Orion Energy Systems, Inc. (NASDAQ: OESX), a leading designer and manufacturer of high-performance, energy-efficient lighting platforms, today announced financial results for its fiscal 2016 fourth quarter and full fiscal year ended March 31, 2016.
Operating and Financial Highlights
- Total revenue for the fiscal 2016 fourth quarter was $18.6 million, in-line with our expectations, while LED lighting product sales reached a record $13.5 million, or 76% of total lighting product revenue, which compared to 61% in the fiscal 2015 fourth quarter.
- Gross profit for the quarter increased 55% to $4.6 million from $3.0 million in the prior year period, and gross margin for the quarter increased 950 basis points to 24.9% compared to 15.4% in the prior-year period.
- As of March 31, 2016, Orion had a backlog of $5.6 million in lighting orders, compared to a backlog of $7.5 million in lighting orders as of December 31, 2015.
- Orion reported a net loss for the fiscal 2016 fourth quarter of $10.9 million, or $0.39 per share, compared to net loss of $4.7 million, or $0.19 per share, in the prior-year period. The net loss for the fiscal fourth quarter 2016 included a goodwill impairment charge of $4.4 million, an impairment loss of $1.6 million on assets held for sale relating to the sale and leaseback of Orion’s manufacturing facility, and the recognition of a loss contingency and associated expenses of $1.8 million, all which resulted in a total impact to the net loss for the quarter of $7.8 million, or $0.28 per share.
“Fiscal 2016 was a successful year for us in many ways. We launched numerous state-of-the-art, breakthrough products aimed at improving margin and positioning us to capture greater market share. Our LED lighting product sales reached record levels, we enhanced our sales structure, and significantly expanded our addressable market,” commented John Scribante, Chief Executive Officer. “Furthermore, from a profitability standpoint, we made solid progress as well. We delivered five consecutive quarters of year-over-year margin expansion, and are within close reach of generating positive EBITDA. In spite of the challenging macro-economic headwinds we encountered, we further executed on the strategy we laid out during this time last year.”
“As we enter fiscal 2017, I believe we have never been better positioned. The secular shift from fluorescent to LED lighting and increasingly diversified applications of our innovative products across sectors will enable us to capitalize on the significant market opportunity ahead of us. We are committed to delivering profitable growth and healthy returns on our investors’ capital,” Scribante said.
Financial Results Review
Fiscal 2016 Fourth Quarter
Revenue: Total revenue for the fiscal 2016 fourth quarter was $18.6 million, compared to $19.4 million of revenue in the prior-year period. Total lighting product sales for the fiscal 2016 fourth quarter were $17.7 million, a 2.3% increase compared to $17.3 million in the prior-year period. Strong customer response to Orion’s next generation LED high-bay product offering was offset somewhat during the quarter by tempered demand in the industrial sector as a result of macro-economic uncertainty.
LED Lighting Revenue: LED lighting product sales were $13.5 million in the fiscal 2016 fourth quarter compared to $10.4 million in the prior-year period, reflecting 76% of total lighting product revenue compared to 61% in the fiscal 2015 fourth quarter.
Gross Margin: The fiscal 2016 fourth quarter gross margin was 24.9% compared to 15.4% in the prior-year period, reflecting a 950 basis point improvement. The gross margin was positively impacted by a reduction in LED component costs, an improvement in manufacturing expenses, and a mix shift to higher margin products.
Net Loss: Orion reported a net loss for the fiscal 2016 fourth quarter of $10.9 million, or $0.39 per share, compared to net loss of $4.7 million, or $0.19 per share, in the prior-year period. The net loss for the fiscal fourth quarter 2016 included a goodwill impairment charge of $4.4 million, an impairment loss of $1.6 million on assets held for sale relating to the sale and leaseback of Orion’s manufacturing facility, and the recognition of a loss contingency and associated expenses of $1.8 million, all which resulted in a total impact to the net loss for the quarter of $7.8 million, or $0.28 per share.
Full-Year Fiscal 2016
Revenue: Total revenue was $67.6 million for fiscal 2016, a 6.3% decrease compared to $72.2 million in fiscal 2015. Total lighting product sales for fiscal 2016 were $64.0 million, a 2.8% decrease compared to $65.9 million in the prior-year period.
