Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Orion Energy Systems, Inc. (NYSEMKT:OESX)

F1Q09 (Qtr End 06/30/08) Earnings Call Transcript

August 5, 2009 5:30 pm ET

Executives

Erik Birkerts - IR

Neal Verfuerth - President and CEO

Scott Jensen - CFO

Analysts

Eric Sigh - Northland Securities

Jeff Osborne - Thomas Weisel Partners

Bill Nasgovitz - Heartland Advisor

Kevin McKane - UBS

Brad Hendrickson - Nicholas Capital

Operator

Good afternoon, and thank you for standing by, and welcome to Orion Energy Systems First Quarter 2009 Earnings Conference Call. Your lines have been placed in a listen-only mode until the question-and-answer segment of today’s call. Today’s call also is being recorded. If you have any objections, you may disconnect at this time.

I’d now like to turn the call over to Mr. Erik Birkerts, Investor Relations. Erik, please go ahead, sir.

Erik Birkerts

Thank you, Dena, and thank you for joining us for Orion Energy Systems fiscal 2009 first quarter conference call. Joining me on the call today, we have Neal Verfuerth, President and CEO; and Scott Jensen, CFO.

The format of today’s call will be as follows. Neal will review some of the highlights of the quarter and discuss some of the key trends driving our business. I will then discuss some of the operational initiatives we have implemented. And then Scott will then provide financials detail on the quarter, and we will be happy to take your questions at that point.

Before we begin, I’ll read the Safe Harbor Statement. Our remarks that follow, including answers to your questions includes statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified as such because of the context of such statements will include words such as believe, anticipate, expect or words of similar import.

Similarly, statements that describe future plans, objectives, or goals, are also forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different from those expected. Those risks include, among others, matters that we have described in our press release issued this afternoon and furnished to the Securities and Exchange Commission on Form 8-K, and those that can be found in our filings with the Securities and Exchange Commission. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly conference call if at all.

Now, I would like to turn the call over to Neal.

Neal Verfuerth

Thanks Erik. I’d like to welcome all of you to our Orion Energy Systems fiscal 2009 first quarter conference call. For the first quarter that ended for fiscal 2009, we reported revenues of $16.1 million versus $16.7 million in the first quarter of fiscal 2008. Net income for the quarter was $34,000 compared to $748,000 in the same period last year, and earnings per diluted share were at a breakeven this year versus $0.04 in fiscal 2007.

The softness we experienced in the first quarter was due to convergence of really two primary factors. First, we made a decision as part of our long race plan to invest time and effort to build our sales organization now rather than wait for future when the negative impact to our business will likely be a lot more substantial.

With our most experienced sales people focused on these efforts in the early part of the quarter, we did not close some near-term opportunities as we normally would have done so. Although, we did not originally anticipate that these investments in time and effort would have had such a material impact on our results, we do believe they were necessary to further position our volume to capture the opportunities that exist in this quickly evolving energy efficiency marketplace.

Secondly, we witnessed the lengthening sales cycle due to the current economic environment. This became apparent in June. Many deals that historically have been closed in normal holding range based on the strength of our ROI were now subject to lot more protracted and scrutiny of decision-making process due to the capital investment involved. This creates really a pushing out of the opportunities, however, we have not witnessed any customer losses or had any more customers decide against implementing our technology.

During our call on July 16th, we discussed a number of changes in our management, and I would like to spend a few minutes discussing both changes and the reasons we decided to make them. Underlying our decision making is the fact that Orion has grown tremendously over the past year and our business is more demanding and multidimensional. Key areas of our business now require more dedicated focus by senior management.

The changes we have made are designed to provide that focus under aligned skill set with those areas where they will have the most positive impact on our business. To this end, these changes will also allow me to focus more my time and attention where I can add the most near-term and long-term value, meeting with customers and working elbow to elbow with our sales team to execute on the opportunities before us.

