Orion Energy Systems, Inc. (OESX) research, news, and more from GeoInvesting

Company description

Fri, 07 Jun 2019 12:40:35 GMT

Orion Energy Systems, Inc. researches, designs, develops, manufactures, implements, markets, and sells energy management systems for the commercial office and retail, area lighting, and industrial markets in North America. The company operates in three segments: Orion U.S. Markets Division, Orion Engineered Systems Division, and Orion Distribution Services Division. It offers LED Troffer Door Retrofit for use in office or retail grid ceilings; and LED interior high bay lighting products, including Apollo class of LED interior fixtures designed for new construction and retrofit projects, as well as ISON class of LED interior fixtures. The company also provides an array of smart building control systems, which provide lighting control options and data intelligence capabilities for building managers under the InteLite brand or procured from third parties; and various other LED, HIF, and induction fixtures for lighting and energy management needs comprising fixtures for agribusinesses, parking lots, roadways, retail, mezzanine, outdoor applications, and private label resale. In addition, it offers lighting-related energy management services, such as site assessment, site field verification, utility incentive and government subsidy management, engineering design, project management, and installation; and sells and distributes replacement lamps and fixture components into the after-market. The company serves customers directly; and through independent sales agencies and distributors, and energy service companies and electrical contractors. Orion Energy Systems, Inc. was founded in 1996 and is headquartered in Manitowoc, Wisconsin.

Research

Thu, 23 Jan 2020 15:34:14 GMT

**Call To Action - Closing Out OESX Position

As shares passed our initial short term price target of $5.00, we have decided to close out our position.

On June 7, 2019 we disclosed that we initiated a long position in Orion Energy Systems, Inc. (NASDAQ:OESX) ($5.03; $152.0M market cap) when the stock was trading at around $3.00 with the belief that it could approach $5.00. On July 5, 2019 we issued a comprehensive update, with one of the main points of the article being:

“Still, a less than optimal aspect of the OESX bull case is that it operates a project-based business, meaning that quarterly and annual revenue can experience noticeable lumpiness.”

Although we continue to believe that management's long-term growth strategy to drive consistent growth makes sense, there is some uncertainty on how linear the quarter over quarter growth can be. For example, the company will soon be facing some tough comparisons:

EPS History and Estimates

Recall that growth over the last several quarters has been largely fueled by a significant product win in Q1 2020 (June quarter). That project is now winding down. Before committing to the stock longer-term, we'd like to see some confirmation from the company that they'll be able to replace this revenue. We do think it's very possible that the company that awarded OESX this large project may expand its relationship with them.

So in the end, we could see ourselves getting back into the stock.

On the positive side, with TTM EPS of $0.30, equating to a TTM P/E of 16, the stock is not overly expensive at its current price. Shares are selling at a P/E of 13.2 based on 2020 EPS estimates of $0.38 (However, 2021 EPS estimates are currently lower than 2020, at $0.27)

We think long term investors could be given some downside support to the stock’s price given OESX’s reasonable valuation, especially if growth does in fact slow down for a quarter or two. It's also important to keep in mind that the microcap space has been a little healthier right now, rewarding value even if growth isn't quite there.

Conference Call Notes

Thu, 07 Nov 2019 20:57:29 GMT

Orion Energy Systems, Inc.(NASDAQ:OESX) ($2.77; $82.7M market cap) Q2 2020 conference call summary quotes:

As you may know, our results are being driven by strength in our national accounts channel principally due to a contract for over $100 million in turnkey LED lighting and controls retrofit activity for one of our customers during fiscal 2020.
Current and potential markets where we see opportunities, are having dialogue and are winning or expect to win awards include automotive; retail stores, including big-box retailers and pharma; retail distribution centers; logistics; the public sector; health care as well as maintenance and electrical services.
Though it takes time to advance sales dialogues, particularly with large, more complex national account opportunities, we feel increasingly confident in our sales outlook for fiscal 2021 and beyond.
As previously disclosed, we expect the first half of fiscal 2020 to likely be stronger than the second half based on the expected planned installation schedule of a large national account project, the normal slower period in November and December as some customers don't want to disrupt operations during the holiday season as well as other factors.
What we do find with some of our customers, particularly national accounts, is that they tend to make capital decisions later in the calendar year, particularly if they're a calendar year company. And therefore, we expect to get more information over the next 6 weeks of what some of our larger customers will be doing during perhaps their calendar '20 as well as what impacts our fiscal '21.