LED Lighting Revenue: LED lighting product sales were $45.7 million in fiscal 2016 compared to $30.8 million in fiscal 2015, reflecting 71% of total lighting product revenue compared to 48% in fiscal 2015.
Gross Margin: Gross margin was 23.7% for fiscal 2016 compared to (1.6)% in fiscal 2015. Fiscal 2015 gross margin included a non-cash impairment charge of approximately $12.1 million, which negatively impacted the gross margin by 1,680 basis points. Gross margin for fiscal 2015 excluding the impairment charge would have been 15.2%.
Net Loss: Orion reported a net loss for fiscal 2016 of $20.1 million, or $0.73 per share, compared to a net loss of $32.1 million, or $1.43 per share, in fiscal 2015. The net loss for the full fiscal year 2016 included a goodwill impairment charge of $4.4 million, an impairment loss of $1.6 million on assets held for sale relating to the sale and leaseback of Orion’s manufacturing facility, and the recognition of a loss contingency and associated expenses of $1.8 million, which resulted in a total impact to the net loss for fiscal 2016 of $7.8 million, or $0.28 per share.
Balance Sheet Review
Cash and Borrowings: Orion had $15.5 million in cash and cash equivalents as of March 31, 2016, compared to $20.0 million at March 31, 2015. As of March 31, 2016, Orion had $3.7 million in borrowings outstanding on its line of credit.
Net Working Capital: Orion’s net working capital as of March 31, 2016 was $31.8 million compared to $36.7 million at March 31, 2015.
Net Cash from Operations: Orion reported cash flows used in operating activities of $0.1 million during the fiscal 2016 fourth quarter, and a use of $3.4 million for fiscal 2016. This compares to a use of cash flows from operating activities of $2.2 million in the fiscal 2015 fourth quarter and a use of $12.8 million for fiscal 2015.
Total Debt: Orion’s total debt was $4.8 million at March 31, 2016, compared to $5.1 million at March 31, 2015.
Management Outlook for Fiscal Year 2017
Mr. Scribante continued, “While we are still facing macro-economic headwinds that may impact our business, our sales channel strategy, coupled with a robust pipeline and sales momentum gives us confidence that we can generate a minimum of $80 million in sales in fiscal 2017. We also expect gross margin expansion leading to just over 30% by the end of fiscal Q4 2017. This should lead to positive trends in both EPS and EBITDA,” concluded Scribante.
Conference Call
Orion will discuss these results in a conference call on June 2, 2016, at 4:30 p.m. ET.
| The dial-in numbers are: | |||
| U.S. callers: | (877) 754-5294 | ||
| International callers: | (678) 894-3013 | ||
Orion will be utilizing an accompanying slideshow presentation in conjunction with this call, which will be available on the Investor Relations section of Orion’s website at www.orionlighting.com.
To listen to the live webcast, go to the Investor Relations section of Orion Energy Systems’ website at http://investor.oriones.com/events.cfm for a live webcast link. To ensure a timely connection, it is recommended that users register at least 15 minutes prior to the scheduled webcast.
An audio replay of the earnings conference call will be available shortly after the call and will remain available through June 10, 2016. The replay can be accessed by dialing (855) 859-2056. The replay pass code for callers is 25608331.
About Orion Energy Systems
Orion is leading the transformation of commercial and industrial buildings with state-of-the-art energy efficient lighting systems and retrofit lighting solutions. Orion manufactures and markets a cutting edge portfolio of products encompassing LED Solid-State Lighting and high intensity fluorescent lighting. Many of Orion's nearly 100 granted patents and pending patent applications relate to lighting systems that provide exceptional optical and thermal performance, which drive financial, environmental, and work-space benefits for a wide variety of customers in the retrofit markets.
