Orion Energy Systems: Q4 and Full-Year 2012 Results
Orion Energy Systems, Inc., a leading power technology enterprise, announced today financial results for its re-stated full fiscal-year ended March 31, 2011, full fiscal-year ended March 31, 2012 and its fiscal 2012 fourth quarter.
Neal Verfuerth, Chief Executive Officer of Orion commented, “We are pleased to report a record level of revenue and backlog for fiscal 2012. Crossing $100 million in revenue is a significant inflection point for the Company. Assuming that the overall economy continues to rebound and that electricity prices remain the same or rise, we are well positioned to scale our revenues with our core organization and infrastructure that we’ve invested in over the last 5 years. As a result of these strategic investments, we expect that annual revenue of $250 million can be achieved by 2017.”
Restated Fiscal Year 2011
As previously disclosed, the Company has restated its previously issued consolidated financial statements for fiscal year 2011 to account for revenue from its sales of solar photovoltaic, or PV, systems using the percentage-of-completion method rather than based upon multiple deliverable elements.
Under the Company’s prior method of accounting for sales of PV systems, revenue was recognized in two stages (i) when the title to the products had been transferred and (ii) when the service installation was complete. On February 1, 2012, the Company concluded that generally accepted accounting principles, or GAAP, required that revenue from sales of solar PV systems be recognized under the percentage-of-completion method. The percentage-of-completion method, however, recognizes revenue over the life of the project. The percentage-of-completion method requires revenue from the delivery of products to be deferred and the cost of such products to be capitalized as a deferred cost and current asset on the balance sheet. The percentage-of-completion method requires periodic evaluations of the progress of the installation of the solar photovoltaic systems using actual costs incurred over total estimated costs to complete a project and requires immediate recognition of any losses that are identified on such contracts. Incurred costs include all direct materials, costs for solar modules, labor, subcontractor costs, and those indirect costs related to contract performance, such as indirect labor, supplies, and tools. The difference between the percentage-of-completion method and the multiple deliverable elements method is a question of timing of revenue recognition.
Generally, for the Company’s 2011 fiscal year ended March 31, 2011, this change in accounting treatment and financial statement restatements has resulted in:
No impact to the Company’s cash, cash equivalents, short-term investments or overall cash flow;
A decrease in the Company’s revenue of $10.5 million for its full fiscal year 2011;
A decrease in the Company’s net income of $0.9 million and a decrease in its fully diluted earnings per share of $0.04 for its full fiscal year 2011; and
An increase in the Company’s current assets of $6.4 million, an increase in the Company’s total assets of $6.7 million, an increase in the Company’s current liabilities of $8.2 million and a decrease in the Company’s total shareholders’ equity of $1.5 million for its fiscal year 2011.
In addition to the impact of the accounting treatment change for solar PV sales described above, the re-audit of fiscal 2011 resulted in the following additional changes:
An increase in the Company’s revenue of $0.1 million due to adjustments for returns reserves and other net revenue adjustments which increased its net income $0.1 million and its fully diluted earnings per share $0.01;
A decrease in the Company’s net income of $0.5 million due to adjustments for bad debt reserves, inventory reserves and insurance reserves which decreased its fully diluted earnings per share $0.03;
An increase in long-term assets of $13.2 million and a decrease in current assets of $13.2 million as a result of a reclassification of current inventory to long-term inventory related to the Company’s investment in wireless control products; and
An increase in the Company’s net cash flows from operating activities due to an increase in its depreciation expense of $0.4 million and an increase in its change in prepaid and other assets of $0.2 million. A decrease in the Company’s net cash flow used in investing activities due to a decrease in its capital expenditures of $0.6 million.
The full impact of all changes as described above was as follows:
No impact to the Company’s cash, cash equivalents, short-term investments or overall cash flow;
A decrease in the Company’s revenue of $10.4 million (11%) for its full fiscal year 2011;
A decrease in the Company’s net income of $1.3 million (81%) and a decrease in its fully diluted earnings per share of $0.06 (86%) for its fiscal year 2011;
A decrease in the Company’s current assets of $8.9 million (12%), an increase in the Company’s total assets of $6.1 million (5%), an increase in the Company’s current liabilities of $8.0 million (49%) and a decrease in the Company’s total shareholders’ equity of $1.9 million (2%) for its fiscal year 2011; and
A decrease in the Company’s net cash used in operating activities of $0.1 million (1%), a decrease in its net cash used in investing activities of $0.6 million (11%) and a decrease in its net cash provided by financing activities of $0.7 million (26%) for its fiscal year 2011.
