MANITOWOC, Wis.–(BUSINESS WIRE)–Orion Energy Systems, Inc. (NASDAQ Capital Market: OESX), a leading designer and manufacturer of high-performance, energy-efficient lighting platforms, today announced financial results for its fiscal 2016 second quarter ended September 30, 2015, highlighted by record LED sales and solid gross and operating margin expansion.
Operating and Financial Highlights
- Total revenue for the fiscal 2016 second quarter was $15.7 million, an increase of 17.4% compared to $13.4 million in the prior-year period.
- LED lighting product sales were $10.6 million in the fiscal 2016 second quarter, an increase of 104% compared to $5.2 million in the prior-year period, reflecting a record 71.8% of total lighting product revenue, compared to 41.1% in the fiscal 2015 second quarter.
- The fiscal 2016 second quarter gross margin was 18.5% compared to 11.8% in the prior-year period excluding a one-time non-cash impairment charge.
- As of September 30, 2015, Orion had a lighting backlog of $5.6 million in LED and high-intensity fluorescent (HIF) lighting orders, compared to a lighting backlog of $5.2 million as of June 30, 2015.
“We have made significant strides in transforming Orion into a leading manufacturer of high-performance, energy efficient LED platforms. Fueled by growing acceptance of the technology and our unmatched value proposition, LED sales reached a new record of 72% of total lighting product revenue during the quarter, while our margins expanded significantly year-over-year. We continue to win highly competitive contracts with Fortune 500 companies, as well as creating beachheads in new verticals, such as education, with two of the three largest school districts in the country installing Orion’s products,” said John Scribante, Chief Executive Officer. “As we move into the second half of the fiscal year, our pipeline remains robust; however, we are expecting a slight shift in terms of our historic seasonality that typically follows CapEx spending cycles. We feel confident that our initiatives for 2016, namely growing LED revenues, driving innovation, and improving gross and operating margins, will continue to position Orion to capitalize on the substantial market opportunity in LED retrofit lighting.”
Financial Review
Fiscal 2016 Second Quarter
Revenue: Total revenue was $15.7 million for the fiscal 2016 second quarter, an increase of 17.4% compared to $13.4 million in the prior-year period. Total lighting sales for the fiscal 2016 second quarter were $15.5 million, a 17.4% increase compared to $13.2 million in the prior-year period. The increase was driven by stronger reseller sales during the quarter as we experienced higher LDR sales for schools and an increased demand for Orion’s new LED product offerings, particularly its LDR fixtures.
LED Lighting Revenue: Product revenue from Orion’s LED products was $10.6 million during the fiscal 2016 second quarter, an increase of 104% compared to $5.2 million in the prior-year period. LED sales during the period were 67.4% of total revenue and 71.8% total lighting product revenue, marking a new record for LED sales as a percentage of total revenue.
Gross Margin: Total gross margin expanded to 18.5% during the fiscal 2016 second quarter, compared to an adjusted 11.8% for the prior-year period (excluding a one-time non-cash impairment charge), reflecting a 678 basis point improvement. The gross margin improvement was largely due to the increase in product gross margin, reflecting reductions in component costs and manufacturing efficiencies. The gross margin decreased sequentially from 22.7% during the fiscal 2016 first quarter almost entirely due to product mix, which shifted towards lower margin LDR fixtures.
Net Income / Loss: The Company reported a net loss for the fiscal 2016 second quarter of $3.6 million, or $0.13 per share, compared to net loss of $18.3 million, or $0.84 per share, in the prior-year period. Excluding a $12.1 million one-time non-cash impairment charge, the Company reported a net loss in the prior-year period of $6.2 million, or $0.28 per share.
Balance Sheet Review
Cash and Investments: Orion had $13.4 million in cash and cash equivalents as of September 30, 2015, compared to $11.1 million at September 30, 2014. The Company had $2.5 million in borrowings outstanding on its line of credit.
Working Capital: The Company’s working capital as of September 30, 2015 was $32.0 million, consisting of $46.6 million in current assets and $14.5 million in current liabilities, compared to $25.2 million, consisting of $41.3 million in current assets and $16.1 million in current liabilities, at September 30, 2014.
Net Cash from Operations: The Company reported a $3.2 million use of cash from operations during the fiscal 2016 second quarter, compared to a $3.8 million use of cash from operations during the prior-year period. The improvement in the Company’s net loss during the fiscal 2016 second quarter compared to the prior-year period, as adjusted for an asset impairment charge during the prior-period, was largely offset by a sharp decrease in accounts payable related to the timing of vendor payments.
Total Debt: Orion’s total debt decreased $0.6 million to $4.4 million at September 30, 2015, compared to $5.0 million at September 30, 2014. It decreased $1.2 million sequentially.
Management Outlook for Remainder of Fiscal Year 2016
“We remain encouraged by the positive trends we are seeing in the LED marketplace and the strong reception we are receiving for our latest product introductions. While our second quarter results were impacted by a shift in mix towards our lower-priced, lower-margin LDR fixtures, the traction we are seeing in some of our newer verticals, including education and government, far exceeded our expectations. Looking forward, as our newly launched high-bay products gain traction, we expect our sales mix to reflect our historical average price points and margin levels,” Scribante continued. “We remain confident that we will achieve a significant year-over-year increase in revenue, significant year-over-year margin expansion for the full fiscal year, and positive GAAP EPS in the second half of the fiscal year. Given the shift we are seeing in product mix, we now expect to achieve trailing 12-month EBITDA profitability and positive cash flow from operations in June 2016.”
Explanation of Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted accounting principles, or GAAP. This press release includes certain non-GAAP financial measures to supplement this GAAP information. Orion uses certain non-GAAP financial measures to enable it to analyze its performance and financial condition. Orion believes EBITDA and adjusted gross margin can provide a more complete understanding of the underlying operating results and trends and an enhanced overall understanding of its financial performance and prospects for the future. The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
Additional information regarding the non-GAAP financial measures presented herein is as follows:
* Adjusted gross profit consists of GAAP gross profit adjusted to exclude the impact of non-cash impairment charges.
* Adjusted operating loss consists of GAAP operating loss adjusted to exclude the impact of non-cash impairment charges.
* Adjusted net income consists of GAAP net income adjusted to exclude the impact of non-cash impairment charges.
* Adjusted EBITDA adjusts GAAP net income available to common stockholders for the items considered in adjusted net income as well as (a) depreciation and amortization, (b) net interest expense and (c) income tax expense.