In terms of some of the personnel changes, we promote Scott Jensen to CFO and Treasurer, assuming the responsibilities of Dan Waibel. Scott has been with Orion for over four years in the position of Controller and Vice President of Corporate Finance, and I personally worked with Scott during that period. Scott’s responsibility will be to further build our financial organization and financial processes and procedures to meet the need of our growing business.

We have also promoted Erik Birkerts as newly created position of COO. Erik has been working with Orion for the past several years and first as an external consultant and then as Orion’s VP of Strategic Initiatives. As COO Eric will be responsible to build his planning, budgeting, forecasting and further strengthening our management processes.

Finally, we are working on a number of initiatives to further our competitive advantage in the marketplace. To this end, we have created the Orion Asset Management Division to provide structure and dedicated organizational focus on the long-term strategic opportunities, most of which will lead to recurring revenues for Orion.

We will point Dan Waibel our former CFO as President of Orion Asset Management, and Dan will be responsible for following key strategic initiatives. First, creating and following through out of innovative customer finance solution that we’ve been working on that will allow customers to benefit from our technology without experiencing any technology or financial risks.

These new payment options that Dan is developing are increasingly important in this current economic climate. Dan will also work on delivering demand response solutions utilizing our wider controllers and overall integrated system for capacity solutions for large utilities. Dan has already spearheaded Orion’s involvement on some utility scale RFPs.

Our energy efficient technology can remove one megawatt of load from the grid, base load that is for approximately $1 million and then further supplement that with demand response solutions. In contrast for utility to add one megawatt of capacity of base load costs more than $2.2 million per megawatt and involves long lead-times. Finally, Orion Asset Management will further the development of our carbon emissions monetization platform.

I’d now like to turn the call over to Erik to discuss some of our operational initiatives for future growth.

Erik Birkerts

Thanks, Neal. Although the first quarter was softer than anticipated, I do want to take some time to highlight some of the positive accomplishments that took place. First of all, within the quarter we added 276 facilities to our install base, representing over 34 million retrofitted square feet. A little more than half of those additions represent further penetration in our existing customer base and the balance represents new customer additions.

Since our last earnings call, we have also seen some notable customer wins that deserve mention. The largest is a 36 months rollout agreement covering over 75 facilities that we recently signed with the division of a major publicly-traded industrial products manufacturer.

Revenues from this opportunity are expected to begin hitting in early Q4 and then roll into fiscal years 10 and fiscal year 11. The total deal value for this division is estimated between $8 million and $10 million. There are also other divisions within that company that are currently being targeted.

We also entered into a rollout agreement with a large publicly-traded engine manufacturer in which we expect to retrofit more than 7 million square feet in the months ahead. Revenue from this opportunity will begin to hit in Q2 and we are forecasting approximately $3 million for this fiscal year.

We also secured commitment from a large food service company to retrofit over 2 million square feet and revenues from this opportunity are expected to begin hitting in Q2 with the overall deal value estimated at about $1.5 million for this fiscal year.

We are also preparing to begin shipments of our recently launched wet-rated fixture to a major drilling company. Concurrently, we are also committing resources and making investments in surveying facilities for additional business. The potential revenue opportunities with this brewer is estimated at upwards of $7 million for this fiscal year.

On our recent call, we also discussed a customer win of NUMMI, which is a joint venture between Toyota and General Motors. This project is now about half complete and is shaping up to be one of the largest energy efficiency projects ever accomplished in the state of California, and it will save NUMMI over 8 million kilowatt-hours of electric power annually and nearly $1 million energy cost annually.

What is interesting is that these type of efficiency gains are increasingly featuring corporate sustainability reports. To date, we have accounted 23 customers who have highlighted their energy efficient lighting projects in such reports. The good examples, I will recommend are reports issued Miller Brewing and Coca-Cola Enterprises.

