Orion Energy Systems: Q2 Results and Strategic Refocus

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Orion Energy Systems, Inc., a leading power technology enterprise, announced today its financial results for its fiscal 2013 second quarter and fiscal year-to-date period ended September 30, 2012.

"Our revenues this quarter continued to be impacted by the challenged capital spending environment and faced a tough comparable versus the fiscal second quarter of 2012 where we had a number of large solar deals coming together at one time. We also had several non-recurring charges related to income tax and reorganization expenses. We are taking swift actions to refocus our sales and product development strategy, and reduce variable expenses to get us back on the path towards profitable growth," commented John Scribante, Chief Executive Officer of Orion Energy Systems. "As customer demand for energy solutions that lower operating costs and fulfill environmental mandates grows, I am confident that Orion's unique product portfolio and value proposition will create a significant runway for profitable growth in the years ahead."

Second Quarter of Fiscal 2013

For the second quarter of fiscal 2013, the Company reported revenues of $19.4 million, a 42% decrease compared to $33.5 million for the second quarter of fiscal 2012.

For the second quarter of fiscal 2013, the Company reported a net loss of $9.7 million, or $(0.46) per share. For the second quarter of fiscal 2012, the Company's net income was $1.4 million, or $0.06 per share. During the second quarter of fiscal 2013, the Company incurred non-recurring charges in the amount of $7.6 million, including a non-cash valuation reserve charge related to its deferred tax assets of $5.6 million, or approximately $(0.27) per share, and reorganization expenses of $2.1 million, or approximately $(0.10) per share.

Total order backlog as of September 30, 2012 was $46.7 million. The Company currently expects approximately $18.1 million of the existing backlog to be recognized as revenue during the remainder of fiscal 2013.

First Half of Fiscal 2013

For the first six months of fiscal 2013, the Company reported revenues of $34.7 million, a 33% decrease compared to $51.7 million for the first six months of fiscal 2012.

For the first six months of fiscal 2013, the Company reported a net loss of $11.6 million, or $(0.53) per share. For the first half of fiscal 2012, the Company's net income was $0.6 million, or $0.02 per share.

Strategic Refocus and Cost Reduction Initiatives

Due to the recent management change, the Company is refocusing its strategic initiatives. The Company intends to enhance and refocus its sales organization with an emphasis on expanding its direct sales efforts, streamlining product development initiatives, implementing a disciplined product control release process versus a process of continuous development and implementing cost reductions, including headcount reductions, product material cost decreases and reductions in consulting and other discretionary spending. The Company expects that $1.2 million of these cost reduction efforts will be recognized in the second half of fiscal 2013.

Cash, Debt and Liquidity Position

Orion had $13.2 million in cash and cash equivalents and $1.0 million in short-term investments as of September 30, 2012, compared to $23.0 million and $1.0 million, respectively, at March 31, 2012. The reduction in cash during the first half was primarily due to $4.5 million used to repurchase common shares, $1.7 million for capital expenditures, $1.4 million for the repayment of debt and $2.3 million due to the net loss and changes in operating activities.

Total short and long-term debt was $8.2 million as of September 30, 2012, compared to $9.5 million as of March 31, 2012. There were no borrowings outstanding under the Company's revolving credit facility as of September 30, 2012, which has availability of $13.3 million.

The Company repurchased 2.1 million shares of its common stock at an average price per share of approximately $2.15 during the fiscal 2013 first half. Under the Company's current authorized $7.5 million share repurchase plan, the Company has repurchased 2.4 million shares at a total cost of $5.3 million. The Company has halted the share repurchase program as of the date of this release as it conserves cash while it stabilizes its profit performance.

Definition of Contracted Revenues

The Company defines contracted revenues, which is a financial measurement not recognized under GAAP, as expected future revenue from firm customer purchase orders received, including both purchase orders payable immediately in cash and for potential future revenues expected to be realized under firm OTAs and solar Power Purchase Agreements, or PPAs. For OTA and cash contracted revenues for sales of its energy management systems, the Company generally expects that it will begin to recognize GAAP revenue under the terms of the agreements within 90 days from the firm contract date. For cash contracted revenues for sales of solar PV systems and for PPA contracted revenue, the Company generally expects that it will recognize GAAP revenue within three to 15 months from the firm contract. The Company believes that total contracted revenues are a key financial metric for evaluating and measuring the Company's performance because the measure is an indicator of the Company's success in its customers' adoption and acceptance of the Company's energy products and services as it measures firm contracted revenue value, regardless of the contract's cash or deferred financing structure and the GAAP revenue recognition treatment.

 Use of Non-GAAP Financial Measures

The Company reports all financial information required in accordance with GAAP and also provides certain non-GAAP financial measures. A non-GAAP financial measure refers to a numerical measure of the Company's historical or future financial performance, financial position or cash flows that includes (or excludes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in the Company's financial statements. The Company presents these non-GAAP financial measures as a complement to results provided in accordance with GAAP because management believes that these non-GAAP financial measures help reflect underlying trends in the Company's business and are important in comparing current results with prior period results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for revenue prepared in accordance with GAAP.

The Company's management uses the foregoing non-GAAP financial measurement to evaluate its ongoing operations and for internal planning, budgeting, forecasting and business management purposes. A schedule that reconciles the Company's GAAP and non-GAAP financial measures is included with this release. Investors are encouraged to review this reconciliation to ensure that they have a thorough understanding of the reported non-GAAP financial measures and their most directly comparable GAAP financial measures.

In the Company's earnings releases, conference calls, slide presentations and/or webcasts, it may use or discuss non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure are included in this press release after the condensed consolidated financial statements.

About Orion Energy Systems

Orion Energy Systems, Inc. is a leading power technology enterprise that designs, manufactures and deploys energy management systems — consisting primarily of high-performance, energy efficient lighting platforms, intelligent wireless control systems and direct renewable solar technology for commercial and industrial customers — without compromising their quantity or quality of light. Since December 2001, Orion's technology has benefitted its customers and the environment by reducing its customer's:

    Energy demand by 758,401 kilowatts, or 23.4 billion kilowatt-hours;
    Energy costs by $1.8 billion; and
    Indirect carbon dioxide emission by 15.4 million tons.

Investor Relations Contact:
Orion Energy Systems
Scott Jensen
Chief Financial Officer
(920) 892-5454

Source: Orion Energy Systems
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