Orion Energy Systems (OESX) Reports In-Line Q3 EPS, Revenues Beat; Raises FY20 Revenue Outlook

Orion Energy Systems (NASDAQ: OESX) reported Q3 EPS of $0.07, in-line with the analyst estimate of $0.07. Revenue for the quarter came in at $34.2 million versus the consensus estimate of $32.5 million.

Highlights

• Q3’20 revenue increased 110%, or $18.0M, to $34.2M, compared to Q3’19, due to the continued benefit of a large turnkey LED lighting retrofit contract for a major national account
• Gross profit increased $4.1M to $8.3M in Q3’20 for a gross margin of 24.2% versus 25.6% in Q3’19
• Ongoing cost discipline held operating expenses to $5.8M in Q3'20 vs. $4.8M in Q3'19, growing well below revenue growth rate
• Orion achieved Q3’20 diluted EPS of $0.07 versus a loss of ($0.02) in Q3’19
• EBITDA rose to $2.8M in Q3’20 and $14.7M for the first 9 months of fiscal 2020, versus EBITDA losses of ($0.1M) and ($4.1M), respectively, in the comparable prior-year periods
• Cash flow from operating activities improved to $5.8M in Q3'20 versus ($0.5M) in Q3'19

CEO Commentary

Mike Altschaefl, Orion’s CEO and Board Chair, commented, "Our fiscal 2020 performance to date reflects the continued successful execution of a nationwide turnkey design-build-install LED lighting system retrofit and controls project for a major national account. As anticipated, we expect to complete initial awards for this project in our current fiscal fourth quarter. In addition, installations for our recently announced $18 to $20 million project expansion for this same customer are slated for completion during our fiscal fourth quarter and our fiscal 2021 first quarter ending June 30, 2020.

“Our expanded senior sales team is remaining focused on our turnkey solutions offerings and this unique and wholistic approach is resonating very strongly with customers. Our sales team has developed a range of large national account opportunities on which we are working to advance to formal awards over the next several months. In addition, our new senior sales executives have begun to make meaningful contributions to our sales pipeline as they become comfortable in our customer-centric culture and gain an understanding of our product quality advantages and the custom capabilities and turnkey services that we are able to bring to customers.

“There are many challenges for customers in determining the best path forward in the fast moving and complex arena of LED lighting systems, controls and a growing array of integrated Internet of Things (IoT) capabilities, all being offered by a disparate group of vendors and service providers. Orion’s deep industry experience, breadth of relationships, national service network, full turnkey capabilities and strong customer-centric culture position us well to gain customer trust in guiding them through these major capital decisions.

“We are seeing increased traction with both new and existing accounts and expect to have more to report regarding specific projects over the next several months. We are very encouraged by the contributions being made by the four veteran sales executives we added to our national accounts team over the past two quarters, as well as our strong legacy sales team. Meanwhile, we remain very disciplined in managing our costs and overhead to deliver as much as possible from new business wins to the bottom-line.

“On the product front, we are expanding our reach with product line extensions in both our indoor high bay and our outdoor product categories. These efforts will result in strong, highly competitive new product introductions in Q4’20. We have received very positive initial reviews, and we expect to have more to say about these products as we roll them out to the market.

“In light of our FY’20 year-to-date performance, the recent project expansion commitment from a major national account and our expectations for the balance of Q4’20, we recently increased our FY’20 revenue goal to a range of $150M to $155M from a range of $135M to $145M. Our intent is to continue to drive our top line using the competitive advantages we have developed in turnkey solutions, seeking to position Orion to benefit from inherent economies of scale that are possible from greater throughput from our US manufacturing facility.

“We are pleased not only with our improved financial results, but also with the direction of our business and our future prospects. Throughout the year, we used cash from operations to substantially eliminate debt and have been building our cash position. We continue to have a strong balance sheet, with nearly $13 million of net cash. We believe we are well-positioned to continue to build our business, to look for profitable growth opportunities and to drive value for our shareholders through improved financial performance.”

GUIDANCE:

Orion Energy Systems sees FY2020 revenue of $150-155 million, versus the consensus of $152 million.

• Outlook and GoalsOrion recently increased its fiscal 2020 revenue goal to a range of $150M to $155M. Based on achieving this goal, Orion expects to achieve an EBITDA margin of at least 10% for FY‘20. Further, management continues to believe it has sufficient available capital and liquidity to execute its growth plans.

For earnings history and earnings-related data on Orion Energy Systems (OESX) click here.

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