The quarter also witnessed further expansion in our contractor network. From a marketing perspective, we continued our direct mail initiative and touched our database of over 60, 000 contractors, five-times within the quarter, adding 87 new contractor partners and expanding our network of partners who have done business with us on a recurring basis to over 280.

We are also building relationships with key roofing contractors to advance our Apollo Light Pipes product line and are working with several of the nation’s largest roofing contract companies to establish technology demonstration sales facilities in regional markets that will feature both Apollo Light Pipes and Orion’s integrated light system.

Since year-end, we have established over 10 such center as well educated countless sales people and employees from this contractors. Much of our efforts during the quarter were spent on identifying, recruiting, interviewing, and hiring new talent into our sale organization. We added 13 new people, which equates to approximately 50% of our goal for fiscal 2009. These new hires were made in markets including Seattle, L.A. and Chicago, and our sales organization numbered 64 employees as of June 30th.

To be productive as soon as possible these new hires require training on product applications, and most importantly training on how to sale in the Orion way. Additionally, we invested many hours in developing training content tools and methodologies as well as training trainers to prepare Orion for future expansion. While we have made strides in positioning our business for the growth opportunities ahead of us, there are still many areas we can improve upon to ensure better operational execution.

In my new role, I will focus on our key performance indicators; operational metrics, informational tools, and management processes to ensure that our execution phase is on track. I am also working closely with Scott to further refine our internal forecasting processes for better future visibility.

Some of our recent improvements in operational structure, in our operational structure include the appointment of a national sales manager responsible for day-to-day management training and coaching of our field sales personnel, the hiring of a director of partner development to provide day-to-day dedicated focus to developing and managing our partnering network. We’ve also hire a sales person who was a trained architect, who will be responsible for our Apollo and integrated light system business. And finally, we have hired a university level curriculum developer and instructor to further refine and streamline our training and development initiative.

At Orion, we are faced with, what I call a nice problem, to have. We do not suffer from a lack or leaser opportunities, rather we are blessed with opportunity. However, as an organization, we need to be highly disciplined and focused on closing out in compressed timeframes the deals we have already opened.

And with that let me turn the call over to Scott to take you through the financials in more detail. Scott?

Scott Jensen

Thank you, Erik. Our reported revenues for the first quarter of fiscal 2009 were $16.1 million compared to revenues of $6.7 million in the same period of fiscal 2008. As Neal mentioned, the softness we experienced during the quarter was the result of our efforts to expand our sales force and our work in developing a streamline process through recruiting, interviewing, hiring and training future candidates. Additionally, we have experienced the lengthening of our sales cycle due to the current economic environment.

A gross margin for the quarter was 32.3% slightly less from 33.5% in the prior year’s first quarter. A gross profit for the quarter was $5.2 million compared to $5.6 million in fiscal 2008. The decrease in gross margin was due primarily to two factors. First, the reduction in revenue did not allow us to fully leverage the fixed costs of our manufacturing assets.

Secondly, at the end of fiscal 2008, we invested an additional equipment and processes that will allow us to support our planned revenue growth, reduce costs and reduce inventory levels. This investment in our manufacturing operations should allow us to improve margin percentages in the future. In the short-term, we have excess capacity related to these additions and we continue to seek opportunities to increase the utilization of these assets.

G&A expenses for the first quarter of fiscal 2009 were $2.6 million, or 16.2% of revenue, versus the prior year of $1.6 million, or 9.4% of revenues.

This increase in G&A expenses is primarily attributable to increased compensation costs related to new employment contracts, additional staffing in our accounting, IT, and administrative function, increased stock-option compensation cost, and increased public-company costs for legal, compliance, audit and fax initiatives.

Our G&A expenses for the quarter were positively impacted by a $360,000 gain from the sale of an asset.

Looking forward, we anticipate that quarterly G&A expenses for the remainder of fiscal 2009, will be in the $3 million to $3.3 million range as we incurred additional stock-option compensation cost and building-occupancy costs in our fourth quarter.

