UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2024
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-33887
Orion Energy Systems, Inc.
(Exact name of Registrant as specified in its charter)
Wisconsin
39-1847269
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification number)
2210 Woodland Drive, Manitowoc, Wisconsin
54220
(Address of principal executive offices)
(Zip code)
Registrant’s telephone number, including area code: (920) 892-9340
Securities registered pursuant to Section 12(b) of the act:
Title of Each Class
Trading Symbol (s)
Name of Each Exchange on Which Registered
Common stock, no par value
OESX
The Nasdaq Stock Market LLC
(NASDAQ Capital Market)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an "emerging growth company". See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
Non-accelerated filer
☒
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 32,743,409 shares of the Registrant’s common stock outstanding on August 6, 2024.
ORION ENERGY SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2024
TABLE OF CONTENTS
Page(s)
PART I FINANCIAL INFORMATION
3
ITEM 1.
Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2024 and March 31, 2024
Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2024 and June 30, 2023
4
Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended June 30, 2024 and June 30, 2023
5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2024 and June 30, 2023
6
Notes to the Condensed Consolidated Financial Statements
7
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
19
ITEM 3.
Quantitative and Qualitative Disclosures about Market Risk
26
ITEM 4.
Controls and Procedures
PART II OTHER INFORMATION
27
Legal Proceedings
ITEM 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 5.
Other Information
ITEM 6.
Exhibits
28
SIGNATURE
29
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
June 30, 2024
March 31, 2024
Assets
Cash and cash equivalents
$
5,692
5,155
Accounts receivable, net
12,475
14,022
Revenue earned but not billed
4,841
4,539
Inventories
15,860
18,246
Prepaid expenses and other current assets
3,272
2,860
Total current assets
42,140
44,822
Property and equipment, net
9,275
9,593
Goodwill
1,484
Other intangible assets, net
4,214
4,462
Other long-term assets
2,642
2,808
Total assets
59,755
63,169
Liabilities and Shareholders’ Equity
Accounts payable
14,421
18,350
Accrued expenses and other
9,835
9,440
Deferred revenue, current
245
260
Current maturities of long-term debt
264
Total current liabilities
24,765
28,053
Revolving credit facility
10,000
Long-term debt, less current maturities
3,261
—
Deferred revenue, long-term
394
413
Other long-term liabilities
2,256
2,161
Total liabilities
40,676
40,627
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $0.01 par value: Shares authorized: 30,000,000 at June 30, 2024 and March 31, 2024; no shares issued and outstanding at June 30, 2024 and March 31, 2024
Common stock, no par value: Shares authorized: 200,000,000 at June 30, 2024 and March 31, 2024; shares issued: 42,214,171 at June 30, 2024 and 42,038,967 at March 31, 2024; shares outstanding: 32,743,409 at June 30, 2024 and 32,567,746 at March 31, 2024
Additional paid-in capital
162,163
161,869
Treasury stock, common shares: 9,470,762 at June 30, 2024 and 9,471,221 at March 31, 2024
(36,234
)
(36,235
Retained deficit
(106,850
(103,092
Total shareholders’ equity
19,079
22,542
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these Condensed Consolidated Statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Three Months Ended June 30,
2024
2023
Product revenue
12,767
13,671
Service revenue
7,139
3,942
Total revenue
19,906
17,613
Cost of product revenue
8,541
10,059
Cost of service revenue
7,066
4,383
Total cost of revenue
15,607
14,442
Gross profit
4,299
3,171
Operating expenses:
General and administrative
4,530
5,739
Acquisition related costs
53
Sales and marketing
2,937
3,296
Research and development
480
Total operating expenses
7,731
9,568
Loss from operations
(3,432
(6,397
Other income (expense):
Interest expense
(262
(176
Amortization of debt issue costs
(58
(24
Royalty income
15
Interest income
2
Total other expense
(305
(198
Loss before income tax
(3,737
(6,595
Income tax expense
21
42
Net loss
(3,758
(6,637
Basic net loss per share attributable to common shareholders
(0.12
(0.21
Weighted-average common shares outstanding
32,610,604
32,345,823
Diluted net loss per share
Weighted-average common shares and share equivalents outstanding
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Shareholders’ Equity
Common Stock
Shares
AdditionalPaid-in Capital
TreasuryStock
RetainedDeficit
TotalShareholders’ Equity
Balance, March 31, 2024
32,567,746
Shares issued under Employee Stock Purchase Plan
459
1
Stock-based compensation
175,204
294
Balance, June 30, 2024
32,743,409
Retained Deficit
Balance, March 31, 2023
32,295,408
160,907
(36,237
(91,421
33,249
699
206,451
188
Balance, June 30, 2023
32,502,558
161,095
(36,236
(98,058
26,801
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Operating activities
Adjustments to reconcile net loss to net cash used inoperating activities:
Depreciation
348
346
Amortization of intangible assets
248
266
58
24
Loss (gain) on sale of property and equipment
(6
Provision for inventory reserves
33
161
Provision for credit losses
40
190
Other
196
Changes in operating assets and liabilities:
Accounts receivable
1,507
(1,075
(301
89
2,156
355
Prepaid expenses and other assets
(304
(257
(3,929
(1,906
490
666
Deferred revenue, current and long-term
(34
234
Net cash used in operating activities
(2,962
(7,327
Investing activities
Purchases of property and equipment
(508
Proceeds from sale of property, plant and equipment
95
Net cash used in investing activities
(413
Financing activities
Payment of long-term debt
(3
(4
Proceeds from long-term debt
3,525
Proceeds from employee equity exercises
Net cash provided by (used in) financing activities
3,523
Net increase (decrease) in cash and cash equivalents
537
(7,743
Cash and cash equivalents at beginning of period
15,992
Cash and cash equivalents at end of period
8,249
Supplemental disclosure of non-cash investing and financing activities:
Operating lease assets obtained in exchange for new operating lease liabilities
363
UNAUDITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF BUSINESS
Orion includes Orion Energy Systems, Inc., a Wisconsin corporation, and all consolidated subsidiaries. Orion provides light emitting diode lighting systems, wireless Internet of Things enabled control solutions, project engineering, energy project management design, maintenance services and turnkey electric vehicle charging station installation services to commercial and industrial businesses, and federal and local governments, predominantly in North America and Germany.
