February 7, 2024

Orion's LED Division Drives 28% Revenue Jump

Company remains optimistic about growth prospects in LED lighting and EV charging

Orion Energy Systems, Inc. (NASDAQ: OESX), a provider of energy-efficient LED lighting, maintenance services, and electric vehicle (EV) charging station solutions, has shown commendable financial performance in its third quarter of fiscal year 2024, ending December 31, 2023. The company, headquartered in Manitowoc, Wisconsin, reported a significant 28% year-over-year increase in revenue, reaching $26 million, driven primarily by its LED lighting segment.

This revenue growth is particularly notable in comparison to the previous quarters of the same fiscal year, where Q2'24 and Q1'24 revenues stood at $20.6 million and $17.6 million, respectively, illustrating a consistent upward trajectory in sales. The growth momentum is attributed to an acceleration in contract activities, particularly in large LED lighting projects through Energy Service Companies (ESCOs), government sector engagements, and key customer relationships, alongside an uptick in maintenance services revenue.

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Positive Highlights:

Significant Revenue Growth: Orion Energy Systems reported a substantial 28% increase in revenue to $26 million in Q3’24 from $20.3 million in Q3’23, driven primarily by the strength in its LED lighting projects.
Improved Gross Profit and Margin: The gross profit rose to $6.4 million in Q3’24 from $4.8 million in Q3’23, and the gross profit margin increased by 95 basis points to 24.5% in Q3’24 from 23.6% in Q3’23. This improvement is attributed to sales of higher-margin new products and better fixed cost absorption on a higher sales volume, reflecting operational efficiency and a better pricing mix.
Strengthened Financial Liquidity: Orion ended Q3’24 with $17.5 million in financial liquidity, which is a significant improvement from the previous quarter.

Q3 Financial Summary				Prior Three Quarters
$ in millions except per share figures	Q3’24	Q3’23	Change	Q2’24	Q1’24	Q4'23
Revenue	$26.0	$20.3	+$5.7	$20.6	$17.6	$21.6
Gross Profit	$6.4	$4.8	+$1.6	$4.6	$3.2	$4.7
Gross Profit %	24.5%	23.6%	+95 bps	22.2%	18.0%	21.9%
Net Loss (1)	($2.3)	($24.1)	+$21.8	($4.4)	($6.6)	($5.1)
Net Loss per share (1)	($0.07)	($0.75)	+$0.68	($0.14)	($0.21)	($0.16)
Adjusted EBITDA (2)	($0.1)	($1.6)	+$1.5	($2.2)	($4.4)	($1.6)
Cash	$5.0	$8.1	($3.1)	$4.0	$8.2	$16.0
(1) Q3’23 Net Loss & EPS reflect $17.8M non-cash charge recording a valuation allowance against Deferred Tax Assets. The 2024 quarters each include $1.1M of earnout expense related to the Voltrek acquisition. Q4’23 and Q3’23 included $2.5M and $1.5M of earnout expense, respectively. (2) See Adjusted EBITDA reconciliation below.

Other highlights:

Net Loss: Despite improvements, Orion reported a net loss of $2.3 million in Q3’24, indicating that the company is still facing challenges in achieving profitability.
Decline in Cash: The cash position decreased to $5.0 million in Q3’24 from $8.1 million in the same quarter of the previous year, suggesting a potential issue in cash management or higher cash utilization in operations and investments.
Potential Challenges in Maintenance Services: While the maintenance services revenue has increased, the company anticipates a slight decrease in this segment over the balance of FY 2024.

Additionally, Orion successfully navigated a potential NASDAQ delisting by ensuring its stock price remained above the $1.00 threshold for ten consecutive business days in January, reflecting investor confidence and market resilience.

Looking ahead, Orion remains optimistic about its growth prospects, particularly in LED lighting and EV charging solutions. The company anticipates revenue growth between 16% and 23% for FY 2024, projecting revenues in the range of $90 million to $95 million. This forecast is supported by ongoing and upcoming large-scale projects, including a significant European retrofit project for the U.S. Department of Defense, among others.