Wisconsin | 01-33887 | 39-1847269 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01(d). | Financial Statements and Exhibits. |
ORION ENERGY SYSTEMS, INC. | ||
Date: February 9, 2015 | By: /s/ Scott R. Jensen | |
Scott R. Jensen | ||
Chief Financial Officer |
• | Total revenue for the fiscal 2015 third quarter was $26.1 million, a decrease of 5.6% compared to $27.7 million in the prior-year period. Quarterly revenues reflect a decrease in revenue from the Company’s discontinued solar business and an increase in total lighting revenue. |
• | As of December 31, 2014, the Company had a lighting backlog of $7.1 million in LED and high-intensity fluorescent (HIF) lighting orders, compared to a lighting backlog of $11.8 million as of September 30, 2014. |
• | LED lighting product sales increased to $12.7 million in the fiscal 2015 third quarter, accounting for 54.1% of total lighting product revenues, an increase from $1.4 million, or 6.9% of total lighting product revenues in the prior year period. Third quarter LED lighting product sales increased 807% over the prior year third quarter. |
• | The Company increased its network of key regional resellers to 101 at December 31, 2014, up from 70 at September 30, 2014, and 30 at March 31, 2014. |
• | As of December 31, 2014, the Company’s working capital was $21.5 million compared to $33.1 million at March 31, 2014. |
• | Revenue: Total revenue was $26.1 million for the fiscal 2015 third quarter, compared to $27.7 million in the prior-year period. Orion reported a $5.0 million increase in total lighting revenues year over year as a result of higher LED lighting sales during the period. Total lighting sales for the fiscal 2015 third quarter were $25.9 million, compared to $20.9 million in the prior year period. Revenue from Orion’s now discontinued solar business for the 2015 fiscal third quarter was $0.3 million, compared to $6.8 million in the prior year period. |
• | LED Lighting Revenue: Product revenue from Orion’s LED products increased to $12.7 million during the fiscal 2015 third quarter, compared to $1.4 million in the prior-year period. LED sales have grown to 54.1% of total lighting product revenue. |
• | Gross Margin: Total gross margin was 14.6% during the fiscal 2015 third quarter, compared to 29.4% for the prior-year period. Gross margin for the third quarter was significantly impacted by a $0.6 million warranty reserve charge to account for identified deficiencies in the Company's initial shipments of its Apollo High Bay product. Certain shipments of this product had higher than anticipated heat signatures for customers, and Orion replaced such products with another series of lighting systems to its customers, which have operated without fail. The Company has successfully corrected these initial problems and shipped units of the updated product with favorable reviews from its customer base, and does not foresee any further warranty charges or other long-term customer detriment as a result of these initial product deficiencies. |
• | Net Income / Loss: The Company reported a net loss for the fiscal 2015 third quarter of $(4.7) million, or $(0.21) per share, compared to net income of $1.0 million, or $0.05 per diluted share, in the prior year period. |
• | Revenue: Total revenue was $52.8 million for the first nine months of fiscal 2015, compared to $76.0 million in the prior-year period. Orion reported a $23.2 million decrease in revenues year over year as a result of the expected lower revenues from the Company's phased out non-core solar energy business and a $3.9 million decrease in lighting revenues from the Company’s ongoing transition to an LED-driven sales platform. |
• | Gross Margin: The Company’s gross margin for the nine months ended December 31, 2015 of (7.8)% was impacted by a non-cash impairment charge to its long-term wireless controls inventory of approximately $12.1 million and the earlier mentioned charge on the Company’s warranty, which was included in Orion’s cost of product revenue. |
• | Net Income / Loss: The Company reported a net loss for the fiscal 2015 nine months of $(27.4) million, or $(1.26) per share, which included the $12.1 million, or $0.56 per share, non-cash impairment charge relating to the write-down of its long-term wireless controls inventory. In the prior year period, Orion reported net income of $2.6 million, or $0.12 per diluted share, which included a $2.2 million tax benefit related to deferred tax liabilities related to the acquisition of Harris. |