Safe Harbor Statement
Certain matters discussed in this press release, including under our “Management Outlook For Fiscal Year 2017,”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 the Company's 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 achieve our expected revenue, gross margin and EBITDA objectives in fiscal 2017 and beyond; (ii) our ability to achieve and sustain profitability and positive cash flows; (iii) the availability of additional debt financing and/or equity capital; (iv) our levels of cash and our limited borrowing capacity under our bank line of credit; (v) our development of, and participation in, new product and technology offerings or applications, including customer acceptance of our new light emitting diode product lines; (vi) deterioration of market conditions, including our dependence on customers' capital budgets for sales of products and services; (vii) our ability to compete and execute our strategy in a highly competitive market and our ability to respond successfully to market competition; (viii) our ability to successfully implement our strategy of focusing on lighting solutions using new LED technologies in lieu of traditional HIF lighting upon which our business has historically relied; (ix) our ability to effectively manage the growth of our business; (x) adverse developments with respect to litigation and other legal matters that we are subject to; (xi) our failure to comply with the covenants in our revolving credit agreement; (xii) increasing duration of customer sales cycles; (xiii) fluctuating quarterly results of operations as we focus on new LED technologies; (xiv) the market acceptance of our products and services; (xv) our ability to recruit and hire sales talent to increase our in-market sales and our ability to pursue an expanded third-party sales channel through distribution and sales agents; (xvi) price fluctuations, shortages or interruptions of component supplies and raw materials used to manufacture our products; (xvii) loss of one or more key customers or suppliers, including key contacts at such customers; (xviii) our ability to effectively manage our product inventory to provide our products to customers on a timely basis; (xix) a reduction in the price of electricity; (xx) the cost to comply with, and the effects of, any current and future government regulations, laws and policies; (xxi) increased competition from government subsidies and utility incentive programs; (xxii) potential warranty claims; and (xxiii) the other risks described in our filings with the SEC. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and the Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, which are available at http://www.sec.gov or at http://www.oesx.com in the Investor Relations section of the Company's Web site.
| ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES | ||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||||||||||||||||||
| (Amounts in thousands, except share and per share data) | ||||||||||||||||||
| UNAUDITED | UNAUDITED | |||||||||||||||||
| Three Month Ended March 31, | Twelve Months Ended March 31, | |||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| Product revenue | $ | 18,025 | $ | 17,347 | $ | 64,897 | $ | 65,881 | ||||||||||
| Service revenue | 551 | 2,020 | 2,746 | 6,329 | ||||||||||||||
| Total revenue | 18,576 | 19,367 | 67,643 | 72,210 | ||||||||||||||
| Cost of product revenue | 13,642 | 14,876 | 49,630 | 68,388 | ||||||||||||||
| Cost of service revenue | 315 | 1,508 | 2,015 | 4,959 | ||||||||||||||
| Total cost of revenue | 13,957 | 16,384 | 51,645 | 73,347 | ||||||||||||||
| Gross profit (loss) | 4,619 | 2,983 | 15,998 | (1,137 | ) | |||||||||||||
| Operating expenses: | ||||||||||||||||||
| General and administrative | 5,751 | 3,604 | 16,613 | 14,908 | ||||||||||||||
Goodwill and long lived asset impairment | 6,023 | - | 6,023 | - | ||||||||||||||
| Acquisition and integration related expenses | - | 23 | 274 | 47 | ||||||||||||||