Orion’s corporate offices and leased primary manufacturing operations are located in Manitowoc, Wisconsin. Orion also leases office space in Jacksonville, Florida, Lawrence, Massachusetts and Pewaukee, Wisconsin.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Orion Energy Systems, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of Orion have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement have been included. Interim results are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2025 or other interim periods.
The Condensed Consolidated Balance Sheet as of March 31, 2024 has been derived from the audited consolidated financial statements at that date but does not include all of the information required by GAAP for complete financial statements.
The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in Orion’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024 filed with the SEC on June 12, 2024.
Allowance for Credit Losses
Orion performs ongoing evaluations of its customers and continuously monitors collections and payments. Orion estimates an allowance for credit losses based upon the historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. We also consider customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during that reporting period. Areas that require the use of significant management estimates include revenue recognition, net realizable value of inventory, allowance for credit losses, accruals for warranty and loss contingencies, earn-out, income taxes, impairment analyses, and certain equity transactions. Accordingly, actual results could differ from those estimates.
Concentration of Credit Risk and Other Risks and Uncertainties
Orion's cash is primarily deposited with one financial institution. At times, deposits in this institution exceeds the amount of insurance provided on such deposits. Orion has not experienced any losses in such accounts and believes that it is not exposed to any significant financial institution viability risk on these balances.
Orion purchases components necessary for its lighting products, including lamps and LED components, from multiple suppliers. For the three months ended June 30, 2024, one supplier accounted for 14.0% of total cost of revenue, while no suppliers accounted for more than 10% of total cost of revenue for three months ended June 30, 2023.
For the three months ended June 30, 2024, one customer accounted for 21.1% of total revenue. For the three months ended June 30, 2023, two customers accounted for 20.6% and 11.0% of total revenue, respectively.
As of June 30, 2024, one customer accounted for 15.7% and two customers accounted for 10.1% of accounts receivable. As of March 31, 2024, two customers accounted for 17.3% and 11.7% of accounts receivable.
Recent Accounting Pronouncements
Recently Adopted Standards
In June 2016, the Financial Accounting Standards Board ("FASB:) issued accounting standards updates ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires an entity to assess impairment of its financial instruments based on its estimate of expected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to improve and clarify the implementation guidance. The provisions of ASU 2016-13 and the related amendments are effective for Orion for fiscal years (and interim reporting periods within those years) beginning after December 15, 2022. Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Orion adopted ASU 2016-13 effective April 1, 2023. The effect of adoption was immaterial.
Issued: Not Yet Adopted
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which modifies the disclosure and presentation requirements of reportable segments. The amendments in the update require the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (the "CODM") and included within each reported measure of segment profit and loss. The amendments also require disclosure of all other segment items by reportable segment and a description of its composition. Additionally, the amendments require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. This update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Orion is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity's income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2025. Orion is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.
8
NOTE 3 — REVENUE
Orion generates revenue primarily by selling manufactured or sourced commercial lighting fixtures and components, sourced electric vehicle chargers and related products, installing these products in customer’s facilities, and providing maintenance services including repairs and replacements for the lighting and related electrical components. Orion recognizes revenue in accordance with the guidance in “Revenue from Contracts with Customers” (Topic 606) when control of the goods or services being provided (which Orion refers to as a performance obligation) is transferred to a customer at an amount that reflects the consideration Orion expects to receive in exchange for those goods or services.
The sale of charging stations and related software subscriptions, renewals and extended warranty is presented in Product revenue. Orion is the principal in the sales of charging stations as it has control of the physical products prior to transfer to the customer. Accordingly, revenue is recognized on a gross basis. For certain sales, primarily software subscriptions, renewals and extended warranty, Orion is the sales agent providing access to the content and recognize commission revenue net of amounts due to third parties who fulfill the performance obligation. For these sales, control passes at the point in time upon providing access of the content to the customer.
The sale of installation and services related to the EV charging business is presented in Service revenue. Revenue from the EV segment that includes both the sale of product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the Condensed Consolidated Statement of Operations.
Revenue from the lighting maintenance offering that includes both the sale of Orion manufactured or sourced product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the Condensed Consolidated Statement of Operations.
The following tables provide detail of Orion’s total revenue for the three months ended June 30, 2024 and June 30, 2023 (dollars in thousands):
Three Months Ended June 30, 2024
Product
Services
Total
Revenue from contracts with customers:
Lighting product and installation
10,045
2,674
12,719
Maintenance services
1,000
2,323
3,323
Electric vehicle charging
1,688
2,142
3,830
Solar energy related revenues
Total revenues from contracts with customers
12,748
19,887
Revenue accounted for under other guidance
Three Months Ended June 30, 2023
11,785
831
12,616
899
2,855
3,754
982
256
1,238
13,666
17,608
9
From time to time, Orion sells the receivables from one customer to a financing institution. The was no such activity during the three months ended June 30, 2024 or 2023.
The following chart shows the balance of Orion’s receivables arising from contracts with customers, contract assets and contract liabilities as of June 30, 2024 and March 31, 2024 (dollars in thousands):
June 30,2024
March 31,2024
Deferred revenue (1)
124
(1) Includes the unamortized portion of the funds received from the federal government in 2010 and 2011 as reimbursement for the costs to build the two facilities related to the PPAs. As the transaction is not considered a contract with a customer, this value is not a contract liability as defined by ASC 606.