Uncertainty remains surrounding the winding down of its large contract. With no new concrete orders to replace it, investors seem to be taking a cautious approach. Shares remain flat since reporting strong results.

Research

Tue, 06 Aug 2019 14:23:58 GMT

Orion Energy Systems, Inc.(NASDAQ:OESX) ($2.77; $82.7M market cap) a provider of enterprise-grade LED lighting and energy project solutions, announced its Q2 2019 results on Monday morning. While beating both top and bottom line estimates for the quarter, the company only maintained annual guidance and stated it expects the first half of 2019 will be stronger than the second half. You can see our full earnings coverage note here.

Shares fell 15% in yesterday's session. However, we were on the conference call and the call was a little more bullish than we anticipated. The company definitely left the door open for further contract wins with its recent large customer and also mentioned some product expansion news. We believe that long term investors will view the sharp pullback as a buying opportunity.

Quotes from call:

On contracts...

“So given the particular situation, timing of the contracts and fiscal years that if there is additional follow-on business with this particular customer, some of that could hit in our fiscal 2020. At the same time, we're always cautious to tell people that while we're very pleased with the progress we're making on this project and we believe it's going very, very well and we've got a substantial amount yet to do in this fiscal year, at times, things can happen, and customers might push things back somewhat for particular business reasons they may have. So we continue to believe that the contract we've announced will most likely hit during our fiscal 2020. We believe there's opportunity beyond that, and that follow-on opportunity some of which could fall into fiscal 2020, but we're primarily focused on building our opportunities and additional business for fiscal 2021.”

On products….

“New products include our new lumen select LED fixtures with the range of lumen packages that can be set in the field, providing greater efficiency and flexibility for both electrical contractors and their customers.

We have also developed a line of fixtures that are upgradable to higher power lumen packages, or through Internet of Things, controls and monitoring capabilities.”

In related news, Craig-Hallum raised its price target for OESX to $4.00 from $3.50 and reiterated a “Buy” rating.

Research

Mon, 05 Aug 2019 15:54:23 GMT

Orion Energy Systems, Inc.(NASDAQ:OESX) ($3.22; $96.0M market cap) a provider of enterprise-grade LED lighting and energy project solutions, announced its Q1 2020 results:

Sales of $42.4 million vs $13.8 million in the prior year and well ahead of analyst estimates of $28.3 million
EPS of $0.13 vs a loss of $0.09 in the prior year and also way ahead of analyst estimates of $0.02

“In light of our competitive turnkey offering, leadership in large scale energy efficient lighting and smart building retrofits, and the customer traction we have developed, our focus is on replicating our successes with other large national opportunities. We are in the early stages of dialogues with new account opportunities and are also working to finalize the scope of projects for existing customers, particularly in historically strong areas such as automotive and public sector accounts. We are also making selected investments in the expansion of our senior sales team.

“While it will take some time to advance our sales dialogues into concrete order activity, we feel very confident in our ability to build a strong pipeline of business for FY’21 and beyond. With respect to our agent driven distribution and energy service company channels, we continue to invest in the development of LED lighting solutions designed for their specific needs with respect to price, features and functionality.

