MANITOWOC, Wis., Feb. 07, 2024 (GLOBE NEWSWIRE) — Orion Energy Systems, Inc. (NASDAQ: OESX) (Orion Lighting), a provider of energy-efficient LED lighting, maintenance services and electric vehicle (EV) charging station solutions, today reported results for its fiscal 2024 third quarter (Q3’24) ended December 31, 2023. Orion will hold an investor call today at 10:00 a.m. ET – details below.
| Q3 Financial Summary | Prior Three Quarters | |||||||||
| $ in millions except per share figures | Q3’24 | Q3’23 | Change | Q2’24 | Q1’24 | Q4’23 | ||||
| Revenue | $26.0 | $20.3 | +$5.7 | $20.6 | $17.6 | $21.6 | ||||
| Gross Profit | $6.4 | $4.8 | +$1.6 | $4.6 | $3.2 | $4.7 | ||||
| Gross Profit % | 24.5% | 23.6% | +95 bps | 22.2% | 18.0% | 21.9% | ||||
| Net Loss (1) | ($2.3) | ($24.1) | +$21.8 | ($4.4) | ($6.6) | ($5.1) | ||||
| Net Loss per share (1) | ($0.07) | ($0.75) | +$0.68 | ($0.14) | ($0.21) | ($0.16) | ||||
| Adjusted EBITDA (2) | ($0.1) | ($1.6) | +$1.5 | ($2.2) | ($4.4) | ($1.6) | ||||
| Cash | $5.0 | $8.1 | ($3.1) | $4.0 | $8.2 | $16.0 | ||||
| (1) Q3’23 Net Loss & EPS reflect $17.8M non-cash charge recording a valuation allowance against Deferred Tax Assets. The 2024 quarters each include $1.1M of earnout expense related to the Voltrek acquisition. Q4’23 and Q3’23 included $2.5M and $1.5M of earnout expense, respectively.(2) See Adjusted EBITDA reconciliation below. | ||||||||||
Financial Highlights
- LED Lighting revenue increased to $18.5M in Q3’24 vs. $14.2M in Q3’23 and $13.6M in Q2’24, driven by anticipated growth in contract activity for larger customers that is expected to continue into FY 2025. Ongoing larger projects include approximately $6M in remaining revenue from a European retrofit project for the U.S. Department of Defense, an external lighting project for Orion’s largest customer, and a national LED lighting project for a global warehouse/logistics customer.
- EV charging solutions revenue was $2.8M in Q3’24 vs. $3.4M in Q2’24 and $2.8M in the year ago quarter, principally reflecting the timing of large project activity. The Voltrek business has substantially expanded and enhanced its team and geographic reach and is seeing steady growth in its project pipeline as well as new project quoting activity.
- Maintenance services revenue rose to $4.6M in Q3’24 compared to $3.6M in Q2’24 and $3.3M in Q3’23, principally benefitting from a 3-year agreement to provide preventative lighting maintenance services for a customer’s approximately 2,000 retail locations nationwide. Orion continues to focus on the profitability of remaining legacy contracts.
- Orion ended Q3’24 with $17.5M of financial liquidity, comprised of $5.0M of cash and $12.5M of net availability on its credit facility. This is an improvement from Q2’24 liquidity of $12.9M, which included $4.0M of cash and cash equivalents and $8.9M of net credit facility availability.
CEO Commentary Orion CEO Mike Jenkins commented, “We are pleased that our revenue grew 28% in Q3, reflecting an anticipated acceleration in contract activity on large LED lighting projects through ESCO partners, in our government sector and with our largest customer along with an increase in maintenance services revenue.
“Looking forward into Q4’24 and FY 2025, we are optimistic about our growth prospects across the business. In LED lighting we have several larger retrofit projects that should contribute to our growth, including the European retrofit project, external lighting and other potential projects for our largest customer, ongoing projects for a large warehouse/logistics customer and a large project for a global technology customer. In our LED distribution business, we anticipate growth through our ESCO partners who are responding favorably to our expanded line of fixtures, including our TritonPro™ LED retrofit high-bay lighting fixtures and our Harris exterior LED lighting products, targeted more to the value end of the energy-efficient fixture market.