There were no significant changes in the contract assets outside of standard reclassifications to accounts receivable, net upon billing. Deferred revenue, current as of June 30, 2024 and March 31, 2024, includes $0.1 for both periods, of contract liabilities which represent consideration received from a new customer contract on which installation has not yet begun and Orion has not fulfilled the promises included.
NOTE 4 — ACCOUNTS RECEIVABLE
As of June 30, 2024 and March 31, 2024, Orion's accounts receivable and allowance for credit losses balances were as follows (dollars in thousands):
Accounts receivable, gross
12,582
14,094
Allowance for credit losses
(107
(72
Changes in Orion’s allowance for credit losses were as follows (dollars in thousands):
For the Three Months EndedJune 30,
Beginning of period
(86
Credit loss expense
(40
(190
Write-off
End of period
(272
10
NOTE 5 — INVENTORIES
As of June 30, 2024 and March 31, 2024, Orion's inventory balances were as follows (dollars in thousands):
As of June 30, 2024
Raw materials and components
6,357
Work in process
321
Finished goods
9,182
As of March 31, 2024
7,219
267
10,760
NOTE 6 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist primarily of prepaid insurance premiums, debt issue costs, prepaid subscription fees and sales tax receivable. Prepaid expenses totaled $1.5 million and $1.3 million as of June 30, 2024 and March 31, 2024, respectively.
Other current assets as of June 30, 2024 and March 31, 2024 consists primarily of $1.7 million and $1.6 million, respectively, of prepaid software and services.
NOTE 7 — PROPERTY AND EQUIPMENT
As of June 30, 2024 and March 31, 2024, property and equipment, net, included the following (dollars in thousands):
Land and land improvements
433
Buildings and building improvements
9,530
9,504
Furniture, fixtures and office equipment
7,941
Leasehold improvements
540
Equipment leased to customers
4,997
Plant equipment
11,060
11,142
Vehicles
959
Gross property and equipment
35,460
35,516
Less: accumulated depreciation
(26,185
(25,923
Total property and equipment, net
NOTE 8 — LEASES
From time to time, Orion leases assets from third parties. Orion also leases certain assets to third parties.
Orion accounts for leases in accordance with Accounting Standards Codification ("ASC") 842. Under ASC 842, both finance and operating lease ROU assets and lease liabilities for leases with initial terms in excess of 12 months are recognized at the commencement date based on the present value of lease payments over the lease term. Orion recognizes lease expense for leases with an initial term of 12 months or less, referred to as short term leases, on a straight-line basis over the lease term.
11
A summary of Orion’s assets leased from third parties follows (dollars in thousands):
Balance sheet classification
Operating lease assets
1,591
1,770
Liabilities
Current liabilities
Operating lease liabilities
1,010
990
Non-current liabilities
881
1,121
Total lease liabilities
1,891
2,111
Orion had operating lease costs of $0.4 million for the three months ended June 30, 2024 and 2023, respectively.
The estimated maturity of lease liabilities for each of the remaining years is shown below (dollars in thousands):
Maturity of Lease Liabilities
Operating Leases
Fiscal 2025 (period remaining)
815
Fiscal 2026
983
Fiscal 2027
177
Thereafter
Total lease payments
1,975
Less: Interest
(84
Present value of lease liabilities
NOTE 9 — GOODWILL AND OTHER INTANGIBLE ASSETS
Orion has $0.9 million of goodwill related to its purchase of Voltrek LLC ("Voltrek") in the third quarter of fiscal 2023, which has an indefinite life, and is assigned to the EV Charging operating segment.
Orion has $0.6 million of goodwill related to its purchase of Stay-Light Lighting during fiscal year 2022, which has an indefinite life, and is assigned to the Maintenance operating segment.
As of June 30, 2024 and March 31, 2024, the components of, and changes in, the carrying amount of other intangible assets, net, were as follows (dollars in thousands):
Gross CarryingAmount
AccumulatedAmortization
Net
WeightedAverageUseful Life
GrossCarryingAmount
Amortized Intangible Assets
Patents
2,521
(2,053
468
8.1
(2,029
492
Licenses
Trade name and trademarks
300
(104
3.3
(90
210
Customer relationships
5,000
(4,413
587
1.3
(4,296
704
Vendor relationships
2,600
(647
1,953
5.3
(554
2,046
Developed technology
900
(900
Total Amortized Intangible Assets
11,379
(8,175
3,204
4.8
(7,927
3,452
Indefinite-lived Intangible Assets
Total Non-Amortized Intangible Assets
Amortization expense on intangible assets was $0.2 million and $0.3 million for the three months ended June 30, 2024 and 2023, respectively.
12
The estimated amortization expense for the remainder of fiscal 2024, the next five fiscal years and beyond is shown below (dollars in thousands):
741
751
501
Fiscal 2028
455
Fiscal 2029
407
349
NOTE 10 — ACCRUED EXPENSES AND OTHER
As of June 30, 2024 and March 31, 2024, accrued expenses and other included the following (dollars in thousands):
Accrued acquisition earn-out
875
Other accruals
1,963
1,854
Compensation and benefits
2,629
2,255
Credits due to customers
1,401
1,167
Accrued project costs
2,236
2,366
Warranty
545
552
Sales returns reserve
88
106
Sales tax
68
219
Legal and professional fees
30
46
Orion generally offers a limited warranty of one to ten years on its lighting products, including the pass through of standard warranties offered by major original equipment component manufacturers. The manufacturers’ warranties cover lamps, power supplies, LED modules, chips and drivers, control devices, and other fixture related items, which are significant components in Orion's lighting products.