Guidance:

“Orion is maintaining its prior FY’20 revenue goal of $135M to $145M, representing expected growth of more than 100% over FY 2019 revenue of $65.8M. While the timing of revenue remains highly dependent on customer schedules, Orion anticipates revenue in the first half of FY’20 to potentially be higher than revenue in the second half of FY’20. Orion also reiterates its expectation of achieving an EBITDA margin of at least 10%, as well as positive net income and EPS, for the full FY’20. Based on its business outlook and performance to date, Orion believes it has sufficient available capital and liquidity to execute its growth plans in FY’20 and beyond.”

It is our belief that since the Company crushed analyst estimates for this quarter and did not raise its annual outlook, short-term momentum investors may take a cautious approach moving forward. Analyst estimates were calling for a stronger second half of the year, opposite of what management is guiding. This scenario could still lead to quarterly profit generation. We plan on being on the earnings call scheduled to start at 10 a.m EST to determine if we can gain some clarity into the near-term to medium-term growth outlook and if the company can at least maintain profitability in all quarters.

It's good to see that management is trying to fill the pipeline for its next fiscal year.

On June 7, 2019 we disclosed that we initiated a long position in OESX with the belief that it could approach $5.00. On July 5, 2019 we issued comprehensive update on our long position, with one of the main points of the article being:

“Still, a less than optimal aspect of the OESX bull case is that it operates a project-based business, meaning that quarterly and annual revenue can experience noticeable lumpiness.”

Although we do believe that management can execute its long-term growth strategy, given some of the way management phrased its commentary, we could see the stock pulling back. We will reassess our long position after listening to the conference call.

There are also some other recurring revenue stock ideas on our plate right now.

Research

Thu, 13 Jun 2019 14:50:00 GMT

**LD Micro Summary

As we begin our full recap of the LD Micro Conference, we feel the stocks that were already in our portfolio, REPR, ATGN, DHX and STXS, stood out the most. Our meetings with management confirmed our bullish thesis surrounding each company.

Of the 20 companies we interviewed besides the ones above, Orion Energy Systems, Inc. (NASDAQ:OESX) was our favorite and we see significant upside to the current share price.

We are in the process of scheduling a follow up interview with management to get a grip on opportunities and risk.

Here are the cliff notes from our LD interview :

Orion Energy Systems, Inc.(NASDAQ:OESX) ($2.99; $88.5M market cap) delivers enterprise-grade LED lighting and works with third party software providers to provide IoT solutions through lighting fixtures to monitor facilities and collect data.

The company has a customer base going back 50 years.
OESX had historically offered fluorescent lighting to its customers
Revenues peaked at $100 million in 2012 then fell to recent levels in the low $60’s as the company was late in its transition of offering LED products
Usage of LED lighting solutions is growing rapidly due to the efficiency as compared to fluorescent. LED lights last a lot longer and use less energy. A caveat related to this is that upfront cost of LED solutions are more expensive than most alternatives.
LED pricing is dropping which will allow more companies to adopt OESX’s solutions
Penetrations of LED lighting solutions is still in the early stages

The company has issued full year 2020 revenue guidance of $135 million to $145 million
Orion expects to achieve an EBITDA margin of at least 10%, as well as positive net income and EPS for the full year FY 2020.
Based on the above guidance, we calculate 2020 EPS of $0.40 which is above analyst estimates of $0.33.
A P/E of 15 would imply shares could trade at $6.00 a share

Caveats:

We need to become comfortable with the Company’s ability to win more projects.
The market may be unwilling to assign premium valuations until it believes this is not a one time project story

Research

Fri, 07 Jun 2019 15:07:30 GMT

Established Long Position In OESX

Yesterday, via premium tweet, we mentioned we established a long position in Orion Energy Systems, Inc.(NASDAQ:OESX) ($3.00; $88.8M market cap) based on our interview with management at the LD Microcap conference in LA, which added to our confidence that they can meet or exceed the guidance given in the last earnings release. They except fiscal 2020 revenues of $135 to $145 million and EBITDA margins of at least 10%.

We feel the stock could approach $5 in the near term.

Maj was able to interview over 20 companies at the conference. Updates and details from his interviews, including the one we had with OESX, are forthcoming next week.