Undervalued company in energy management and LED lighting industry
Orion Energy Systems, Inc. is in the business of design, manufacture and implementation of energy management systems and light emitting diode (LED) lighting. The Company has guided that they would have rapid growth with revenue of $250 million by 2017 and operates in across two market segments; Energy Management and Engineered Systems. It develops and provides technical services for the sale of commercial high intensity fluorescent (NYSE:HIF), LED lighting, and energy management systems. The company also offers Apollo Solar Light Pipe, a lens-based device that collects and focuses renewable daylight, bringing natural light indoors without consuming electricity; and InteLite wireless dynamic control products that allow customers to remotely communicate with and give commands to individual light fixtures and other peripheral devices through Web-based software. In addition, it provides HIF fixtures to address the lighting and energy management needs, including agribusinesses, parking lots, roadways, outdoor applications, and private label resale. In addition, the company offers solar photovoltaic systems, as well as integrated solar power services, covering project development, engineering, procurement, construction, operations and maintenance and project financing. Additionally, it supplies energy management services, including comprehensive site assessment, site field verification, government subsidy management, engineering design, project management, installation, recycling as well as power data management and cloud-based data storage related services. The company sells directly to commercial and industrial customers both directly and indirectly through Value Added Resellers (VAR's) and electrical contractors. Orion Energy Systems, Inc was founded in 1996 and trades on the NYSE under the symbol OESX.
$ 3.25 / $1.12
$ 40.5 M
$ 63.9 M
Sector: Energy Management Systems
Headquarters: Manitowoc, Wisconsin
Chairman: James R. Kackley
CEO: John H. Scribante
CFO: Scott R. Jensen
2012 Revenues: $100m (FYE March/12)
2013 Revenues: $ 86m (FYE March/13)
LED lighting Market
Orion Systems is in the fast growing LED lighting industry and currently derives a portion of its revenue from this market. The LED lighting industry has seen huge growth over the last five years and shows potential to grow even faster in the next five. Current projections show the LED lighting industry growing 34% annually in the future, reaching $159 billion by 2020. The LED lighting division is a significant division of Orion Energy Systems, Inc. The major players in the LED lighting industry are Cree (NASDAQ:CREE), Philips (NYSE:PHG), Osram (OSR - Frankfurt and Munich) and GE Lighting (NYSE:GE). Other notable players include Orion Energy Systems, Inc. , Revolution Lighting Technologies (NASDAQ:RVLT) and Trans-Lux Corporation (OTCPK:TNLX).
Cree, Inc. (cree.com) develops and manufactures lighting-class light emitting diode products, lighting products, and semiconductor products for power and radio-frequency (NYSE:RF) applications. Its LED products include blue and green LED chips that are used in various applications, including video screens, gaming displays, function indicator lights, and automotive backlighting; LED components comprising lighting class packaged LED products for lighting applications, and surface mount and through-hole packaged LED products for video, signage, general illumination, transportation, gaming, and specialty lighting applications.
Philips Lumileds Lighting (philipslumileds.com). Philips is one of the world's leading manufacturer of high-power LEDs and a pioneer in the use of solid-state lighting solutions for everyday purposes including automotive lighting, computer displays, LCD televisions, signage and signaling and general lighting. The company's patented LUXEON® Power Light Sources are the first to combine the brightness of conventional lighting with the small footprint, long life and other advantages of LEDs. The company also supplies core LED material and LED packaging, manufacturing billions of LEDs annually, and ranks as the one of the producers of the world's brightest red, amber, blue, green and white LEDs.
OSRAM (www.ledlight.osram-os.com) is another leading LED light manufacturer. The company's portfolio covers the entire value chain from components - including lamps, opto-semiconductors like light-emitting diodes - to electronic control gears as well as complete luminaires, light management systems and lighting solutions. The company, which has around 39,000 employees worldwide and revenue of 5.4 billion Euros in 2012. More than 70% of its revenue is derived from energy-efficient products. The company's business activities have been focusing on light for over 100 years.
GE Lighting Solutions (gelighting.com) is a subsidiary of GE - Appliances & Lighting, is a proven leader in the light-emitting diode category with an expansive installed base of more than 25 million linear feet of LED lighting. The company provides an extensive line of high-performance LED product solutions, including lamps, architectural lighting, retail display lighting, signage lighting, outdoor lighting and transportation lighting solutions.
Revolution Lighting Technologies (rvlti.com) specializes in LED lighting Technology and recently announced that they have produced a breakthrough product in the tube lighting market. Tube lights are the most commonly used lighting type in buildings around the world. RVLT's new "Seesmart Tube Light" produces the highest light output while using the lowest wattage in the tube light category.
Trans-Lux Corporation (OTCPK:TNLX) (trans-lux.com) is involved in the design, manufacture, and supply of digital signage display solutions utilizing light emitting diode (LED) technologies. They have also entered the LED Lighting industry. The company operates in two segments, Digital Display Sales, and Digital Display Lease and Maintenance. It offers text, graphic, and video displays for financial institutions, including brokerage firms, banks, energy companies, insurance companies, and mutual fund companies; sports stadiums and venues; educational institutions; and outdoor advertising companies.
The Orion impact
Orion counts 151 of the Fortune 500 companies as its customers. Its systems have been installed in over 9,000 facilities including 386 facilities of Coca Cola, 167 facilities of PepsiCo, 97 facilities of Kraft, 115 facilities of Sysco and 44 of GE.
Orion has been recognized by Inc. magazine as one of the fastest growing companies in the United States as well as recipient of several awards including Coca Cola Supplier of the year award.