Changes in Orion’s warranty accrual (both current and long-term) were as follows (dollars in thousands):
725
646
Accruals
108
64
Warranty claims (net of vendor reimbursements)
(105
(56
728
654
Effective on October 5, 2022, Orion acquired all the membership interests of Voltrek, an electric vehicle charging station solutions provider (the “Voltrek Acquisition”). The Voltrek Acquisition agreement includes, depending upon the relative EBITDA growth of Voltrek’s business in fiscal 2023, 2024 and 2025, Orion could pay up to an additional $3.0 million, $3.5 million and $7.15 million, respectively, in earn-out payments. These compensatory payments do not fall within the scope of ASC 805, Business Combinations, and will be expensed over the course of the earn-out periods to the extent they are earned. As of June 30, 2024, Orion recorded $0.9 million to accrued expenses for the fiscal 2025 earn-out opportunity, which is recorded in accrued expenses and other.
13
NOTE 11 — NET LOSS PER COMMON SHARE
Basic net loss per common share is computed by dividing net loss attributable to common shareholders by the weighted-average number of common shares outstanding for the period and does not consider common stock equivalents.
Diluted net loss per common share reflects the dilution that would occur if restricted shares were vested. In the computation of diluted net loss per common share, Orion uses the treasury stock method for outstanding options and restricted shares. For the three months ended June 30, 2024 and 2023, Orion was in a net loss position; therefore, the Basic and Diluted weighted-average shares outstanding are equal because any increase to the basic shares would be anti-dilutive. Net loss per common share is calculated based upon the following shares:
Numerator:
Net loss (in thousands)
Denominator:
Weighted-average common shares and common share equivalents outstanding
Net loss per common share:
Basic
Diluted
The following table indicates the number of potentially dilutive securities excluded from the calculation of Diluted net loss per common share because their inclusion would have been anti-dilutive. The number of shares is as of the end of each period:
Restricted shares
1,524,222
582,506
NOTE 12 — LONG-TERM DEBT
Long-term debt consisted of the following (dollars in thousands):
Term Loan
Equipment debt obligations
Total long-term debt
13,525
10,003
Less current maturities
(264
13,261
Revolving Credit Agreement
On December 29, 2020, Orion entered into a $25 million Loan and Security Agreement with Bank of America, N.A., as lender (the “Credit Agreement”). .
The Credit Agreement provides for a five-year $25.0 million revolving credit facility (the “Credit Facility”) that matures on December 29, 2025. Borrowings under the Credit Facility are subject to a borrowing base requirement based on eligible receivables, inventory and cash. As of June 30, 2024, the borrowing base of the Credit Facility supports $18.3 million of availability, with $8.3 million of remaining availability net of $10.0 million borrowed.
14
Effective November 4, 2022, Orion, with Bank of America, N.A. as lender, executed Amendment No. 1 to its Credit Agreement. The primary purpose of the amendment was to include the assets of the acquired subsidiaries, Stay-Lite Lighting, Inc. ("Stay-Lite Lighting") and Voltrek, as secured collateral under the Credit Agreement. Accordingly, eligible assets of Stay-Lite and Voltrek will be included in the borrowing base calculation for the purpose of establishing the monthly borrowing availability under the Credit Agreement. The amendment also clarified that the earn-out liabilities associated with the Stay-Lite and Voltrek transactions are permitted under the Credit Agreement and that the expenses recognized in connection with those earn-outs should be added back in the computation of EBITDA, as defined, under the Credit Agreement.
Effective April 22, 2024, the Company, with Bank of America, N.A. as lender, executed Amendment No. 2 to its Credit Agreement (“Amendment No. 2”). The primary purpose of Amendment No. 2 was to add a $3.525 million mortgage loan facility to the Credit Agreement secured by the Company’s office headquarters property in Manitowoc, Wisconsin. Amendment No. 2 also broadened the definition of receivables to encompass government receivables as being eligible to be included in the Company’s borrowing base calculation for the purpose of establishing the Company’s monthly borrowing availability under the Credit Agreement. Quarterly installments of $88,125 will be due on the first day of each fiscal quarter beginning October 1, 2024.
Remaining principal payments on long-term debt are $0.2 million and $13.3 million in fiscal 2025 and fiscal 2026, respectively.
As of June 30, 2024, Orion was in compliance with all debt covenants.
NOTE 13 — INCOME TAXES
Orion’s income tax provision was determined by applying an estimated annual effective tax rate, based upon the facts and circumstances known, to book income (loss) before income tax, adjusting for discrete items. Orion’s actual effective tax rate is adjusted each interim period, as appropriate, for changes in facts and circumstances. For the three months ended June 30, 2024 and 2023, Orion recorded income tax expense of $21 thousand and $42 thousand, respectively, using this methodology.
As of June 30, 2024 and March 31, 2024, Orion had a full valuation allowance against its net deferred tax asset balance. Orion considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event that Orion determines that the deferred tax assets are able to be realized, an adjustment to the deferred tax asset would increase income in the period such determination is made.
As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. Orion considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event that Orion determines that the more or less of its deferred tax assets are able to be realized, an adjustment to the valuation allowance would be reflected in the company’s provision for income taxes.
Uncertain Tax Positions
As of June 30, 2024, Orion’s balance of gross unrecognized tax benefits was approximately $0.2 million, all of which would reduce Orion’s effective tax rate if recognized.
Orion has classified the amounts recorded for uncertain tax benefits in the balance sheet as Other long-term liabilities to the extent that payment is not anticipated within one year. Orion recognizes penalties and interest related to uncertain tax liabilities in income tax (benefit) expense. Penalties and interest are included in the unrecognized tax benefits.
NOTE 14 — COMMITMENTS AND CONTINGENCIES
Litigation
Orion is subject to various claims and legal proceedings arising in the ordinary course of business. Orion does not believe the final resolution of any of such claims or legal proceedings will have a material adverse effect on Orion’s future results of operations or financial condition.