| Sales and marketing | 3,231 | 3,274 | 11,343 | 13,290 | ||||||||||||||
| Research and development | 424 | 680 | 1,667 | 2,554 | ||||||||||||||
| Total operating expenses | 15,429 | 7,581 | 35,920 | 30,799 | ||||||||||||||
| Loss from operations | (10,810 | ) | (4,598 | ) | (19,922 | ) | (31,936 | ) | ||||||||||
| Other income (expense): | ||||||||||||||||||
| Interest expense | (74 | ) | (141 | ) | (297 | ) | (376 | ) | ||||||||||
| Interest income | 21 | 54 | 128 | 300 | ||||||||||||||
| Total other income (expense) | (53 | ) | (87 | ) | (169 | ) | (76 | ) | ||||||||||
| Loss before income tax | (10,863 | ) | (4,685 | ) | (20,091 | ) | (32,012 | ) | ||||||||||
| Income tax expense (benefit) | 8 | 8 | 36 | 49 | ||||||||||||||
| Net loss and comprehensive loss | $ | (10,871 | ) | $ | (4,693 | ) | $ | (20,127 | ) | $ | (32,061 | ) | ||||||
| Basic net loss per share attributable to common | ||||||||||||||||||
| shareholders | $ | (0.39 | ) | $ | (0.19 | ) | $ | (0.73 | ) | $ | (1.43 | ) | ||||||
| Weighted-average common shares outstanding | 27,758,859 | 24,071,357 | 27,627,693 | 22,353,419 | ||||||||||||||
| Diluted net loss per share | $ | (0.39 | ) | $ | (0.19 | ) | $ | (0.73 | ) | $ | (1.43 | ) | ||||||
| Weighted-average common shares and share | ||||||||||||||||||
equivalents outstanding | 27,758,859 | 24,071,357 | 27,627,693 | 22,353,419 | ||||||||||||||
| ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES | ||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| (Amounts in thousands, except share data) | ||||||||||
| UNAUDITED | ||||||||||
| March 31, | ||||||||||
| 2016 | 2015 | |||||||||
| Assets | ||||||||||
| Cash and cash equivalents | $ | 15,542 | $ | 20,002 | ||||||
| Accounts receivable, net | 10,889 | 18,263 | ||||||||
| Inventories, net | 17,024 | 14,283 | ||||||||
| Deferred contract costs | 36 | 90 | ||||||||
| Prepaid expenses and other current assets | 5,038 | 2,407 | ||||||||
| Assets held for sale | 2,600 | - | ||||||||
| Total current assets | 51,129 | 55,045 | ||||||||
| Property and equipment, net | 14,405 | 21,223 | ||||||||
| Goodwill | - | 4,409 | ||||||||
| Other intangible assets, net | 5,048 | 6,335 | ||||||||
| Long-term accounts receivable | 108 | 426 | ||||||||
| Other long-term assets | 185 | 367 | ||||||||
| Total assets | $ | 70,875 | $ | 87,805 | ||||||
| Liabilities and Shareholders’ Equity | ||||||||||
| Accounts payable | $ | 11,716 | $ | 11,003 | ||||||
| Accrued expenses and other | 6,588 | 5,197 | ||||||||
| Deferred revenue, current | 241 | 287 | ||||||||
| Current maturities of long-term debt | 747 | 1,832 | ||||||||
| Total current liabilities | 19,292 | 18,319 | ||||||||
| Revolving credit facility | 3,719 | 2,500 | ||||||||
| Long-term debt, less current maturities | 302 | 722 | ||||||||
| Deferred revenue, long-term | 1,022 | 1,231 | ||||||||
| Other long-term liabilities | 558 | 522 | ||||||||
| Total liabilities | 24,893 | 23,294 | ||||||||
| Commitments and contingencies | ||||||||||
| Shareholders’ equity: | ||||||||||
| Preferred stock, $0.01 par value: Shares authorized: 30,000,000 shares at March 31, 2016 and 2015; | - | - | ||||||||
no shares issued and outstanding at March 31, 2016 and 2015 | ||||||||||
| Common stock, no par value: Shares authorized: 200,000,000 at March 31, 2016 and 2015; | - | - | ||||||||
| shares issued: 37,192,559 and 36,837,864 at March 31, 2016 and 2015; | ||||||||||
| shares outstanding: 27,767,138 and 27,421,533 at March 31, 2016 and 2015 | ||||||||||
| Additional paid-in capital | 152,140 | 150,516 | ||||||||
| Treasury stock: 9,425,421 and 9,416,331 common shares at March 31, 2016 and 2015 | (36,075 | ) | (36,049 | ) | ||||||
| Shareholder notes receivable | (4 | ) | (4 | ) | ||||||
| Retained deficit | (70,079 | ) | (49,952 | ) | ||||||
| Total shareholders’ equity | 45,982 | 64,511 | ||||||||
| Total liabilities and shareholders’ equity | $ | 70,875 | $ | 87,805 | ||||||
| ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES | ||||||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||
| (Amounts in thousands) | ||||||||||||||||||
| UNAUDITED | ||||||||||||||||||
| Fiscal Year Ended March 31, | ||||||||||||||||||
| 2016 | 2015 | 2014 | ||||||||||||||||
| Operating activities | ||||||||||||||||||
| Net loss | $ | (20,127 | ) | $ | (32,061 | ) | $ | (6,199 | ) | |||||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||||||||
| Depreciation | 2,950 | 2,853 | 3,798 | |||||||||||||||
| Amortization | 1,328 | 1,460 | 740 | |||||||||||||||
| Stock-based compensation expense | 1,462 | 1,499 | 1,593 | |||||||||||||||
Accretion of fair value on contingent consideration | - | - | 11 | |||||||||||||||
| Deferred income tax benefit | - | - | (2,123 | ) | ||||||||||||||
| Impairment of assets | 6,023 | 12,130 | - | |||||||||||||||
| Loss on sale of property and equipment | 75 | (21 | ) | 1,733 | ||||||||||||||
| Provision for inventory reserves | 509 | 361 | 1,995 | |||||||||||||||
| Provision for bad debts | 575 | 285 | 174 | |||||||||||||||
| Other | 144 | 132 | 129 | |||||||||||||||
| Changes in operating assets and liabilities, net of changes from acquisitions: | ||||||||||||||||||
| Accounts receivable, current and long-term | 7,116 | (1,909 | ) | 8,395 | ||||||||||||||
| Inventories, current and long-term | (3,249 | ) | (2,356 | ) | 3,962 | |||||||||||||
| Deferred contract costs | 54 | 651 | 1,376 | |||||||||||||||
| Prepaid expenses and other current assets | (2,560 | ) | 1,261 | (1,072 | ) | |||||||||||||
| Accounts payable | (254 | ) | 2,475 | (762 | ) | |||||||||||||
| Accrued expenses and other | 713 | 838 | (1,575 | ) | ||||||||||||||
| Deferred revenue, current and long-term | 1,803 | (410 | ) | (2,274 | ) | |||||||||||||
| Net cash provided by (used in) operating activities | (3,438 | ) | (12,812 | ) | 9,901 | |||||||||||||
| Investing activities | ||||||||||||||||||
| Cash paid for acquisition, net of cash acquired | - | - | (4,992 | ) | ||||||||||||||
| Purchase of property and equipment | (420 | ) | (2,006 | ) | (410 | ) | ||||||||||||
| Purchase of short-term investments | - | (2 | ) | (4 | ) | |||||||||||||
| Sale of short-term investments | - | 472 | 555 | |||||||||||||||
| Additions to patents and licenses | (7 | ) | (234 | ) | (43 | ) | ||||||||||||
| Proceeds from sales of property, plant and equipment | - | 1,040 | 80 | |||||||||||||||
| Net cash used in investing activities | (427 | ) | (730 | ) | (4,814 | ) | ||||||||||||
| Financing activities | ||||||||||||||||||
| Payment of long-term debt | (1,882 | ) | (4,494 | ) | (3,229 | ) | ||||||||||||
| Proceeds from revolving credit facility | 65,767 | 2,500 | - | |||||||||||||||
| Payments of revolving credit facility | (64,549 | ) | - | - | ||||||||||||||
| Proceeds from long-term debt | - | 446 | - | |||||||||||||||
| Proceeds from repayment of shareholder notes | - | 46 | 215 | |||||||||||||||
| Proceeds from issuance of common stock , net of issuance costs | (1 | ) | 17,465 | - | ||||||||||||||
| Repurchase of common stock into treasury | (33 | ) | - | - | ||||||||||||||
| Excess tax benefits from stock-based compensation | - | - | 13 | |||||||||||||||
| Deferred financing costs | - | (406 | ) | (19 | ) | |||||||||||||
| Net proceeds from exercise of warrants and employee stock options | 103 | 419 | 1,125 | |||||||||||||||
| Net cash (used in) provided by financing activities | (595 | ) | 15,976 | (1,895 | ) | |||||||||||||
| Net increase (decrease) in cash and cash equivalents | (4,460 | ) | 2,434 | 3,192 | ||||||||||||||
| Cash and cash equivalents at beginning of period | 20,002 | 17,568 | 14,376 | |||||||||||||||
| Cash and cash equivalents at end of period | $ | 15,542 | $ | 20,002 | $ | 17,568 | ||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20160602006512/en/
Contacts:
Orion
Energy Systems, Inc.
Bill Hull
Chief Financial Officer
(312)
660-3575
or
Clermont Partners
Victoria Sivrais
(312)
690-6004
vsivrais@clermontpartners.com
