Orion Q2’23 Analysis: Continued Drastic Drop in Revenue Year-Over-Year, Leadership Looks to Second Half for Better Results

Orion Energy Systems (NASDAQ: OESX), a Wisconsin-based provider of energy-efficient LED lighting and controls, maintenance service and EV charging station solutions, recently released Q2 FY2023 results that felt a whole lot like its first quarter results with revenue declining -58% at $17.6M compared to $36.5M in Q2 FY2022, and Adjusted EBITDA dropping to a loss of -$1.5M compared to Adjusted EBITDA of +$4.0M in Q2 FY2022.  As noted in Orion’s release, the Q3 FY2023 earnings loss  of -$1.5M was as an improvement over last quarter’s Adjusted EBITDA loss of -$2.9M.

While reinforcing that Orion’s pipeline of opportunities continues to expand, CEO Mike Altschaefl stated that the results reflect continued customer delays that are pushing projects into future periods.  The truck-sized hole in the revenue compared to the Q2 FY2022 is related to Orion’s number one account who completed a major retrofit project in the prior period (over $18M in revenue from that single customer), along with a “global online retailer”, who was down in revenue by $900K in Q2 FY2023 compared to Q2 FY2022, abruptly halting new warehouse construction in Q1 FY2023. 

Orion has three reportable business segments:

OSG (Orion Services Group) selling lighting products, providing construction, engineering, installation and maintenance services.

ODS (Orion Distribution Services) selling lighting products through manufacturer’s reps, electrical distributors and contractors.

USM (Orion US Markets) selling commercial lighting systems and energy management systems to ESCO’s and contractors.

Orion acquired Stay-Lite in January 2022, a nationwide lighting and electrical maintenance service provider, to strengthen the OSG segment.  Last month, another acquisition was announced, also to be added to the OSG segment:  Voltrek, an EV charging station solutions provider, for $5M cash and $1M in Orion shares.  CEO Mike Altschaefl noted Orion entered the electric vehicle charging market through the Voltrek acquisition, expressing excitement at this expansion of their portfolio of solutions, adding EV charging solutions to address a growing need for customers with large national or regional footprints – “with hundreds and sometimes thousands of locations”.  He commented in the earnings call Q&A that after two acquisitions during this calendar year, their focus was now on the integration and growth of both businesses.

The previously announced CEO transition plan was confirmed, with this earnings call being the final one for Atlschaefl as CEO.  Altschaefl will remain on the Orion Board of Directors until the end of FY2023 and may provide consulting services to Orion until December 31, 2023.  Mike Jenkins moved up from EVP/COO to CEO during the Orion Board meeting last week.  Prior to joining Orion last year, Jenkins served for eight years as GM-Americas of Bostik, Inc., an industrial adhesive and sealing products provider ($2.4B in annual sales). 

Asked in the earnings call Q&A for an update on Orion’s “PureMotionTM” UVC product development, Altschaefl commented that Orion continues to work diligently on the UV-C product which can deactivate/kill viruses, mold and mildew.  He admitted it has been a slower process than expected, but noted they have some very nice opportunities of size, and continue to believe they have a very strong product. 

Looking ahead to the second half of FY2023, the company expects revenue to be much stronger than the first half of FY2023 (which totalled $35.5M), confirming the full year FY2023 revenue outlook in a range between $90M and $110M.  

Go Deeper

Orion Reports Q2 FY2023:  https://investor.oriones.com/news-releases/news-release-details/orion-energy-systems-reports-q2-revenue-176m-gross-profit

Orion Announces Michael Jenkins as CEO:  https://investor.oriones.com/news-releases/news-release-details/michael-h-jenkins-assumes-role-orion-energy-systems-ceo

Orion Announce Voltrek Acquisition:  https://investor.oriones.com/news-releases/news-release-details/orion-adds-electric-vehicle-charging-station-solutions-voltrek

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