Sales and marketing expenses for the quarter were $2.7 million, or 16.5% of revenues, compared to $2.1 million, or 12.6% of revenues in the prior year. This increase reflects the frontloading of costs as we made the investments in our sales organization and we expect to see the returns from these investments in the third and fourth quarter as the revenue contributions from our new hires kick in.

As Erik mentioned, we are now about 50% complete with our expansion of the sales organization that we discussed back at the end of fiscal 2008. R&D expenses for the quarter were $418,000 or 2.6% of revenues, down from $437,000 in fiscal 2008.

Looking forward, we expect that quarterly R&D expenses for the remainder of fiscal 2009 will be in the $400,000 to $450,000 range. Our wireless technology continues to progress into the production stages and we will continue to invest in research opportunities that will allow us to stay ahead of our competition with improved energy technology.

The operating loss for the quarter ended June 30, 2008 was $488,000 versus operating income of $1.5 million in the prior year. Net interest expense for the quarter was $67,000 versus $295,000 in the same period for fiscal 2008. Our effective tax rate for the first quarter was 42.2%. The increase in our effective rate was due to a mixed change in our state income tax expense, increase in non-deductible, incentive stock option compensation expense, and phase out of Federal R&D credits.

Net income for the quarter was $34,000 primarily as the result of interest and dividend income for the quarter of $617,000, which helped to offset our income from operations shortfall. Our fully diluted earnings per share for the first quarter of fiscal 2009 was breakeven on an weighted average fully diluted shares outstanding of 30 million shares compared to $0.04 for the same period in the prior year, based on 18.1 million share count, the weighted average fully diluted shares outstanding.

Turning to the balance sheet, as of June 30, 2008, we had a total of $54.2 million in cash and cash equivalents on hand compared to $78.3 million at the end of our fiscal year ended March 31, 2008. The change in cash and cash equivalence is due to a different classification for our $23 million investments in short-term government agency bond with improved yield versus our cash and money market investments. None of this cash is invested beyond 360 days, and we believe that we still have sufficient liquidity to meet our operating and strategic requirements and to fund our $20 million stock repurchase program.

Accounts receivable declined by $5.2 million from year-end on reduced revenues and also increased collection efforts. During the same time period our DSO decreased from 80 days at year-end to 70.7 days. Our receivable portfolio continues to remain credit strong with solid national account and retail customers and resellers and contractors who had true business partners.

Inventory through the quarter increased by $3.2 million from year-end. Our strategy has always been to insure that we could support customer orders with short lead times. For the quarter, we did increase inventories of raw material components and work in process to allow us to satisfy the national account roll outs and volume increases forthcoming. Additionally, we have invested in wireless component inventories which have longer deliver lead times versus our traditional fixture components.

Before I turn the call back to Neal, I would like to discuss our outlook for the remainder of fiscal 2009. As we have stated on the call in mid July we now expect fiscal 2009 total revenues growth to be in the range of 25% to 28% which equates to approximately $101 million to $103 million in annual sales for the year. This reflects the business realities that we see in front of us including the softer months of April and May and the current economic environment. We also continue to expect that the percentage of our annual revenue contributed by the second half of our fiscal year to be somewhat higher than the 55% to 60% that we have witnessed historically.

Finally, we expect that earnings per share for fiscal 2009 will be in the range of $0.16 to $0.19 per share and fully diluted shares of approximately 30.3 million.

With that I would like to turn the call back to Neal for some closing remarks.

Neal Verfuerth

Thanks, Scott. To conclude, let me re-state that we are not satisfied with our first quarter results. However, we have made and we will continue to make improvements in our forward momentum. I’d like to highlight two key initiatives on which we are currently making progress that will become much more meaningful over the next 12 to 18 months. As stated earlier in this call, we are now producing and shipping our wireless controls and integrated light system. This system allows management of light used across multiple facilities allowing for demand response solutions with our corresponding sacrifices and quality work environments.