Full Fiscal Year 2012
For the full fiscal year 2012, revenues were $100.6 million, an increase of 23% compared to $82.0 million for fiscal year 2011. For fiscal year 2012, contracted revenue was $122.6 million, an 18% increase compared to $103.9 million for fiscal year 2011.
Total backlog at the end of the fourth quarter of fiscal 2012 was $41.4 million, which included $36.1 million of solar photovoltaic (PV) system orders, compared to $21.2 million, which included $17.0 million of solar PV orders at the end of the fourth quarter of fiscal 2011 and $50.6 million, which included $44.4 million of solar PV orders at the end of the third quarter of fiscal 2012. For the fourth quarter of fiscal 2012, “contracted revenue” was $12.6 million, which was net of a $4.3 million reduction during the quarter related to change orders received for solar PV systems where the customer assumed responsibility for the direct procurement of the solar panels. Contracted revenue is explained in more detail below.
For fiscal year 2012, the Company reported net income of $0.5 million, or $0.02 per fully diluted share. For fiscal year 2011, net income was $0.3 million, or $0.01 per fully diluted share and included the favorable one-time tax benefit of $0.6 million, or $0.03 per fully diluted share.
Fourth Quarter of Fiscal 2012
For the fourth quarter of fiscal 2012, the Company reported revenues of $21.5 million, a 16% decrease compared to $25.6 million for the fourth quarter of fiscal 2011.
For the fourth quarter of fiscal 2012, the Company reported a net loss of $157,000, or $(0.01) per share. For the fourth quarter of fiscal 2011, the Company’s net income was $0.5 million, or $0.02 per share, which included a favorable one-time tax benefit of $0.6 million, or $0.03 per share, from the conversion of incentive stock options to non-qualified stock options.
Cash, Debt and Liquidity Position
Orion had $23.0 million in cash and cash equivalents and $1.0 million in short-term investments as of March 31, 2012, compared to $11.6 million and $1.0 million, respectively, at March 31, 2011. Total short and long-term debt was $9.5 million as of March 31, 2012, compared to $5.4 million as of March 31, 2011. There were no borrowings outstanding under the Company’s revolving credit facility as of March 31, 2012, which has an availability of $13.3 million.
Key Business Highlights
During the fourth quarter of fiscal 2012:
Orion increased the number of facilities retrofitted with its energy management technologies to 7,986 as of the end of the fourth quarter fiscal 2012 (compared to 7,673 as of the end of the third quarter of fiscal 2012), representing 1.2 billion square feet of installed facilities.
Total Megawatts, or MWs, under contract from solar projects remained at 24.0 MWs, the same as MWs under contract as of the end of the third quarter of fiscal 2012. The Company attributes the reduced contract activity in the fiscal 2012 fourth quarter to accelerated buying decisions occurring during the fiscal 2012 third quarter as customers took advantage of tax benefits that expired at the end of calendar 2011.
The Company borrowed $1.4 million against its Orion Throughput Agreement, or OTA, credit facility with J.P Morgan Chase Bank N.A. for the purpose of funding internally-held OTA contracts.
The Company repurchased 180,000 shares of its common stock at an average price per share of approximately $2.56. For the full fiscal 2012 year, the Company has repurchased 278,300 shares of its common stock at an average price per share of $2.66.
In keeping with the Company’s long-term initiatives, it has elected to shift its guidance to a longer-term horizon from its previous annual timeframe. The Company expects to achieve $250 million in annual revenues by fiscal 2017.
Historically, Orion has tended to experience revenue in the first quarter that represents the lowest or second-lowest quarterly revenue amount within any given fiscal year. Also, on a historical basis, the Company tends to experience a sequential decline in revenue during the first quarter of a fiscal year relative to the fourth quarter of the prior fiscal year.
The above information is based on the Company’s current expectations. These statements are forward-looking and actual results may differ materially. The Company assumes no obligation to publicly update or revise its outlook. Investors are reminded that actual results may differ, and may differ materially, from these estimates for the reasons described below under the caption “Safe Harbor Statement” and in the Company’s filings with the Securities and Exchange Commission.
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 724,135 kilowatts, or 20.6 billion kilowatt-hours;
Energy costs by $1.6 billion; and
Indirect carbon dioxide emission by 13.7 million tons.
Orion Energy Systems
Investor Relations Contact
Chief Financial Officer