Orion Energy Systems Inc. Reports Operating Results (10-Q/A)

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Jun 14, 2012
Orion Energy Systems Inc. (OESX, Financial) filed Amended Quarterly Report for the period ended 2011-06-30.

Orion Energy Sy has a market cap of $49.7 million; its shares were traded at around $2.04 with and P/S ratio of 0.5.

Highlight of Business Operations:

Revenue. We sell our energy management products and services directly to commercial and industrial customers, and indirectly to end users through wholesale sales to electrical contractors and value-added resellers. We currently generate the substantial majority of our revenue from sales of HIF lighting systems and related services to commercial and industrial customers. While our services include comprehensive site assessment, site field verification, utility incentive and government subsidy management, engineering design, project management, installation and recycling in connection with our retrofit installations, we separately recognize service revenue only for our installation and recycling services. Our service revenues are recognized when services are complete and customer acceptance has been received. In fiscal 2011, we increased our efforts to expand our value-added reseller channels, including through developing a partner standard operating procedural kit, providing our partners with product marketing materials and providing training to channel partners on our sales methodologies. These wholesale channels accounted for approximately 54% of our total revenue in fiscal 2011, not taking into consideration our renewable technologies revenue generated through our Orion Engineered Systems division. During the fiscal 2012 first quarter, wholesale revenues accounted for approximately 64% of our total revenue, not taking into consideration our renewable technologies revenue generated through our Orion Engineered Systems Division, compared to 53% for the fiscal 2011 first quarter.

Our dependence on individual key customers can vary from period to period as a result of the significant size of some of our retrofit and multi-facility roll-out projects. Our top 10 customers accounted for approximately 27% and 36% of our total revenue for the first quarter of fiscal 2011 and fiscal 2012, respectively. No customer accounted for more than 10% of our total revenue in the fiscal 2012 first quarter. To the extent that large retrofit and roll-out projects become a greater component of our total revenue, we may experience more customer concentration in given periods. The loss of, or substantial reduction in sales volume to, any of our significant customers could have a material adverse effect on our total revenue in any given period and may result in significant annual and quarterly revenue variations.

Backlog. We define backlog as the total contractual value of all firm orders and OTA contracts received for our lighting products and services where delivery of product or completion of services has not yet occurred as of the end of any particular reporting period. Such orders must be evidenced by a signed proposal acceptance or purchase order from the customer. Our backlog does not include PPAs or national contracts that have been negotiated, but under which we have not yet received a purchase order for the specific location. As of June 30, 2011, we had a backlog of firm purchase orders of approximately $25.5 million, which included $18.1 million of solar PV orders. As of March 31, 2011, we had a backlog of firm purchase orders of approximately $21.2 million, which included $17.0 million of solar PV orders. We generally expect this level of firm purchase order backlog related to HIF lighting systems to be converted into revenue within the following quarter. We generally expect our firm purchase order backlog related to solar PV systems to be recognized within the following three to 15 months. Principally as a result of the increased volume of our solar PV orders, the continued lengthening of our customers purchasing decisions because of current recessed economic conditions and related factors, the continued shortening of our installation cycles and the number of projects sold through OTAs, a comparison of backlog from period to period is not necessarily meaningful and may not be indicative of actual revenue recognized in future periods.

Revenue. Product revenue increased from $15.8 million for the fiscal 2011 first quarter to $17.4 million for the fiscal 2012 first quarter, an increase of $1.6 million, or 10.2%. The increase in product revenue was a result of increased sales of our high intensity fluorescent, or HIF, lighting systems and renewable energy systems. Service revenue decreased from $1.2 million for the fiscal 2011 first quarter to $0.9 million for the fiscal 2012 first quarter, a decrease of $0.3 million or 29.5%. The decrease in service revenues was a result of the continued percentage increase of our total revenues generated by our wholesale channels where our services are not provided. Total revenue from renewable energy systems was $1.2 million for the fiscal 2012 first quarter compared to $0.4 million for the fiscal 2011 first quarter, an increase of $0.8 million or 200%.

Sales and Marketing. Our sales and marketing expenses increased from $3.6 million for the fiscal 2011 first quarter to $3.8 million for the fiscal 2012 first quarter, an increase of $0.2 million, or 5.2%. The increase was a result of increased costs for headcount additions in our newly formed telemarketing department, higher commission expense on our increased revenue and increased depreciation for our new customer relationship management, or CRM, system. Total sales and marketing headcount as of June 30, 2011 was 88 compared to 83 as of June 30, 2010.

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