As Erik outlined earlier, we have established over 10 technology demonstration of sales centers in a partnership with several national [routine] contractors. Although, this is so early, this is example of how we are receiving the calls today to create opportunities to re-occur revenues in the future. With respect to our carbon emissions monetization, in fiscal '08 we have achieved a significant milestone by successfully completing a sale of CO2 credit center by a customer utilizing volumes technology platform. We are now increasing our efforts to offer the valuable services to our customers to generate recurring revenue stream for volume and our customers and to help reduce harmful CO2 emissions from the environment. We hope to provide update in the coming quarters with these initiatives.

These are two examples of Orion's strong leadership and relentless drive to distance the competition and further establish our market advantage and sustainable differentiation in the marketplace. At the end of the day we are very optimistic. We are highly motivated in our quest of workable solutions to the energy and environmental (inaudible) challenges facing businesses today. As [towards] of our shareholders capital we will continue to invest in and grow our organization with a goal of delivering solid financial results and investment returns. We look forward to updating you on the progress in the coming months.

With that operator I would like to now open the call for questions. Thank you.

Question-and-Answer Session

Operator

Thank you sir. Today's question-and-answer session will be conducted electronically. (Operator Instructions). And we will take our first question today from [Eric Sigh] of [Northland Securities].

Eric Sigh - Northland Securities

Hi guys. How are you doing?

Neal Verfuerth

Fine. Thanks. How are you?

Eric Sigh - Northland Securities

Not too bad. I was wondering first just kind of bookkeeping thing, could you breakdown product and service? Is that inline with typical 80%, 20%?

Scott Jensen

Eric, this is Scott. Yes, it is, the service component was exactly 20%.

Eric Sigh - Northland Securities

Okay.

Scott Jensen

Exactly.

Eric Sigh - Northland Securities

And I was wondering in the call two weeks ago you guys indicated that April and May that was results kind of how you start off a little bit. Do you have any initial feedback on how July has been and also, I know Erik, you talked about you were charged with putting in place efforts to improve your visibility going forward, and also along with that should we still think about the second quarter as being up slightly sequentially?

Scott Jensen

Yes, I mean, you are right Eric, the April and May were months that we weren’t happy with and then June, was solid. We are focused on driving our business, and closing business, please understand that we do have a policy not to provide inter-quarter trends but I will say that we are tracking to annual guidance.

In terms of sequential growth we are expecting growth in the quarter.

Eric Sigh - Northland Securities

Okay. And can you also just provide a little information, I know, in the past you have talked about some additional revenue opportunities such as re-lamping and that sort of thing?

Neal Verfuerth

This is Neal. We have, just put in place a couple of initiatives and really some program to incorporate group re-lamping, services and products bundled together as well as we have already seen a nice steady upward progression in just lamp sales to our existing install base. Given the fact, that we have probably 6.5 million lamps or so today, it is not matter of if they are going to pronounce when. So, it’s a great opportunity for us to get more face time with the customer and additional recurring revenue.

Eric Sigh - Northland Securities

Okay, I appreciate that. And then just one last thing. You said, you have filed 13 sales people, you anticipate you are about 50% through?

Neal Verfuerth

Yeah, I think the best way to think about it, we are looking at that number a little bit but we’re looking at about 10 more in the number we saw circled it about 70 in the sales organization.

Eric Sigh - Northland Securities

Okay, 70 in total.

Neal Verfuerth

Yeah. And that may migrate upwards or downwards it had but that’s the good number.

Eric Sigh - Northland Securities

Okay, I appreciate. I’ll jump back in the line. Thanks.

Neal Verfuerth

Thank you.

Erik Birkerts

Thank you.

Operator

And we will take our next question from Jeff Osborne from Thomas Weisel Partners.