NOTE 15 — SHAREHOLDERS’ EQUITY
Employee Stock Purchase Plan
In August 2010, Orion’s Board of Directors approved a non-compensatory employee stock purchase plan, or “ESPP”. In the three months ended June 30, 2024, Orion issued 459 shares under the ESPP plan at a closing market price of $1.11. In the three months ended June 30, 2023, Orion issued 700 shares under the ESPP plan at a closing market price of $1.63.
Sale of shares
In March 2023, Orion filed a universal shelf registration statement with the Securities and Exchange Commission. Under the shelf registration statement, Orion currently has the flexibility to publicly offer and sell from time to time up to $100 million of debt and/or equity securities. The filing of the shelf registration statement may help facilitate Orion’s ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, repay existing debt, or for other general corporate purposes.
In March 2021, Orion entered into an At Market Issuance Sales Agreement to undertake an “at the market” (ATM) public equity capital raising program pursuant to which Orion may offer and sell shares of common stock from time to time, having an aggregate offering price of up to $50 million. No share sales have been effected pursuant to the ATM program through June 30, 2024.
NOTE 16 — RESTRICTED SHARES
At Orion’s 2023 annual meeting of shareholders, Orion’s shareholders approved the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan, as amended and restated (the “Amended 2016 Plan”). The Amended 2016 Plan increased the number of shares of Orion’s common stock available for issuance under the Amended 2016 Plan from 3,500,000 shares to 6,000,000 shares (an increase of 2,500,000 shares); added a minimum vesting period for all awards granted under the Amended 2016 Plan (with limited exceptions); and added a specific prohibition on the payment of dividends and dividend equivalents on unvested awards.
The Amended 2016 Plan authorizes grants of equity-based and incentive cash awards to eligible participants designated by the Plan's administrator. Awards under the Amended 2016 Plan may consist of stock options, stock appreciation rights, performance shares, performance units, common stock, restricted stock, restricted stock units, incentive awards or dividend equivalent units.
Prior to the 2016 Omnibus Incentive Plan, Orion maintained its 2004 Stock and Incentive Awards Plan, as amended, which authorized the grant of cash and equity awards to employees (the “2004 Plan”). No new awards are being granted under the 2004 Plan; however, all awards granted under the 2004 Plan that are outstanding will continue to be governed by the 2004 Plan. Forfeited awards originally issued under the 2004 Plan are canceled and are not available for subsequent issuance under the 2004 Plan or under the Amended 2016 Plan. The Amended 2016 Plan and the 2004 Plan also permit accelerated vesting in the event of certain changes of control of Orion as well as under other special circumstances.
Certain non-employee directors have from time to time elected to receive stock awards in lieu of cash compensation pursuant to elections made under Orion’s non-employee director compensation program.
16
The following amounts of stock-based compensation were recorded (dollars in thousands):
282
182
The following table summarizes information with respect to performance-vesting restricted stock and time vesting-restricted stock activity:
Time-BasedRestricted Shares
Performance-BasedRestricted Shares
WeightedAverageFair ValuePrice
Balance at March 31, 2024
1,014,104
1.87
708,377
1.66
Shares issued
685,322
1.09
821,559
Shares vested
(175,204
2.99
Shares outstanding at June 30, 2024
1.39
1,529,936
1.35
Per share price on grant date
$1.09
As of June 30, 2024, the amount of deferred stock-based compensation expense to be recognized, over a remaining period of 2.6 years, was approximately $1.7 million.
NOTE 17 — SEGMENT DATA
Reportable segments are components of an entity that have separate financial data that the entity's chief operating decision maker ("CODM") regularly reviews when allocating resources and assessing performance. Orion's CODM is the chief executive officer. Orion evaluates and reports on the business using three segments: Lighting Segment, Maintenance Segment and Electric Vehicle Charging Segment (“EV Segment”).
Lighting Segment
The Lighting Segment develops and sells lighting products and provides construction and engineering services for Orion's commercial lighting and energy management systems. The Lighting Segment provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers mostly through direct sales and also sells lighting products though manufacturer representative agencies and to the wholesale contractor markets through energy service companies and contractors.
Maintenance Segment
The Maintenance Segment provides retailers, distributors and other businesses with maintenance, repair and replacement services for the lighting and related electrical components deployed in their facilities.
Electric Vehicle Charging Segment
The Electric Vehicle Charging Segment offers leading electric vehicle charging expertise, sells and installs sourced electric vehicle charging stations with related software subscriptions and renewals and provides EV turnkey installation solutions with ongoing support to all commercial verticals.
17
Corporate and Other
Corporate and Other is comprised of operating expenses not allocated to Orion’s segments and adjustments to reconcile to consolidated results (dollars in thousands).
Revenues
Operating Loss
Total Assets
Segments:
12,751
12,621
(1,206
(766
23,785
25,911
3,324
(976
(1,840
5,856
8,827
3,831
(231
(1,934
14,812
15,291
(1,019
(1,857
15,302
13,140
NOTE 18 — RESTRUCTURING EXPENSE
As part of Orion's response to declining financial results, Orion entered into separation agreements with multiple employees during the fourth quarter of fiscal 2024. In addition, an inventory write-off was recognized in the first quarter of fiscal 2025 for inventory related to a customer Orion no longer does business with. Orion's restructuring expense for the three months ended June 30, 2024 and 2023 is reflected within its consolidated statement of operations as follows (dollars in thousands):
197
393
Total restructuring expense by segment was recorded as follows (dollars in thousands):
Maintenance
389
18
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited Condensed Consolidated Financial Statements and related notes included in this Form 10-Q, as well as our audited Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
Cautionary Note Regarding Forward-Looking Statements
Any statements in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, prospects, financial condition, assumptions or future events or performance are not historical facts and are “forward-looking statements” as that term is defined under the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as “believe”, “anticipate”, “should”, “intend”, “plan”, “will”, “expects”, “estimates”, “projects”, “positioned”, “strategy”, “outlook” and similar words. You should read the statements that contain these types of words carefully. Such forward-looking statements are subject to several risks, uncertainties and other factors that could cause actual results to differ materially from what is expressed or implied in such forward-looking statements. There may be events in the future that we are not able to predict accurately or over which we have no control. Potential risks and uncertainties include, but are not limited to, those discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or uncertainties after the date hereof or to reflect the occurrence of unanticipated events.
