OESX - Earnings call transcript Q3 2018 | Orion Energy Systems, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Orion Energy's Fiscal 2018 Third Quarter Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will be given at that time.

As a reminder, today’s conference is being recorded. I would now like to turn the call over to David Collins. begin. may you Sir,

David Collins

obligation XXXX. Investor today's words X, similar anticipate, as has later statements and Except include, described matters who’ll risks Relations archived An Reform and be conference Mike. goals for filings in update Litigation of forward-looking subject Orion's call today replay to its generally over among call. turn CFO, that website. statements. These to this filings, then in be statements. believes anticipated. goals, to open available Such the morning are Securities call statements answers will also Altschaefl; on everyone, in progress, Likewise, the forward-looking that than the I'll of will Commission. now call Orion's its taking could Systems' import. to that these strategy, described company the others, press or company questions. the different include we in will plans, some business expect, and to statements CEO, that Orion financial actual statements issued describe including forward-looking With Securities third and any This call and disclaims release section open Mike forward-looking cause with will Hull. that quarter Act Exchange objectives, Private to this Participating that, the the are forward-looking questions, materially corporate by Bill future to results or XXXX. believe, Orion's place be thank the include as words of within These such risks morning of follow, discuss joining recent of company to Bill, you followed Energy is Mike call provide Wednesday, Good the Remarks today February And are meaning highlights.

Mike Altschaefl

solid make continue and operations third towards joining streamlining you revenue progress our today's by quarter call. driving overhead Thanks, goals margins to morning, for ongoing thank and gross Good of expenses. in reducing David. Orion the improving growth,

four, energy XXXX. unmatched performing with Premium market; time the the Fixture, experience of in including on is a third highest on energy over the and at QX were provider one, Orion’s customers. value XX% a on enterprise value efficiency illumine revenue in which costs. from sequential and rooted the focused times of product unparalleled designed commitment responsiveness the to the technology XX% year is delivering margin a lighting in As XX.X% proposition LED represented able solutions output for of reduce and lighting based period fully design; focused best energy $XX.X with of also our service million lead ISON our assembled XX.X% products substantial of services project project and to to customer our provide or Orion The quarter XX.X% costs; one-to-four five, highest improvement XXXX energy to solutions million. We QX gross LED to in with service of in grade the leading customer XX% light; quality delivering three, and reduction and improved greater improve revenue QX industry following; quantity to a in payback has smart Orion’s two, $XX.X products a and installation improvement

putting traction ago below solid been our goal was we year efforts are position we’ve to us sales the performance the gaining and our and While adjustments in advance a in and marketing QX business. our revenue making feel

agent sized accounts margins, as on the structure level. our driven growth, cost Orion we’re national the well is as with in improving we for which right side, distribution to expense positioned steps bottom-line the and model, Based performance. achieving have strength our current we’ve solidly our taken gross On for our business believe reduce enhance business revenue along

performance, we $XX these efficient in contracts longstanding fiscal XXXX now our execute solutions. to customers QX anticipate Turning continue for $XX in lighting to from to million retrofit sales We in revenue XXXX. facilities their approximately two million automotive fiscal and with energy customers

recorded million QX approximately $X.X also in from of long-term related customers. We revenue government XXXX

On our accounts. the ISON demand to from see for efficient line national product front, solid we continue highly product

installation. line Interior to We’re High also light modular We developed should modular weight for or the construction, more engines products. with including makes other these savings that down our quality and decide customer demand easily a price energy a seeking quick lighting The sensitive and products to upgradable new design efficient more LED light them offers enhancements. projects target of lighting, deploy Harris seeing good controls, customers affordable high product road Bay this improved the advanced

potential Of course a with opportunities. play Orion potential provides range revenue the line plug also the and upgrade of Harris future of