In the fourth quarter of fiscal 2013, ending March, Orion delivered both year-over-year revenue and earnings growth for the second consecutive quarter. For the quarter, the Company reported revenues of $22.3 million, a 4% increase compared to $21.5 million for the fourth quarter of fiscal 2012.
Net income was $0.5 million, or $0.03 per fully diluted share, compared to net loss of $0.2 million, or $(0.01) per share for the fourth quarter of fiscal 2012 due to streamlining sales and product development operations. Total order backlog as of March 31, 2013 was $21.9 million. The Company currently expects approximately $17.6 million of its existing backlog to be recognized as revenue during fiscal 2014.
Orion had $14.4 million in cash and cash equivalents and $1.0 million in short-term investments as of March 31, 2013. Total short and long-term debt was $6.7 million. There were no borrowings outstanding under the Company's revolving credit facility as of March 31, 2013, which has availability of $13.3 million. The Company repurchased 2.7 million shares of its common stock at an average price per share of approximately $2.20 during fiscal 2013. The Company halted its share repurchase program mid-October 2012 in order to conserve cash while it stabilized its profit performance.
Orion recently acquired Harris Manufacturing and Harris LED, located in Green Cove Springs, Florida, which engineer, design, source and manufacture energy efficient lighting systems, including fluorescent and LED lighting solutions, and day-lighting products. This strategically important transaction further expands the breadth and depth of the company's offering with a comprehensive product line and will further expand its sales force and broaden the served markets, as well as provide immediate accretive growth in earnings. The purchase price of the transaction was $10 million, subject to post-closing adjustments for net working capital. The purchase price was paid through a combination of $5 million in cash, $3 million in a three-year unsecured subordinated note and $2 million of unregistered Orion common stock (totaling 856,997 shares). In addition, Orion may pay up to an additional $1 million in shares of unregistered common stock upon Harris' post-closing achievement of certain revenue milestones in calendar year 2013 and/or 2014. Harris Manufacturing and Harris LED had combined unaudited revenue of approximately $14.5 million and combined unaudited net income of approximately $0.9 million during the year ended December 31, 2012.
John H. Scribante has been the Chief Executive Officer since September 2012. Previously, as President of Orion Engineered Systems, Scribante grew the division into a multi-million dollar operation. Prior to joining Orion Energy Systems, Inc., Scribante co-founded XE Energy LLC and served as its CEO from 2003-2004. XE Energy LLC, a distribution company, specialized in marketing energy reduction technologies. From 1989 to 2003, Scribante was involved with various technology and startup companies, primarily in sales and executive roles. Scribante earned a Bachelor of Science degree in finance, with an emphasis on economics, from Creighton University in 1989.
Scott R. Jensen, C.P.A., Chief Financial Officer has over twenty years of financial experience. Jensen joined Orion in 2004 through Orion's acquisition of a Koenig & Vits facility. Prior to joining Orion Energy Systems, Inc., Jensen worked for several Fortune 1000 companies. He began his career at Dana Corporation in 1988 where he worked in a variety of accounting positions. From 1996-2003, he worked in various financial management roles for Mirro Corporation, a division of Newell Rubbermaid. In 2003, he served as vice president of finance for Koenig & Vits. Jensen earned his bachelor of business administration degree from the University of Wisconsin-Milwaukee with an emphasis on accounting.
Michael Potts, COO, manages the day-to-day operations at Orion Energy Systems, Inc. Michael joined Orion in 2001 and prior to being appointed president and COO, served as executive vice president. Prior to joining Orion, Mike started his own company, Energy Executives Inc., where he assisted large energy-consuming clients on energy issues. Prior to that, he was the energy manager for Kohler Co. Potts earned his Bachelor of Science degree in mechanical engineering technology from the Milwaukee School of Engineering and a Bachelor of Arts degree in business administration from Lakeland College.
Technical Analysis by Harry Boxer (thetechtrader.com)
From the end of 2008 to the end of 2012 OESX was in a distinct down channel, culminating with its all time low at 1.12 last December when it began a recovery move that lasted 10 weeks and nearly tripled, reaching 3.09. It then consolidated that move and retested support twice near $2 before beginning the current advance, which last week broke out of a 17 week resistance level near 2.50. Friday's action in particular was a key technical event, as it surged past the February high to set a new 18-month high! Our price projection now has it reaching near the 4.85-5 zone at the top of the intermediate up channel. Following that we believe OESX can reach the 6-6.25 zone and then perhaps 7+.
Orion Energy Systems, Inc. is a very attractive investment due to its entry into the fast growing LED lighting industry and its existing energy management systems. The Company has guided that they would have rapid growth with revenue of $250 million by 2017. It is helping forward thinking companies around the world achieve energy independence by implementing energy-efficient and renewable energy products and services. The company counts 151 of the Fortune 500 companies as its customers and has won awards from the top customers like Coca Cola and the President of the United States for its energy efficiency work. With its recent acquisition of Harris Manufacturing and Harris LED, the company will be able to broaden its product offering and will further expand its sales force to serve a wider market, as well as grow its earnings. OESX has lower market cap compared to RVLT, and other companies in their industry and rapid growth is projected by the Company. More than 20 institutions own the stock and it is listed on NYSE/MKT.
Earnings Alert: EARNINGS WILL BE RELEASED THURSDAY, AUGUST 1st, 2013. IN THE EVENT YOU TAKE A POSITION BEFORE THAT, YOU MAY WANT TO TAKE HALF YOUR NORMAL POSITION SIZE.
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Disclosure: I am long OESX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.