Overview
We provide state-of-the-art light emitting diode (“LED”) lighting systems, wireless Internet of Things (“IoT”) enabled control solutions, commercial and industrial electric vehicle (“EV”) charging infrastructure solutions, and lighting and electrical maintenance services. We help our customers achieve their sustainability, energy savings and carbon footprint reduction goals through innovative technology and exceptional service. We sell our products and services into many vertical markets within the broader commercial and industrial market segment. Primary verticals include: big box retail, manufacturing, warehousing/logistics, commercial office, federal and municipal government, healthcare and schools. Our services consist of turnkey installation (lighting and EV) and system maintenance. Virtually all of our sales occur within North America or for the US Department of Defense's military bases operating in foreign countries.
Our lighting products consist primarily of LED lighting fixtures, many of which include sourced IoT enabled control systems. Our principal lighting customers include large national account end-users, federal and state government facilities, large regional account end-users, electrical distributors, electrical contractors and energy service companies (“ESCOs”). Currently, most of our lighting products are manufactured at our leased production facility located in Manitowoc, Wisconsin, although as the LED and related IoT market continues to evolve, we are increasingly sourcing products and components from third parties in order to provide versatility in our product development and offerings.
We differentiate ourselves from our competitors by offering very efficient light fixtures (measured in lumens per watt) coupled with our project management services to national account customers to retrofit their multiple locations. Our comprehensive services include initial site surveys and audits, utility incentive and government subsidy management, engineering design, and project management from delivery through to installation and controls integration and commissioning. In addition, we began to offer lighting and electrical maintenance services in fiscal 2021. We believe that providing these services enables us to support a long-term business relationship with our customers and results in an increase in our recurring revenue. We completed the acquisition of Stay-Lite Lighting on January 1, 2022, which is intended to further expand our maintenance services capabilities. On October 5, 2022, we acquired Voltrek, which was intended to leverage our project management and maintenance expertise into the rapidly growing EV sector.
Our lighting products consist primarily of LED lighting fixtures, many of which include IoT enabled control systems provided by third parties. We believe the market for LED lighting products continues to grow. Due to their size and flexibility in application, we also believe that LED lighting systems can address opportunities for retrofit applications that cannot be satisfied by other lighting technologies.
We generally do not have long-term contracts with our customers for product or turnkey services that provide us with recurring annual revenue. However, our maintenance services contracts usually consist of multi-year arrangements. We typically generate substantially all of our lighting revenue from sales of lighting systems and related services to governmental, commercial and industrial customers on a project-by-project basis. We also perform work under global services or product purchasing agreements with major customers with sales completed on a purchase order basis. The loss of, or substantial reduction in sales to, any of our significant customers, or our current single largest customer, or the termination or delay of a significant volume of purchase orders by one or more key customers, could have a material adverse effect on our results of operations in any given future period.
We typically sell our lighting systems in replacement of our customers’ existing lighting fixtures. We call this replacement process a "retrofit". We frequently sell our products and services directly to our customers and in many cases we provide design and installation services as well as project management services. We also sell our lighting systems on a wholesale basis, principally to electrical distributors, electrical contractors and ESCOs which then resell to their own customers.
The gross margins of our products can vary significantly depending upon the types of products we sell, with gross margins typically ranging from 10% to 50%. As a result, a change in the total mix of our sales among higher or lower gross margin products can cause our profitability to fluctuate from period to period.
Our fiscal year ends on March 31. We refer to our current fiscal year which ends on March 31, 2025 as "fiscal 2025". We refer to our most recently completed fiscal year, which ended on March 31, 2024, as “fiscal 2024”, and our prior fiscal year which ended on March 31, 2023 as "fiscal 2023". Our fiscal first quarter of each fiscal year ends on June 30, our fiscal second quarter ends on September 30, our fiscal third quarter ends on December 31, and our fiscal fourth quarter ends on March 31.
20
Results of Operations - Three Months Ended June 30, 2024 versus Three Months Ended June 30, 2023
The following table sets forth the line items of our Condensed Consolidated Statements of Operations and as a relative percentage of our total revenue for each applicable period, together with the relative percentage change in such line item between applicable comparable periods (dollars in thousands, except percentages):
Amount
%Change
% of Revenue
(6.6
)%
64.1
%
77.6
81.1
35.9
22.4
13.0
100.0
(15.1
42.9
57.1
61.2
35.5
24.9
78.4
82.0
35.6
21.6
18.0
General and administrative expenses
(21.1
22.8
32.6
(100.0
0.0
0.3
Sales and marketing expenses
(10.9
14.8
18.7
Research and development expenses
(45.0
2.7
(46.3
(17.2
(36.3
48.9
(1.3
(1.0
141.7
(0.3
(0.1
NM
0.2
(43.3
(18.8
(37.4
Income tax expense (benefit)
(50.0
0.1
(43.4
(18.9
(37.7
* NM - Not Meaningful
Revenue, Cost of Revenue and Gross Margin. Product revenue decreased 6.6%, or $0.9 million, for the first quarter of fiscal 2025 versus the first quarter of fiscal 2024. Service revenue increased 81.1%, or $3.2 million, for the first quarter of fiscal 2025 versus the first quarter of fiscal 2024. The resulting increase in total revenue was due to increased revenues in the EV segment, partially offset by decreased revenue in the Maintenance segment. Cost of product revenue decreased by 15.1%, or $1.5 million, in the first quarter of fiscal 2025 versus the comparable period in fiscal 2024. Cost of service revenue increased by 61.2%, or $2.7 million, in the first quarter of fiscal 2025 versus the comparable period in fiscal 2024. Gross margin increased from 18.0% of revenue in the first quarter of fiscal 2024 to 21.6% in the first quarter of fiscal 2025, due primarily to project mix and increased sales which assisted in the absorption of fixed costs.