in with progress our over markets, larger formed along reach approach basis the our substantially takes approximately were development America. time able the previously is our expanded to teaming lighting Our since we driven driven XX% our We to broad model our has sales substantially partners. national adding to LED to model. focused agent have our on inception, of of distribution reach not expand which agent with prior opportunities our in it making base that business of up national strong LED Though opportunities grow XX% that opportunities efforts North The the whereas designed of touched into we’re footprint, effectively distribution channel to of pursue. lighting estimate are total accounts, channel agent a in sales

to to sequential last quarters. driver and accounts has two main results deliver continues national sales solid our the the improvements been business Our

product some more relationships slowly dating established agency account we driven the to underestimated third had takes more newness relationships third the than fine XX of management of contributed we At channel. we agent relationships. distribution and particularly expected. we distribution initially XX time is as our compared effort years. productive our agency have sales advancing agent retrospect driven approximately build model support progress model expect to quarter continued agent Our In our our or tune had we the we efforts it of the of sales given Nonetheless where close long and XX% national this quarter our

range we gain simply sales reach. that expand and more investment step as Orion, strong and to expand products agent In service through including take and in Part and experience this working with committed to base productive become time any our of well relationships comfortable more of product our they responsiveness. continuing incentives. develop our We’re as is sales initiatives a agents to our with are education, with effort to the training process time business, support can first so spending

sense. also We are revising with business agents, when it relationships our make

careful release, evaluation, and a related workforce additional today's In have to we in reductions of opting expect indicated cost to we not total, eliminate identified including renew the actions reduction. As an $X.X approximately on Chicago implemented office after year. our $X annual million million in top yielding million each additional annual costs $X expenses savings lower million of from the $X.X already in in to lease

results. will our Given forward, discipline execution to confidence improved well positioned financial steadily that Orion and is going our financial operational believe solid improve deliver position, we sales

which to be We XXXX our now stated margins revenue our line earlier our imply XXXX XXXX performance revenue fiscal expect goal XX% achieving QX based breakeven to QX compared our should expectation and previously of third of we million, $XX non-recurring to $XX total approximately in approximately with Moving our on be EBITDA items of XXXX. to before fiscal million. by gross XXXX quarter, roughly QX outlook, the

reduction demonstrated results XXXX goals and revenues in our factors, a negative we significant QX hope Our these reach EBITDA. gross progress QX in through quarterly industry goals other now an our QX to by our Due in to in improvement sequential XXXX. margins of caused reduction fiscal these by and towards softness expected

of While see our anticipated, model progressing positive our in fiscal national outlook is do support in distribution ramp accounts, range agent than slowly for driven factors our we that XXXX. our more revenue a

regarding did status. listing our to comment I Finally, NASDAQ want

in the you minimum XX, price NASDAQ announced December regain know, we bid $X XXX to May closing have given compliance that As Orion XXXX with days until may been rule.

this May If requirement improvements NASDAQ bid has requirement in an anticipated XXX our cured extension share to the business, XXXX. an the the been minimum expect for and some with price reason to and the price not price given timeframe, additional would reflect progress begin within bid Given request prior XX, should seek we period. cure Orion day

only to our certain the While way no consider the retain reverse we should implement we serious would stock it time, to status. have be it this listing NASDAQ plans at split

For on to Bill? through regain to have I which the provide financials. call activity. trading still months turn detail over in With now, normal we the that, over to Bill three will more compliance

Bill Hull

outlook. metrics additional some sheet Thanks, will our Mike. on performance, our on providing focus financial and balance remarks my perspective I and

$XX.X in QX product compared but Our in $XX.X total to million revenue than lighting versus QX XXXX. total revenue XXXX. product to of revenue XX% was to product revenue XX% rose million rose or million LED lighting $XX.X of QX XX.X% of revenue, lower or $X.X $XX.X sequentially million million, QX

by fluorescent request. to million product to on last which QX revenue Orion of lighting on focused fluorescent $X.X related decrease certain effort in significant LED XXXX However LED still lighting is $XX.X though declined product revenue based customer products, versus in year. declined A portion provide sales, the we has compared total XXXX. million QX its year-over-year products

