Orion(OESX) - 2022 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements (unaudited) The unaudited financial statements for Q1 FY2022 show significant revenue growth and a shift from net loss to net income, reflecting improved financial performance Condensed Consolidated Balance Sheets Total assets increased slightly to $93.6 million, while total liabilities decreased, leading to a rise in shareholders' equity Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Total current assets | $58,022 | $56,531 | | Total assets | $93,618 | $92,821 | | Total current liabilities | $28,601 | $30,372 | | Total liabilities | $32,774 | $34,747 | | Total shareholders' equity | $60,844 | $58,074 | Condensed Consolidated Statements of Operations Total revenue surged 224.7% to $35.1 million, resulting in a net income of $2.5 million compared to a prior-year net loss Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 FY2022 (ended June 30, 2021) | Q1 FY2021 (ended June 30, 2020) | | :--- | :--- | :--- | | Total revenue | $35,101 | $10,811 | | Gross profit | $10,230 | $2,635 | | Income (loss) from operations | $3,418 | $(2,045) | | Net income (loss) | $2,510 | $(2,219) | | Diluted net income (loss) per share | $0.08 | $(0.07) | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $60.8 million, primarily driven by the quarter's net income of $2.5 million - Total shareholders' equity grew by $2.8 million during the quarter, mainly due to net income of $2.5 million[11] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $3.0 million, with overall cash and equivalents decreasing to $15.9 million Cash Flow Summary (in thousands) | Activity | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,966) | $(7,709) | | Net cash used in investing activities | $(656) | $(244) | | Net cash provided by (used in) financing activities | $92 | $(10,014) | | Net decrease in cash and cash equivalents | $(3,530) | $(17,967) | | Cash and cash equivalents at end of period | $15,863 | $10,784 | Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, significant customer concentration, segment performance, and the status of the Shareholder Rights Plan and ATM equity program - Orion is a developer, manufacturer, and seller of lighting and energy management systems, primarily in North America[14] - For the three months ended June 30, 2021, two customers accounted for 50.9% and 14.2% of total revenue, and 56.9% and 17.4% of accounts receivable, respectively[25] - The company has a Shareholder Rights Plan, amended to expire on January 7, 2022, designed to protect against coercive takeover tactics[61][62][65] - In March 2021, Orion established an "at the market" (ATM) equity program to sell up to $50 million in common stock, but no sales were made through June 30, 2021[68] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 224.7% revenue growth driven by project resumptions, improved gross margins, and an evolving strategy towards IoT and recurring revenue streams - The company's business rebounded in the second half of fiscal 2021 as project installations for its largest customer and a new large specialty retail customer resumed after COVID-19 related delays[15][94] - Orion is evolving its business strategy to expand into IoT, "smart-building" technologies, and recurring revenue services like lighting and electrical maintenance, which may involve organic investment and potential acquisitions[87][88] - The company's backlog was $12.2 million as of June 30, 2021, down from $19.2 million at March 31, 2021, with most expected to be recognized as revenue within a year[122] Results of Operations Total revenue increased 224.7% to $35.1 million, driven by product and service growth, improving gross profit margin to 29.1% Results of Operations Comparison (in thousands) | | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $35,101 | $10,811 | 224.7% | | Gross profit | $10,230 | $2,635 | 288.2% | | Gross Profit % | 29.1% | 24.4% | - | | Income (loss) from operations | $3,418 | $(2,045) | NM | - The increase in product and service revenue was primarily due to projects, including for one large national account customer (50.9% of Q1 FY22 revenue), resuming after being put on hold in the prior year due to COVID-19[98] - Sales and marketing expenses rose by $1.4 million (75.0%) mainly due to increased commission expense on higher sales[101] Segment Analysis All segments showed strong revenue growth, with Orion Engineered Systems (OES) leading with an 874.6% increase to $22.0 million Orion Engineered Systems (OES) Segment Results (in thousands) | Metric | Q1 FY2022 | Q1 FY2021 | | :--- | :--- | :--- | | Revenues | $21,988 | $2,256 | | Operating income (loss) | $1,864 | $(1,850) | Orion Distribution Services (ODS) Segment Results (in thousands) | Metric | Q1 FY2022 | Q1 FY2021 | | :--- | :--- | :--- | | Revenues | $9,286 | $6,629 | | Operating income | $2,122 | $752 | Orion U.S. Markets (USM) Segment Results (in thousands) | Metric | Q1 FY2022 | Q1 FY2021 | | :--- | :--- | :--- | | Revenues | $3,827 | $1,926 | | Operating income | $651 | $81 | Liquidity and Capital Resources Cash and cash equivalents decreased to $15.9 million due to increased accounts receivable, while net working capital improved to $29.4 million - Cash and cash equivalents decreased by $3.5 million during the quarter to $15.9 million, mainly due to a $5.9 million increase in accounts receivable from higher sales[108][111] - Net working capital was $29.4 million at June 30, 2021, up from $26.2 million at March 31, 2021[116] - The company has a five-year, $25.0 million revolving credit facility that matures in December 2025, with no amounts borrowed as of June 30, 2021[120] Quantitative and Qualitative Disclosures about Market Risk No material changes to the company's market risk exposures have occurred since March 31, 2021 - There have been no material changes to the company's market risk exposures since March 31, 2021[128] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Based on an evaluation as of June 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[130] - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2021[131] PART II OTHER INFORMATION Legal Proceedings Management does not expect current legal proceedings to materially affect the company's financial condition or future results - The company does not expect any current legal proceedings to have a material adverse effect on its future results of operations[133] Risk Factors The report refers to the Annual Report on Form 10-K for a detailed discussion of market risks and uncertainties - For a discussion of risks and uncertainties, the report refers to Part I, Item 1A of the Annual Report on Form 10-K for the fiscal year ended March 31, 2021[134] Unregistered Sale of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - There were no unregistered sales of equity securities or use of proceeds to report for the period[135] Other Information No other information was reported for the period - There is no other information to report for the period[135] Exhibits This section lists exhibits filed, including CEO and CFO certifications and Inline XBRL documents for financial reporting - Exhibits filed with the report include CEO and CFO certifications under Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act, as well as Inline XBRL instance and taxonomy documents[138]