Operating Expenses
General and Administrative. General and administrative expenses decreased 21.1%, or $1.2 million, in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024. This comparative decrease was primarily due to a decrease in Voltrek earn out expense to $0.3 million in the first quarter of fiscal 2025 compared to $1.1 million in the first quarter of fiscal 2024.
Sales and Marketing. Sales and marketing expenses decreased 10.9%, or $0.4 million, in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024. This comparative decrease was primarily due to the lower volume of product sales resulting in lower commissions expense.
Research and Development. Research and development expenses decreased 45.0%, or $0.2 million, in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024.
Our lighting segment develops and sells lighting products and provides construction and engineering services for our commercial lighting and energy management systems. Our lighting segment provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers mostly through direct sales and also sells lighting products though manufacturer representative agencies and to the wholesale contractor markets through ESCOs and contractors.
The following table summarizes our lighting segment operating results (dollars in thousands):
1.0
Operating loss
(57.4
Operating margin
(9.5
(6.1
Lighting segment revenue in the first quarter of fiscal 2025 increased by 1.0%, or $0.1 million compared to the first quarter of fiscal 2024. The increase in lighting segment revenue was due to variability in the timing of larger lighting projects. The increase in operating loss in this segment is a result of an increased percentage of service revenue, which has a lower gross margin than product revenue.
Our maintenance segment provides retailers, distributors and other businesses with maintenance, repair and replacement services for the lighting and related electrical components deployed in their facilities.
The following table summarizes our maintenance segment operating results (dollars in thousands):
(11.5
47.0
(29.4
(49.0
Maintenance segment revenue in the first quarter of fiscal 2025 decreased by 11.5%, or $0.4 million, compared to the first quarter of fiscal 2024 primarily due to the winddown of several customer contracts. Operating loss in this segment decreased as a result of an increase in gross margins driven by a more favorable revenue mix.
Our EV segment offers leading electric vehicle charging expertise and provides EV turnkey installation solutions with ongoing support to all commercial verticals.
The following table summarizes our EV segment operations results (dollars in thousands):
209.5
(88.1
(6.0
(156.2
EV segment revenue increased $2.6 million to $3.8 million in the first quarter of fiscal 2025. The increase in revenue over the first quarter of fiscal 2024 is due to a higher revenue volume to municipalities. Operating loss decreased $1.7 million in the
22
first quarter of fiscal 2025 due to a $0.8 million decrease of earn-out expense included in general and administrative costs along with improved gross margins.
Liquidity and Capital Resources
We believe our existing cash and operating cash flow provide us with the financial flexibility needed to meet our capital requirements, including to fund targeted our budgeted capital expenditures and working capital needs for at least one year from the date of this report, as well as our longer-term capital requirements for periods beyond at least one year from the date of this report.
We had approximately $5.7 million in cash and cash equivalents as of June 30, 2024, compared to $5.2 million at March 31, 2024. Our cash position increased as a result of the mortgage loan largely offset by an operating loss and a net use of working capital during the first quarter of fiscal 2025.
Our future liquidity needs and forecasted cash flows are dependent upon many factors, including our relative revenue, gross margins, cash management practices, cost containment, working capital management and capital expenditures. While we believe that we will likely have adequate available cash and equivalents and credit availability under our Credit Agreement to satisfy our currently anticipated working capital and liquidity requirements for at least the next 12 months based on our current cash flow forecast, if we experience significant liquidity constraints, we may be required to issue equity or debt securities, reduce our sales efforts, implement additional cost savings initiatives or undertake other efforts to conserve our cash.
Cash Flows
The following table summarizes our cash flows for the three months ended June 30, 2024 and 2023 (in thousands):
Increase (decrease) in cash and cash equivalents
Cash Flows Related to Operating Activities. Cash used in operating activities primarily consists of net loss adjusted for certain non-cash items, including depreciation, amortization of intangible assets, stock-based compensation, amortization of debt issue costs, provisions for reserves, and the effect of changes in working capital and other activities.
Cash used in operating activities for the first quarter of fiscal 2025 was $3.0 million and consisted of our net loss of $3.8 million adjusted for non-cash expense items and net cash provided in changes in operating assets of $0.6 million, the largest of which was a $3.9 million decrease in accounts payable, which was mostly offset by increases in accounts receivable and inventories.
Cash used in operating activities for the first quarter of fiscal 2024 was $7.3 million and consisted of our net loss of $6.6 million adjusted for non-cash expense items and net cash used in changes in operating assets of $0.8 million, the largest of which was a $1.9 million decrease in accounts payable.
Cash Flows Related to Investing Activities. Cash used in investing activities of $24 thousand in the first quarter of fiscal 2025 consisted primarily of purchases of property and equipment, net of proceeds.
Cash used in investing activities of $0.4 million in the first quarter of fiscal 2024 consisted primarily of purchases of property and equipment.
23
Cash Flows Related to Financing Activities. Cash provided by financing activities of $3.5 million in the first quarter of fiscal 2025 was primarily due to the term loan discussed in Note 12 above, which was partially offset by payments on long-term debt.
Cash used by financing activities of $3 thousand in the first quarter of fiscal 2024 consisted primarily of payment of long-term debt.
Working Capital
Our net working capital as of June 30, 2024 was $17.4 million, consisting of $42.1 million in current assets and $24.8 million in current liabilities. Our net working capital as of March 31, 2024 was $16.7 million, consisting of $44.8 million in current assets and $28.1 million in current liabilities.