Jeff Osborne - Thomas Weisel Partners

Great, thank you. Scott I was just wondering, could you breakout the gross margins for services and products. I just wanted to get a better sense to what that mix shift is there given the sequential downtick?

Scott Johnson

Sure, on the product side 33.2% and really are function again as I spoke earlier on the volume reduction in some of the excess capacity would cost that we have.

Jeff Osborne - Thomas Weisel Partners

Sure.

Scott Johnson

And then on the service side 28.6%.

Jeff Osborne - Thomas Weisel Partners

Okay. Is there any way you could give a range for sales and marketing for the year you gave it for the other two, I may have missed it, can you talk about hiring the same people just pay some EPS guidance side imagine that, that would tickup and gradually through the year or how should we be think about that?

Scott Johnson

Yeah, good question Jeff. You can anticipate that that will tickup through the year, we’ll have full impact of all the ads from the first quarter and the next quarter. We’re at 2.6 million almost 2.7 million. You can probably tick that up 250 to 300k per quarter, incrementally.

Jeff Osborne - Thomas Weisel Partners

I just want to go back to the Eric’s question, because I think is some of valid understand the policy here because not giving inter-quarter guidance but from the company that’s six months ago seems to be immune to the economic, way it mean to the economy to highlighting that as one of several reasons for the substantial production and guidance. Can you just confirm whether or not you expect in the second half of the calendar year, the deteriorating economic environment will remain at the longer sales cycles or how much confidence do you have that, you mentioned a couple of initiatives to shorten those. But it sounds like your guidance maybe implying that.

Neal Verfuerth

Well, first off, we discussed this few weeks ago. Scott and I, when we looked at our previous guidance number which was canceling out to 120 million and we brought it down by 17 million to the top end of the range of our new guidance number. We incorporated about $10 million due to the lengthening of sales cycle. So, we looked at that number and we took a pretty conservative cut to our annual guidance based on what we are seeing in the economy.

In terms of where we get visibility and where we get comfort on the numbers we have to out there right now. I just want to highlight, on that last call I also talked about our forecasting model and how our model has four components. One of the component in which we have the best visibility is our national account rollout. And as it stands now we have got great visibility on $14 million or $15 million of business that lies in front of us for this fiscal year. Then we have, probably another $10 million that we are incorporating that as convergent of kind of our existing pipeline and that is based on some pretty conservative convergence ratios. So, if you think about what is left our go-get is approximately $40 million and what I mean by that is that's where our guys still have to go out, generate the opportunity, and close the opportunity out by the end of fiscal year.

Jeff Osborne - Thomas Weisel Partners

Okay. And the other sense of what type of go-get order would have been in this quarter as already you've mentioned $11.5 million in revenue or new deals for this fiscal year, I may be true 8 to 10 over several years?

Neal Verfuerth

Yeah, the way the first quarter worked out being -- we referenced this earlier as well. The majority of first quarter was based on go-get versus business that we have locked and loaded from our national account role out.

Jeff Osborne - Thomas Weisel Partners

Okay.

Neal Verfuerth

And that's where -- provide a little bit more color on it. We talked about lengthening sales cycles, kind of, I think Q4 last fiscal year. Others deal that closed, 70% closed within six months, and then we were seeing upward to 40% closing within 60 days. Based on most recent analysis, we are now down to about 58% closing with six months but more importantly 25% are closing within 60 days. So, while there is quick care opportunities that we used to see by going in on the strength of our ROI payback are not closing that quickly. And that's when we talked about lengthening sales cycle that's where we see it.

Jeff Osborne - Thomas Weisel Partners

Okay. And then just a couple of quick ones for Scott. Scott, you mentioned $23 million of cash reclassified. Are any of those in auction rate securities or just what actually are those in?

Scott Jensen

None of those are in auction rate securities, Jeff, and they are all in government agencies and a small amount in some corporate there, all high rated investments.