“Throughout our product and service offerings, Orion remains focused on delivering the highest quality, energy efficiency and value to our customers with industry leading customer service. In particular, we are focused on the needs of large national accounts that are best able to benefit from our turnkey solutions. This starts with site visits followed by custom design and configuration, project management, securing utility and government rebates and progresses through to installation and commissioning – all with just one point of contact and accountability nationwide.
“Our initiatives to diversify the business over the past two years have taken some time and effort to develop and integrate but are starting to make meaningful contributions to our growth from both new and existing customers. We continue to see significant cross-selling opportunities between our lines of business, particularly with large national accounts, where there is potential to serve customers in each of our three areas of operation. One of our priorities in the coming quarters is to ensure we are effectively marketing each of our capabilities across our combined customer base. We expect our expanded array of solutions to support increasing growth in the quarters ahead.”
Business Outlook
- Orion expects FY 2024 revenue growth between 16% and 23% to a range of approximately $90M to $95M. This outlook implies Q4’24 revenue in the range of $26M to $31M compared to $21.6M in Q4’23.
- Growth over the balance of FY 2024 is primarily expected from large national LED lighting projects including the European retrofit project, an external lighting project for Orion’s largest customer, and projects for a large warehouse/logistics sector customer. Additionally, Orion expects growth in EV charging solutions driven by its current project pipeline. Maintenance services are expected to decrease slightly over the balance of FY 2024, reflecting the likely impact of new pricing on certain legacy customer renewal discussions.
- On a preliminary basis, Orion is targeting growth in FY 2025 in the range of 10-15% on a consolidated basis (recognizing the completion of the large DOD project and top-line headwinds in the maintenance business) and will update its outlook when it reports full year results in early June.
Financial Results Orion’s Q3’24 revenue rose 28% to $26.0M versus $20.3M in Q3’23, driven by strength in LED lighting projects and maintenance services. LED Lighting revenue increased to $18.6M in Q3’24 vs. $14.2M in Q3’23, reflecting an anticipated ramp-up of large LED lighting projects, including a large European retrofit project and a large outdoor lighting project for Orion’s largest customer. Maintenance services revenue also rose to $4.6M in Q3’24 compared to $3.3M in Q3’23, principally benefitting from a 3-year agreement to provide preventative lighting maintenance services for a customer’s ~2,000 retail locations nationwide.
Gross profit increased to $6.4M in Q3’24 from $4.8M in Q3’23 and gross profit percentage (gross margin) increased 95 basis points to 24.5% in Q3’24 from 23.6% in Q3’23, due to sales of higher margin new products and improved fixed cost absorption on higher sales volume. Services gross margin has benefited from pricing mix across various projects, improved fixed cost absorption on increased revenues and price increases on renewing maintenance contracts, to better reflect the current cost environment. Orion remains committed to returning its maintenance business to profit margins more in line with the overall company.
Total operating expenses declined to $8.4M in Q3’24 from $9.4M in Q3’23. Operating expenses included $1.1M of expense related to the Voltrek earnout accrual in Q3’24 vs. $1.5M in Q3’23. The year-ago period also included $0.5M of Voltrek acquisition costs versus none in Q3’24.
Orion reported a Q3’24 pretax loss of $2.3M, a $2.4M improvement over its Q3’23 pretax loss of $4.7M, primarily due to higher revenues and lower costs.
Orion reported a Q3’24 net loss of $2.3M, or $0.07 per share, as compared to a Q3’23 net loss of $24.1M, or $0.75 per share, which included a $17.8M non-cash tax charge to establish a valuation allowance against the Company’s Deferred Tax Assets.
Balance Sheet and Cash Flow Orion generated cash of $1.0M from operating activities in Q3’24, reflecting operating results and positive working capital impacts. Orion believes it is in a good position to fund its operations and growth objectives across each of its business segments through fiscal 2025.
Orion ended Q3’24 with current assets of $45.7M, including $5.0M of cash and cash equivalents, $15.7M of accounts receivables, and $20.8M of inventory. Net of current liabilities, working capital was $15.0M. Orion had financial liquidity of $17.5M at the close of Q3’24, a $4.6M improvement from $12.9M at September 30, 2023. The improved liquidity reflects a $1.0M increase in cash and a $3.1M increase in net credit availability. Orion had $10.0M of borrowings outstanding on its credit facility at both December 31, 2023 and September 30, 2023.