in solutions. LED improvement sequential margin that $X.X overhead XXXX gross compared compared XXXX, along limited continue XX.X% very higher offset of by below $XXX,XXX efforts. a with Gross QX to achieved on in revenue. of to year was operating to fiscal XXXX expenses QX the revenues decreased XX.X% higher in absorption margin to completely to $X.X in overhead ago QX of not million the to also to in in principally in ROI QX basis Total XXXX, XXXX. absorption XX.X% margin cost progress slightly enough However is QX QX was management due on XX.X% approximately better achieved higher and as improve QX XXXX, million demand period, the given and

of active the mentioned, provide under should to reductions. close believe we the borrowings generated our in and net implementation savings with to Orion of current additional year-end. recorded and than working fiscal QX credit by XXXX expenses $X.X our foreseeable for benefit had $X.X working $X cash financial million, expect the General million in with the in to to Again expect quarter more efforts full our operating reflected annual $X.X the with revolving XXXX. cash Orion We substantially as activities nonrecurring QX position and million future. $X.X revolving $XXX,XXX in QX we to facility, XXXX be credit the at positive under charges our QX borrowings has QX, estimate of of capital Mike million from efforts. at total facility with compared beginning annual fiscal decreased $X.X in million of primarily our long-term the estimated. offset million of $X.X close management administrative ended million be from $X.X of $X.X fiscal cost cost XXXX previously capital fiscal approximately Orion to in potential compared million the million We XXXX QX and At up was the combined XXXX, sufficient increased for our resources of $XX.X to million approximately $X As loss in million in of reduction

let's founding As CEO. of Operator? a are against brought release, pleased the also the with favorable resolution its that, your company noted the our lawsuit press call And to with questions. we by open in

Operator

question Yes, And Roth come line from will our first sir. from Craig the Irwin [Operator of Instructions] Capital.

You may begin.

Craig Irwin

Good for taking morning, my thanks questions. and

accommodation have healthy you major or business two the what for quite from this you been on adjustment Can this I fiscal are forecast next have obviously for related for you down about them sort it an this even the year transparent but year. supplier? there automotive customer is your last for you Orion pretty what a minor maybe expect that side, require both been share noticed you doing step healthy, and external the few well forecast of of maybe in you us the Is while. So or OEM pretty maybe was as a some have year, customers, there. with quarters a with

Mike Altschaefl

Sure, Craig.

to you this $XX.X at automotive what to are been time. entirely for of of the referring one times customers, customers we their we have be coming them revenue business in bumped million fiscal pipe on ability had in have in $XX plants, the at of automotive XXXX, respect with them, think working down with while It known the by labor the said to we million million caused we some pacing using that we’d the is customer. the I at are with about have certain automotive to with usually are that from orders those thought, product. $XX.X previously is And to and are we purchase pace down we us place also to we the of point need

and And it. so to availability it us ability can as plants they the in have impact so have

For the Saturdays be plants work and might only times, example, sometimes Sunday as in get at you the or they busier Sundays. can on day

So it's into that's not the stuff loss it million. some little about a bit split business simply why downgraded has any we that perhaps and $X.X next it’s quarter out

Craig Irwin

Okay, excellent.

last you your to during someone us for of attributed you these that absolutely the quarter, improvement thought at understand of doubt about to pretty help complete one things understand someone that thing, continue process ask would may and been achieve next is the the us? weeks, was you when let the really head number your adjustments of the go can the in Second who I quarters you investments, wanted that you number Can over the be of sourcing emphatic company growth improved year. to last is margin ability have twice sourcing raise the to you to promoted making

Mike Altschaefl

Craig. will I Sure,

in senior that able we the our continue suppliers As felt our in was reductions, other us, did aspects, to had in place, involved reductions as at as that side headcount with efforts company we cost the and people person, those we relationship were the we the decisions recently here where work some additional some make mentioned executives including sourcing were included business. were the involved also who of our great Good directly with in were of going fairly someone we in well we for given sourcing the sourcing forward. seen did sourcing

or see the business on through company a to source the it reductions continue was So are as a sourcing. today. made And going product and terms at significant find having it structuring we forward where in and impact and don’t to ability of us our decision a for we cost size