Jeff Osborne - Thomas Wessel Partners

Got you. And then, can you just say, I am not sure, who are going to answer the question or not, but were you active in the stock buyback at all in July or so far in August?

Scott Jensen

We will answer that question and we have been active with our repurchase program. Through today, we have repurchased about $2.3 million of stock, a little over 400,000 shares, and a further comment on that, I will say that we will continue to evaluate our repurchase and be as aggressive as necessary when we feel that the repurchase of that stock is accretive to our shareholders and also evaluating our other liquidity needs as it relates to investing in our own business, acquisition purposes or working capital requirements.

Jeff Osborne - Thomas Wessel Partners

Understand. And the last one, Scott, you just mentioned the two new pieces of equipment and lower utilization on those, the role former and painting line, and then you mentioned you were looking for ways to increase utilization other than the obvious of greater sales of light, is there any other products that you can use the automated painting line for or sheet metal bending?

Scott Jensen

Good question Jeff. We are actively pursuing those opportunities in the market place. In fact, today we did our first outsourced coding job through the paint line, wasn't high volume, but it certainly a start and will evaluate every opportunity to take advantage of exact capacity.

Jeff Osborne - Thomas Wessel Partners

Very good. Thank you very much.

Scott Jensen

Thank you.

Operator

And we will take our next question from Bill Nasgovitz with Heartland Advisor

Bill Nasgovitz - Heartland Advisor

Good afternoon, fellows.

Scott Jensen

Good afternoon.

Neal Verfuerth

Good afternoon.

Bill Nasgovitz - Heartland Advisor

A couple of questions here. In terms of CapEx, I saw the announcement on the new building, what do you expect this will cost the company looking over the next year?

Scott Jensen

The budget for the new building has approved by the Board was in the $8.5 million to $9 million range, and we also recognize that there is certainly some infrastructure costs to get that building up an operational.

Bill Nasgovitz - Heartland Advisor

Okay. And then, over and above that what do you think your CapEx would be on an ongoing basis?

Scott Jensen

We are continuing to look at our operations, as I previously mentioned, we will look at operations right now that we might outsource or opportunities to control our supply side, we have got some projects in place right now are related to court, assembly in court creation. I would say conservative number for other CapEx internally would be in the $1.5 million to $2 million range for business improvements.

Bill Nasgovitz - Heartland Advisor

Okay. And then could you just talk a little bit about who you compete against, I assume some of big guys but just some color on competition today? And are there new entries or is it heating up?

Neal Verfuerth

This is Neal. We will typically see, especially the national account level, the normal roaster of players would be -- to your point the big guys out there Acuity/Lithonia, Cooper, Holophane, the normal folks out there, many of them just because there are incumbent technology that we're looking to do displace. And then, as you might have imagine with the market, the size, there are always players coming under the scene and getting out of the business. Many of suspensors are getting in.

And again, as you might expect with the market that has this much potential. But we are competing each and every deal and we have never been the incumbent anywhere we go because we don't have any tiny product line. It has been in the market place for the last 30 years and we deal with these competitors as we have done in the past. It will head on and just prove out our value proposition, not just from a product standpoint but really the overall package we delivered, kind of a holistic approach in what we deliver to our customers and talk to our customers in detail about the energy.

And we continue to win customers that way as we have done one of the time. And I suspect, we will continue to refine our processes and try to get smarter and deliver more value of our customers to maintain that sustainable differentiation in the market.

Bill Nasgovitz - Heartland Advisor

Okay, thanks Neal.

Neal Verfuerth

Thank you.

Operator

And we'll take our next question from Kevin [McKane] of UBS.

Kevin McKane - UBS

Hi, just clarification on one more question, if I may. The increase in SG&A and sales & marketing looked to be about a 1.5 million. Can you expect that go down to a 250,000 to 300,000, is that correct for quarter?

Scott Jensen

That would be an increase per quarter, as we have brought in additional people and as we continue to recruit and fulfill positions in future quarters.