We generally attempt to maintain at least a three-month supply of on-hand inventory of purchased components and raw materials to meet anticipated demand, as well as to reduce our risk of unexpected raw material or component shortages or supply interruptions. Because of recent supply chain challenges, we have been making additional incremental inventory purchases. Our accounts receivables, inventory and payables may increase to the extent our revenue and order levels increase.
Indebtedness
Our credit agreement provides for a five-year $25.0 million revolving credit facility (the “Credit Facility”) that matures on December 29, 2025. Borrowings under the Credit Facility are subject to a borrowing base requirement based on eligible receivables, inventory and cash. As of June 30, 2024, the borrowing base supported approximately $18.3 million of availability under the Credit Facility with $10.0 million drawn against that availability. As of June 30, 2023, the borrowing base supported approximately $18.6 million of availability under the Credit Facility with $10.0 million drawn against that availability.
The credit agreement is secured by a first lien security interest in substantially all of our assets.
Borrowings under the credit agreement are permitted in the form of SOFR or prime rate-based loans and generally bear interest at floating rates plus an applicable margin determined by reference to our availability under the Credit Agreement. Among other fees, we are required to pay an annual facility fee of $15,000 and a fee of 25 basis points on the unused portion of the Credit Facility.
The credit agreement includes a springing minimum fixed cost coverage ratio of 1.0 to 1.0 when excess availability under the Credit Facility falls below the greater of $3.0 million or 15% of the committed facility. Currently, the required springing minimum fixed cost coverage ratio is not required.
The credit agreement also contains customary events of default and other covenants, including certain restrictions on our ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, pay any dividend or distribution on our stock, redeem, retire or purchase shares of our stock, make investments or pledge or transfer assets. If an event of default under the credit agreement occurs and is continuing, then the lender may cease making advances under the credit agreement and declare any outstanding obligations under the credit agreement to be immediately due and payable. In addition, if we become the subject of voluntary or involuntary proceedings under any bankruptcy or similar law, then any outstanding obligations under the credit agreement will automatically become immediately due and payable.
Effective April 22, 2024, we, along with the lender, executed Amendment No. 2 (“Amendment No. 2”) to the Credit Agreement. The primary purpose of Amendment No. 2 was to add a $3.525 million mortgage loan facility to the Credit Agreement secured by our office headquarters property in Manitowoc, Wisconsin. Amendment No. 2 also broadened the definition of receivables to encompass government receivables as being eligible to be included in our borrowing base calculation for the
purpose of establishing our monthly borrowing availability under the Credit Agreement. Quarterly installments of $88,125 will be due on the first day of each fiscal quarter beginning October 1, 2024.
Backlog
Backlog represents the amount of revenue that we expect to realize in the future as a result of firm, committed purchase orders. Backlog totaled $14.1 million and $22.0 million as of June 30, 2024 and March 31, 2024, respectively. We generally expect our backlog to be recognized as revenue within one year. Backlog does not include any amounts for contracted maintenance services.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make certain estimates and judgments that affect our reported assets, liabilities, revenue and expenses, and our related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an ongoing basis, including those related to revenue recognition, inventory valuation, stock-based compensation and income taxes. The estimates of forecasted cash flows are used in the assessment for impairment of long-lived assets and the realizability of deferred tax assets. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. A summary of our critical accounting policies is set forth in the “Critical Accounting Policies and Estimates” section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended March 31, 2024. For the quarter ended June 30, 2024, there were no material changes in our accounting policies.
For a complete discussion of recent accounting pronouncements, refer to Note 3 in the Condensed Consolidated Financial Statements included elsewhere in this report.
25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk was discussed in the “Quantitative and Qualitative Disclosures About Market Risk” section contained in our Annual Report on Form 10-K for the year ended March 31, 2024. There have been no material changes to such exposures since March 31, 2024.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of June 30, 2024, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based on this evaluation, such officers have concluded that our disclosure controls and procedures were effective as of June 30, 2024.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) for the quarter ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to various claims and legal proceedings arising in the ordinary course of business. As of the date of this report, we do not believe that the final resolution of any of such claims or legal proceedings will have a material adverse effect on our future results of operations.
See Note 14 – Commitments and Contingencies, to the Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I - Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, which we filed with the SEC on June 12, 2024 and in Part 1 - Item 2 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the three months ended June 30, 2024, no director or officer of Orion adopted or terminated a "Rule 10b5-1 trading arrangement," or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
ITEM 6. EXHIBITS
10.1
Amendment No. 2 to Loan and Security Agreement, dated effective as of April 22, 2024, among Orion Energy Systems, Inc., Bank of America, N.A., as lender, and the subsidiary borrowers party thereto, file as Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on April 24, 2024, is hereby incorporated by reference.
31.1
Certification of Chief Executive Officer of Orion Energy Systems, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.+
31.2
Certification of Chief Financial Officer of Orion Energy Systems, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.+
32.1
Certification of Chief Executive Officer of Orion Energy Systems, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+
32.2
Certification of Chief Financial Officer of Orion Energy Systems, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+
101.INS
Inline XBRL Instance Document+
101.SCH
Inline XBRL Taxonomy extension schema document+
101.CAL
Inline XBRL Taxonomy extension calculation linkbase document+
101.DEF
Inline XBRL Taxonomy extension definition linkbase document+
101.LAB
Inline XBRL Taxonomy extension label linkbase document+
101.PRE
Inline XBRL Taxonomy extension presentation linkbase document+
104
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, has been formatted in Inline XBRL and is contained in Exhibit 101.
+ Filed herewith
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 7, 2024.
By
/s/ J. Per Brodin
J. Per Brodin
Chief Financial Officer
(Principal Financial Officer and Authorized Signatory)