Craig Irwin

a the understand Orion I decision inspires not people something at longer weighs Thank your that know flags strong not of that Can of so say of the remotely Bill just I that to given be I Bill. hoping predominantly was for in about the of think for Bill process this, as plans of a office you. another maybe work forward, helping out someone then to confidence that found your Chicago it’s relevant sort judgment do really importance turbulence those you something last bunch lots let’s going And thought investors of something describe people couple years I. and question, Bill maybe term whether hand shareholders or could the going And call and forward? worked work Orion that the important it able has Chicago vision. maybe with for the the renew lease been to sound you

Mike Altschaefl

cover I’ll half, will cover question. first parts, Bill in second two your the cover half Craig let of the me

situation look the of a May. it First lease end felt expiring our we natural all to because was at at time the was of Chicago

covered And talk be functions locations. working I’ll had his personal in moveable, were allow but that those that so remotely remotely And work Bill have portion ability had some the with that we who will costs. to in the we that we to for without have could location. about departed, to situation. exit any we we A people either or situation other resources were us of individuals the certain there going headcount respect forward. felt We incremental were reductions significant Chicago also

Bill Hull

hey complements for appreciate the all I Craig. Thanks Well, that.

we mean reasons make. tough make right I to was the to it yes, for a decision was on So, decision that Chicago, it’s had think the we

As Wisconsin. working be up far in the me, as out office I’ll yes, of

the company start it So want I'm ground to. up it we’ve of round, to to just mean, the going relocate I be getting part to turning very this in successful could we I take wherever there. up and taking off been

me count your So answers but hope that in. question,

Operator

next line Eric from comes Hallum. our And you. Thank from Stein the question of Craig

may You begin.

Eric Stein

Bill. Mike, Hi hi

Mike Altschaefl

good Hey, Eric. morning,

Eric Stein

a a morning. taken the total get that is sure factor in confident has completely I the channel think something just up been XXX that’s and that agents making number Maybe right be just number questions the it’s longer also you’ve terms that’s now and to I few you of on of is number can that think that in agent really who that speed? that but to come you the Good this know that range are or you got that together, limiting have I right that’s much pretty XX something unchanged about

Mike Altschaefl

is the question, a of No, place. America limiting of in currently substantial quantity have the great with factor, have North that we coverage agencies not agencies we

So making can XX now. as about to hopefully do make for we the agents with that them, support that can Part that productive agencies of those together. as the been our and And help than as to we working we more resource do many worthless to go that is point XX business them this them have place at forward in it we XX build as months. right as closely with of agencies, sure have actually

them some benefits that a so And we’ll that’s from we’re regaining speed think getting positive up and agencies that. we indication those to and see

around a level. from would stay XX So of we expected standpoint covered number the number I territory agencies to

Eric Stein

products that multiple option? source that primary that product And a the mean, maybe things can requires. I viewed there that's with are being as mean, is Orion's primary or there -- market do versus source them any the or products, Okay. up those second third what cover of thing, to is this and I you know getting they agencies speed. are the then I another or But part so because

Mike Altschaefl

job support you customers. understand technical them regional to for provide with Sure, company leads have cases, we it they sales and lighting make We bring our their those our our had field a We from additional are them support managers, sure past agencies In other what customers And including from many more support product to them to to standpoint. really effort the correct. as well one, them. lines. is as can sales in the

will agency Orion the can found times life then customers you interact to place products we while provide we And business back, nimbleness high on easy one products. product that time with sell we to is believe And carry. of the other interact customers. us with some ability make finally that we a step If lighting what at and to job is is the with our as key advantages of the our over of their as the have they they to competitively, to quality have their

Eric Stein

me for or the Okay, that completed those just related projects, in Maybe one how Are thanks just these I'm had bookkeeping fiscal of color. been half that first Florida. have more to-date. things. for expect curious, and projects many be I and weather things last you completed that XXXX? to in know delayed of a Texas some you

Mike Altschaefl

year. issues. related impacted be that Yes, we were fully the weather of the fiscal completed issues by will And weather any end the on modestly had fortunately we

Operator

And you. the from question Amit our comes H.C. line Wainwright. Thank of next from Dayal

may begin. You

Amit Dayal

Mike, Good morning, Bill.