Kevin McKane - UBS

Okay, thank you.

Operator

And we'll take our next question from Brad Hendrickson of Nicholas Capital.

Brad Hendrickson - Nicholas Capital

Hi, good afternoon. Thanks for taking my question. Do you guys hear me?

Scott Jensen

Yes, sure.

Brad Hendrickson - Nicholas Capital

So, I really appreciate you guys, really working hard to grow the business even during this tough time and I get to need to add more sales people and I forget to need to train them when you do hire them. I am a little worried that with Q1 -- help me get comfort, Q1 from the shortfall was -- active better word distraction caused by training these 30 new hires and is got about the same amount of new hires for the rest of fiscal year. So, help me understand how that's going to -- what you are doing differently to prevent that similar things happening in rest of the year?

Eric Birkerts

Hi Brad this is Eric Birkerts. What one other thing that really we spend time on a first quarter was billing out of processes so that things wouldn't impact us in the future. Everything from just finding a profile or who you are trying to source in higher into the organization as well as developing sort of our training curriculum our methodologies. We also spend time training trainer so that our more senior sales people won't pulled out of field and having to conduct training that we could get other people to assume sort of load of that responsibility.

So that is really those investments are going to translate to lesser than impact moving forward. During this call, I also mentioned that we hired a university level instructor and curriculum developer, who is going to be responsible for further streamlining our sales training process into overall organizational training process. So, we believe that we made the investment, we walked away some key learnings and moving forward we are not going to have that same situation unfold.

Brad Hendrickson - Nicholas Capital

Okay. And then, in response for the question, I just wanted to make sure I have understood the CapEx. You were talking about another $1.5 million or $2 million for process improvement. That's some of discussion stuff right. Is there a maintenance CapEx normally you guys gave out that I missed?

Scott Jensen

We did not talk about maintenance CapEx and that's really minimal for our business right now. Most of our equipment is pretty new and we don't have a lot of 40-year old stamp and punch-type equipment.

Brad Hendrickson - Nicholas Capital

Okay. Let me just check the numbers, [do you hear me], I think last question, how many sales people do you have now, did I missed that one?

Scott Jensen

Yeah. So, at the end of June 30, we had 64, 60% of those are in sales and sales-engineering, which we also call phenonomously we called project management and then we have about 40% inside sale-to-sales report. Okay.

Brad Hendrickson - Nicholas Capital

Okay. And then, just a last question, because the back-end nature. I think, sometime it was left. But I just want to make sure, how much of your -- did I hear right -- how much of your business you guys -- national account stuff, do you actually the facility on that, say roughly half on this?

Erik Birkerts

Yeah. It's about half.

Brad Hendrickson - Nicholas Capital

Okay. And the rest is go-get meaning it feels.

Erik Birkerts

Well, it's actually the national account business is about half, call it 50%, and then we have got an additional 10% which is conversion of our existing return on our investment pipeline. It under remain 40% of the go-get.

Brad Hendrickson - Nicholas Capital

Okay. And that's including some assumption for what the new sales people will I guess go-get.

Erik Birkerts

Yeah. So most of the new sales people coming in line, well, yeah, the new sales people coming in line that's been rolled up one of the go-get.

Scott Jensen

In addition, what our existing sales people are going and getting.

Brad Hendrickson - Nicholas Capital

Okay. Alright, thanks a lot.

Operator

And gentlemen, we have no further questions. I would like to turn the call back over to you for any additional or closing remarks.

Neal Verfuerth

Well thank you for joining us and obviously Scott Jensen and I are available for questions offline. So, once again thank you and we look forward speaking with you guys again.

Operator

And that does conclude today's conference call. Thank you for your participation. You may disconnect at this time.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Orion Energy Systems, Inc. F1Q09 (Qtr End 06/30/08) Earnings Call Transcript
This Transcript
All Transcripts