• | Cash and Investments: Orion had approximately $4.8 million in cash and cash equivalents and $0.5 million in short-term investments as of December 31, 2014, compared to $17.6 million and $0.5 million, respectively, at March 31, 2014. |
• | Working Capital: The Company’s working capital as of December 31, 2014 was $21.6 million, consisting of $46.3 million in current assets and $24.7 million in current liabilities, compared to $33.1 million, consisting of $50.3 million in current assets and $17.2 million in current liabilities, at March 31, 2014. |
• | Net Cash from Operations: The Company reported a $5.1 million decrease of net cash from operations during third quarter of fiscal 2015, compared to a $1.3 million increase of net cash from operations in the prior-year period. |
• | Total Debt: Orion’s total debt decreased $2.2 million to $4.4 million at December 31, 2014, compared to $6.6 million at March 31, 2014. |
• | Revenue Guidance: The Company revised its expectations of its total revenues for fiscal 2015 to between $72.0 million and $74.0 million, compared to the Company's prior expected range of between $80.0 million and $88.0 million. The Company’s rate of customer acceptance on its LED lighting solutions has continued to accelerate, and Orion believes that growth in its pipeline will drive sales well into fiscal 2016, with the main variable being short-term commitments and bookings. The Company anticipates providing an annual sales target for fiscal 2016 when it reports fiscal 2015 fourth quarter financial results. |
• | LED Sales Outlook: Orion has continued to see accelerating sales in its core target markets for LED products, including industrial, commercial and exterior applications. Orion is continuing to receive favorable reviews on its new LED products launched at its October 2014 sales summit and its re-selling network has continued to grow. |
• | Margin Outlook: Orion has worked diligently on improving its cost of sales as its unit shipments have increased. The Company is seeing improving cost dynamics from component suppliers for its LED product lines and expects greater purchasing leverage as volumes continue to increase, which resulted in product margin improvement monthly throughout the fiscal 2015 third quarter. The Company is now targeting gross margins for fiscal 2015 of |
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
2013 | 2014 | 2013 | 2014 | ||||||||||||
Product revenue | $ | 22,380 | $ | 23,646 | $ | 61,084 | $ | 48,534 | |||||||
Service revenue | 5,312 | 2,492 | 14,955 | 4,309 | |||||||||||
Total revenue | 27,692 | 26,138 | 76,039 | 52,843 | |||||||||||
Cost of product revenue | 15,742 | 20,293 | 44,264 | 53,512 | |||||||||||
Cost of service revenue | 3,800 | 2,021 | 10,073 | 3,451 | |||||||||||
Total cost of revenue | 19,542 | 22,314 | 54,337 | 56,963 | |||||||||||
Gross profit | 8,150 | 3,824 | 21,702 | (4,120 | ) | ||||||||||
Operating expenses: | |||||||||||||||
General and administrative | 3,277 | 3,814 | 9,134 | 11,304 | |||||||||||
Acquisition and integration related expenses | 88 | 2 | 519 | 24 | |||||||||||
Sales and marketing | 3,397 | 3,771 | 10,344 | 10,016 | |||||||||||
Research and development | 478 | 889 | 1,416 | 1,874 | |||||||||||
Total operating expenses | 7,240 | 8,476 | 21,413 | 23,218 | |||||||||||
Income (loss) from operations | 910 | (4,652 | ) | 289 | (27,338 | ) | |||||||||
Other income (expense): | |||||||||||||||
Interest expense | (123 | ) | (62 | ) | (378 | ) | (235 | ) | |||||||
Dividend and interest income | 132 | 69 | 459 | 246 | |||||||||||
Total other income | 9 | 7 | 81 | 11 | |||||||||||
Income (loss) before income tax | 919 | (4,645 | ) | 370 | (27,327 | ) | |||||||||
Income tax (benefit) expense | (99 | ) | 18 | (2,270 | ) | 41 | |||||||||
Net income (loss) | $ | 1,018 | $ | (4,663 | ) | $ | 2,640 | $ | (27,368 | ) | |||||
Basic net income (loss) per share | $ | 0.05 | $ | (0.21 | ) | $ | 0.13 | $ | (1.26 | ) | |||||
Weighted-average common shares outstanding | 21,219,946 | 21,882,741 | 20,830,247 | 21,791,184 | |||||||||||
Diluted net income (loss) per share | $ | 0.05 | $ | (0.21 | ) | $ | 0.12 | $ | (1.26 | ) | |||||
Weighted-average common shares outstanding | 22,328,766 | 21,882,741 | 21,562,526 | 21,791,184 |
Three Months Ended December 31 | Nine Months Ended December 31, | ||||||||||||||