Mike Altschaefl

Amit. morning Good

Amit Dayal

may good helpful. definitely declines. granularity ground this you sequential be year-over-year on still last relative would Any where understand sign, this question is seeing have really the softness? improvements us Just a on Can industry lost we to we're year, one revenue but help

Mike Altschaefl

we solutions. and always Sure. orientated are new Because are project so selling business, projects new a we

it Amit, we can't and quarter We've some marketplace. has year and hear players of the do And last fight that are this was customers other year, got been industry share softness to it business. there on industry through down, get We in X-to-X as back last our commenting what the the we in down. and simply sold why think was so we go say and

that take some often fruition. have to had some also expect little you to with national We nice than longer accounts very a come opportunities, large

any be significantly why an last and won’t progress. impact so I continue to work annual those really decline couple would of it But that to in things the had we from And point year.

we’re where sequentially of little So a basis. quarterly-to-quarterly at, we're at keep do forward are how on kind we of and and we going saying improving build more focused

Amit Dayal

continuing of room come for Got through it. you two evolve? customers, growth you of do much see where in have they large within more to guys. and your do these sort relationships to And terms customers, How for you automotive two continue these

Mike Altschaefl

companies higher get in so coming these certain need of will version of we the long of facilities to in early long for big the two fact see with we into of with are keep they customers retrofitting lighting. second they plans job, their savings in the And make sense. have in the need play. through calendar I was both upgrade have customers. situations had kickoff XXXX meeting LED a probably LED just retrofits our by the pipeline. to They Fortunately, the one time and last with have those to great their week, implementations as runway because as level the plans doing LED And conversation and LEDs are to we that a they they already have. And be energy improvements the projects that multiple on the frankly the we that because still retrofitted

still So in path customers. have we those good front of us we think two for a

business would are within some some fiscal We other with making progress XXXX. that to some also customers expect achieve we automotive

Operator

Thank next you of line the JMP comes Securities. and our from Osha question Joseph

You may begin.

Joseph Osha

bit a morning, guys. that’s Thanks, Good mouthful. of a

Mike Altschaefl

Good morning.

Joseph Osha

A questions. of couple

business is in gets sort almost the as gross during you of of a off breakeven talking wondering are business And year I what getting sort circle, then to about generally and just it part typically square rolls again just I'm there. talking saying? summer later wondering then the over and you margin getting the be I'm you're year. strongest that how really stronger flat the am of the then XX% to quarter macro if going And off you're again. First tends you’re one, and to to roll the this about seems

Mike Altschaefl

couple Sure, comments. of

we First, goal as margin our we very to to that of said, this Part look close are XX% quarter. close interim we you gross the forward a very economics of are from of that our do manufacturing can costs we we a is incrementally that by nice revenues, in as having overhead bump we increase costs operation. a U.S.-based more know absorbing achieve

So revenues we were encouraged XX% this will and on had to as margins us. the to increase get that be to we close helpful revenues quarter that

currently The go second not question, of fiscal half through your would we expect to XXXX. drift we backwards as

We’re to just and not more XX% below. at the falling XXXX, point fiscal yet don't until we above on give color next call but jumping anticipate then back

Joseph Osha

know, Okay. the the whether to fall I the really to -- understand summer year? some more towards business of might end into of Yes, the question I during question back but there was that you seasonally business is you is XXXX, as trying seasonality well the state was again as blip weaken the this just didn’t my profitability perhaps then

Bill Hull

Yes, think Bill. Joe, -- I this is

but function really related the we not So mentioned raw gross job managing a is have great absorption just it's more thinking that, about earlier. like -- in think a overhead we volume and done it I of margins,

on. that's where we’re So focused

Operator

from instructions] begin. Thank next Gaspar. question of the [Operator line George Our you comes you. may

Unidentified Analyst

Good everyone. morning, Thank you.

