August 9, 2023
Orion Eyes $100M Despite Soft Start to 2024
Large projects seem to hold the key to an accelerated finish to 2024
Orion Energy Systems today reported results for its fiscal 2024 first quarter ended June 30, 2023.
Orion CEO Mike Jenkins started this morning’s earnings call stating that “Q1 was a more modest quarter as previously suggested” but went on to explain that the company is still in line to deliver $100 million in business in 2024. To do so, the company will need to average over $27 million per quarter for the remainder of the year, a threshold it hasn’t exceeded since the quarter that ended December 31, 2021.
While Orion’s diversification into EV charging and strong liquidity position are promising, the decline in revenue, net loss, and other negative financial metrics may be concerning to some investors. The execution of strategic projects and new product lines could play a pivotal role in achieving the ambitious growth targets set for FY 2024. The company expressed confidence in its pipeline and projects that are in the queue.
Diversification and Growth in New Areas: EV Charging Revenue: Introduction of $1.2M in Q1’24 for electric vehicle (EV) charging station solutions which is the same run rate Voltrek had during 2021 when the company achieved $4.8 million in sales. CEO Jenkins explained that the EV pipeline is $30 million as pipeline opportunities (not confirmed backlog).
Increase in Gross Profit Percentage for Products: The gross profit percentage increased to 26.4% from 23.0% in Q1’23 for products, mainly due to product sales mix and improved absorption of fixed costs.
Maintained Revenue Growth Outlook: Despite certain challenges in Q1, the company maintains a 30% revenue growth outlook for FY 2024, aiming for $100M revenue.
Strong Liquidity Position: Closing Q1 with $16.8M of liquidity (including $8.2M of cash and cash equivalents and $8.6M net availability on credit facility) supports ongoing operations and growth strategies.
Ramping of Larger Projects: Several larger projects have commenced or are ramping in Q2, indicating potential revenue increase in the coming quarter.
3-Year Preventative Lighting Maintenance Contract: The finalization of a significant maintenance contract with The Home Depot adds stability and potential growth in maintenance services.
New Product Launches: Introduction of new TritonPro and expanded exterior product lines of LED fixtures enhances the product offering and may attract new clients.
Revenue Decline: Q1'24 revenue decreased slightly to $17.6M from $17.9M in Q1'23, reflecting variability in timing of LED lighting projects.
Increased Net Loss: The net loss grew from ($2.8M) in Q1’23 to ($6.6M) in Q1’24, a significant increase.
Decline in Gross Profit and Margin: Gross profit dropped from $3.6M to $3.2M, and gross profit percentage decreased from 19.8% to 18.0%.
Negative Services Margin: The services margin declined to -11.2% due to legacy maintenance services contracts, reflecting potential pricing issues with long term contracts.
Increased Operating Expenses: Total operating expenses grew to $9.6M in Q1’24 from $7.2M in Q1’23, mainly due to Voltrek acquisition and other G&A expenses.
Decrease in Cash and Equivalents: Cash and cash equivalents fell by $1.2M, which may restrict the company's financial flexibility in the short term.
Use of Cash in Operating Activities: $7.3M of cash used in operating activities indicates potential challenges in cash flow management. The company stated that it used cash of $7.3M in operating activities in Q1’24 due to the operating results during the quarter and amounts paid during the quarter for a significant project that was completed in Q4’23. Orion believes it is in a good position to fund its operations and growth objectives across its business segments through FY 2024.
MORE INFO: Orion's Q1 2024 Report »