2013 | 2014 | 2013 | 2014 | ||||||||||||
Cost of product revenue | $ | 11 | $ | 16 | $ | 48 | $ | 40 | |||||||
General and administrative | 199 | 300 | 650 | 910 | |||||||||||
Sales and marketing | 83 | 139 | 266 | 281 | |||||||||||
Research and development | 4 | 10 | 9 | 19 | |||||||||||
Total | $ | 297 | $ | 465 | $ | 973 | $ | 1,250 |
March 31, | December 31, | |||||||
2014 | 2014 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 17,568 | $ | 4,755 | ||||
Short-term investments | 470 | 472 | ||||||
Accounts receivable, net | 15,098 | 17,977 | ||||||
Inventories, net | 11,790 | 15,040 | ||||||
Deferred contract costs | 742 | 821 | ||||||
Prepaid expenses and other current assets | 4,673 | 7,211 | ||||||
Total current assets | 50,341 | 46,276 | ||||||
Property and equipment, net | 23,135 | 21,548 | ||||||
Long-term inventory | 10,607 | — | ||||||
Goodwill | 4,409 | 4,409 | ||||||
Other intangible assets, net | 7,551 | 6,486 | ||||||
Long-term accounts receivable | 1,966 | 709 | ||||||
Other long-term assets | 931 | 156 | ||||||
Total assets | $ | 98,940 | $ | 79,584 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Accounts payable | $ | 8,530 | $ | 16,618 | ||||
Accrued expenses | 4,597 | 5,071 | ||||||
Deferred revenue, current | 614 | 369 | ||||||
Current maturities of long-term debt | 3,450 | 2,677 | ||||||
Total current liabilities | 17,191 | 24,735 | ||||||
Long-term debt, less current maturities | 3,151 | 1,679 | ||||||
Deferred revenue, long-term | 1,316 | 1,251 | ||||||
Other long-term liabilities | 270 | 522 | ||||||
Total liabilities | 21,928 | 28,187 | ||||||
Shareholders’ equity: | ||||||||
Additional paid-in capital | 130,766 | 132,506 | ||||||
Treasury stock | (35,813 | ) | (35,811 | ) | ||||
Shareholder notes receivable | (50 | ) | (39 | ) | ||||
Retained deficit | (17,891 | ) | (45,259 | ) | ||||
Total shareholders’ equity | 77,012 | 51,397 | ||||||
Total liabilities and shareholders’ equity | $ | 98,940 | $ | 79,584 |
Nine Months Ended December 31, | ||||||||||
2013 | 2014 | |||||||||
Operating activities | ||||||||||
Net income (loss) | $ | 2,640 | $ | (27,368 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating | ||||||||||
activities: | ||||||||||
Depreciation | 2,987 | 2,154 | ||||||||
Amortization | 355 | 1,106 | ||||||||
Stock-based compensation expense | 973 | 1,250 | ||||||||
Accretion of fair value of deferred and contingent purchase price consideration related to acquisition | 11 | — | ||||||||
Deferred income benefit expense | (2,335 | ) | — | |||||||
Impairment on assets | — | 12,130 | ||||||||
Loss (gain) on sale of property and equipment | 112 | (4 | ) | |||||||
Provision for inventory reserves and impairment | 1,191 | 224 | ||||||||
Provision for bad debts | 87 | 236 | ||||||||
Other | 101 | 108 | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts receivable, current and long-term | 2,384 | (1,856 | ) | |||||||
Inventories, current and long-term | 5,293 | (2,975 | ) | |||||||
Deferred contract costs | 1,449 | (80 | ) | |||||||
Prepaid expenses and other assets | (2,225 | ) | (3,645 | ) | ||||||
Accounts payable | 1,905 | 8,090 | ||||||||
Accrued expenses | (1,202 | ) | 721 | |||||||
Deferred revenue | (1,686 | ) | (308 | ) | ||||||
Net cash provided by (used in) operating activities | 12,040 | (10,217 | ) | |||||||
Investing activities | ||||||||||
Cash paid for acquisition, net of cash acquired | (4,992 | ) | — | |||||||
Purchase of property and equipment | (357 | ) | (1,647 | ) | ||||||
Purchase of short-term investments | (4 | ) | (2 | ) | ||||||
Additions to patents and licenses | (23 | ) | (61 | ) | ||||||
Proceeds from sales of property, plant and equipment | 68 | 1,040 | ||||||||
Net cash used in investing activities | (5,308 | ) | (670 | ) | ||||||
Financing activities | ||||||||||
Payment of long-term debt | (2,391 | ) | (2,692 | ) | ||||||
Proceeds from long-term debt | — | 446 | ||||||||
Proceeds from repayment of shareholder notes | 213 | 11 | ||||||||
Deferred financing costs | (19 | ) | (75 | ) | ||||||
Excess tax benefits from stock-based compensation | 19 | — | ||||||||
Proceeds from issuance of common stock | 600 | 384 | ||||||||
Net cash used in financing activities | (1,578 | ) | (1,926 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | 5,154 | (12,813 | ) | |||||||
Cash and cash equivalents at beginning of period | 14,376 | 17,568 | ||||||||
Cash and cash equivalents at end of period | $ | 19,530 | $ | 4,755 |