Mike Altschaefl

morning, Good George.

Bill Hull

Good morning, George.

Unidentified Analyst

that? town this on leave Chicago to I believe because doing Chicago describe more what the in situation, I on R&D follow the that. where that all do into Could was specialist up attractive up like channeled does you're engineering the it pick you effort a little was

Mike Altschaefl

talent have on asked We Chicago, year in Florida location other Jacksonville which two You have feel over like we the taking the we with person steps don't did location. a focused people cover able actually combination engineering located locations. and sourcing by bet, had last front, in we we’re as that is we’re to our backwards -- Manitowoc most our our of of earlier And Craig any George. a the we in

locations. in reductions we cost engineering the other not in of R&D the part and the talent covered feel talent were two reductions there or So the as past

Unidentified Analyst

Okay.

personnel I if would the were total personnel terms Orion of In possibly to in of being share, many of and will up Manitowoc, total this you in number moving with end those how and Chicago that assume?

Mike Altschaefl

first and give eight Bill other over reductions a Chicago. in on flavor we Bill some of to were total The little personnel bit entirely some people. reduction locations was the of in our changes Chicago I headcount of And remote all, had I'll turn approximately before people location, also. all Well let not

Bill Hull

Yes, left working remotely so area what the five, have about Chicago five we’ll people, in is six.

Unidentified Analyst

right. all Okay,

Next developments you terms be line your product bringing quarter, question anything forward special boost? you in in would edge on the out the in you’re that extra give R&D of that further of upon on was your improved some that there going here would

Mike Altschaefl

line talked today And and There about been may the had we we lower back distributors foot October been in previously four had you on line, August our have products. a with we and one favorably I’ll agent received, priced as very came focus of out with a is product the then linear recall Harris which of is entry often in working and somewhat line contractors. are channel that it’s in who updated Patriot particularly level

we’re somewhat, And an out of week. line. lumen last packages expanding that foot bringing same And product literally that some line so out for brought different other Harris that Patriot X we’re then

we So with secondly other -- our add-ons our they with large work to that that that developing are of we can integrated are our with exploring also we And still have controls expect fixtures. working reach companies evolve could them with be some to possibilities nice some products. some the relationships going to area continued as forward. controls or some make can have OEMs that integrate And expanded proprietary sure and controls those have lines either us in our for very then them to

for So we roadmap still rolling out we that and next projects on table some R&D are very on the currently the the months. things have six have exciting

Operator

no like I'm the And remarks. for Thank this would Altschaefl to call now at further Mr. showing closing I to time. questions you. turn back

Mike Altschaefl

our enterprise, you, XX% all solid closing, you Building project LED great Orion today’s on for a industry believe base that energy exceptional call. of lighting of through offers potential accounts opportunities customer leading potential customers model, substantially our to In national firmly thank all includes business account base. national joining see LED us pursuing from off to upgrading growth efficient nearly base more the distribution service customer business our growing Thank illumination driven that grow Fortune also to and market XXX. with from and long-term working solutions industry responsiveness improved while are leading and wrapped I our compelling lighting operator we upgrades. of agent we for providing enormous lighting a in substantial LED clear to By and service with ROI optimize solutions the

We believe call. have our a we our our cost an on in improved gross this value shareholders, profitability. for ability we to right and margins structure in our gain path plan By Thank effort our investors potential executing performance deliver both to become near-term in sized to for bottom-line profitable. create joining you today’s substantial confidence us as will revenue on and improved

Operator

great and This conclude the participating thank gentlemen, may program in conference. all disconnect. and Everyone you day. you a does Ladies today’s for have

Orion Energy Systems (OESX) 7 Feb 182018 Q3 Earnings call transcript