we believe our performance was principally a reflection of the normal variability of our business on a quarterly basis driven by the timing and size of larger orders. We expect to see the positive side of this variability in the future, and are also very pleased with the solid execution in our expanding agent driven distribution channel. Given its far broader and deeper reach, this channel offers Orion strong mid and long-term growth potential.

“In support of that effort, we recently appointed Kevin Grayson as Senior Vice President for Channel Sales.  Kevin brings to Orion over 20 years of lighting industry sales management experience with several industry-leading manufacturers and manufacturer’s rep agencies.  He has particular expertise managing an agent driven distribution model and will be responsible for overseeing this channel for Orion. 

“We are optimistic about our opportunity to generate significant revenue performance from our national accounts over the full fiscal year.

“We are also focusing on our bottom-line, making solid progress in our efforts to trim $3.5 to $4.0 million in costs from our annual operating expenses. These cuts reach across the entire organization, including management and board compensation, and will be substantially implemented by the end of Q2’18. Thereafter, we expect that the full benefit of these actions combined with expected progress in our expanded sales efforts to enable Orion to reach our goal of achieving break-even EBITDA, before non-recurring items, by Q4'18.

“We are seeing many potential customers reengage in their review of LED lighting opportunities. The performance and value proposition of our product lines are being very well received by both our agent driven distribution channel and our national accounts. Together, these dynamics support our confidence in our competitive position in this very large and evolving industry, and we remain excited and optimistic regarding Orion’s business performance in fiscal 2018.

“We also have some new and exciting products that we are launching this month, focusing on 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 control and IoT solution adaptability through new modular plug and play solutions

“Part of our new product launch includes a new modular sensor platform that expands our ability to adapt to a wide range of available control options, from basic controls to advanced IoT solutions, all in a modular plug and play fashion.  This technology and approach allows the customer to deploy sensor technology exactly where and when they want in their facility.”

Mr. Altschaefl added, “Our core value proposition remains unchanged and is centered around four pillars of commitment that differentiate Orion from the competition:

  • Industry leading product performance, energy efficiency, and thought leadership – delivering more rapid ROI and future proof lighting options
  • Genuine, high-quality, high-touch customer service
  • Flexibility and nimbleness in responding to customer needs, including specialty design, development, prototyping, and production – which larger competitors cannot match
  • Rapid response local-to-local production operations delivering the quality and reliability our customers expect – typically in 10 days or less

“Our entire organization is dedicated to achieving these standards each and every day, and we have a strong track record of achievement that we proudly post on our website in real time (www.orionlighting.com/quality-and-reliability).   While price always plays a role, knowing that you can rely on Orion to be there with solid solutions, service and high touch interaction and support will always be a major competitive advantage and one that we believe will lead to success.”

Q1 2018 Overview
Orion initiated a companywide realignment during Q1’18 which included the appointment of Mike Altschaefl as CEO and an initiative to cut $3.5 - $4.0 million in annualized operating expenses versus fiscal 2017. Orion continued to build out its agent driven distribution channel which delivered on-plan revenue performance in Q1’18, with revenue of $5.5 million or 47% of total product revenue. However, due to delays in the closing of a few larger contracts that are still anticipated for later this year, combined with one-time expenses related to the cost and management realignment, Orion’s Q1’18 financial performance did not meet the Company’s growth or profitability expectations.