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Notes on OESX's Sept Quarter

|Includes:Orion Energy Systems, Inc (OESX)

OESX - Oct 2010 - FYQ2 Results


The company trades with an adjusted EV of roughly ZERO.


Net net, it was a mixed bag, but the story remains intact. They should almost surely turn profitable in the Dec quarter...and sustain that at least into the March quarter, based on guidance...thus, it is graduating from "value trap" to "value".


On the negative side, headline numbers were VERY light (13.7M vs 14.6M y/y and vs ests of 18.7M), but the company doesn't provide quarterly guidance, so this was the sell-sides interpretation of how the company's annual guidance should break out. Annual guidance (FY ends March 2011) was reiterated, so the sell-side's quarterly estimates have to go up...thus, we have a couple of nice positive EPS quarters coming. The takeaway -- quarterly results are lumpy...get used to it.


Contracted revenues were up 44% y/y, from 20.3M to 29.2M. Note that $8M of this came from a single solar deal through its partnership with Solyndra. Contracted revenue was flat excluding that big deal. They believe the $8M solar deal is replicable many times over, as they are just getting started with monetizing their 6,000 facility installed base of lighting customers by introducing new solutions, like solar. Meanwhile lighting had a record backlog, despite their quick 2-week lead times. Overall, it sounds like lighting will be ok, but they are really looking to their new offerings to fuel growth and diversify them away from just lighting.


Overall, management was bullish, the story remains intact, and cash flow is moving in the right direction.
They see the customer buying environment (sales) and supply chain (COGS / inventory) both loosening up. They're looking to bring inventory down 30%.


They added 16 sales people.


October was a good order month.


Again, at $3.70, OESX is still trading near $0 EV

Stocks: OESX