Orion Energy Systems, Inc. (OESX)

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Orion Energy Systems, Inc. (OESX)

F3Q10 (Qtr End 12/31/09) Earnings Call

February 2, 2010 5:30 pm ET


Victoria Paris - IR

Neal Verfuerth - Chairman and CEO

Jim Kackley - President and COO

Scott Jensen - CFO


Glenn Wortman - Sidoti & Company

Brian Kremer - Roth Capital Partners

J.J. Abodeely - Paragon Investment Management

Shawn Boyd - Westcliff Capital Management



Good afternoon and thank you for standing by. Welcome to Orion Energy Systems' Third Quarter Fiscal 2010 Earnings Conference Call. Your lines have been placed on a listen-only mode until the question and answer segment of today's call. This call is being recorded. If you have any objections you may disconnect at this time. I will now turn the call over to Victoria Paris, FD. Victoria you may begin.

Victoria Paris

Thank you, [Cynthia]. And thank you for joining us for Orion Energy Systems' fiscal 2010 third quarter conference call. With me on the call today are Neal Verfuerth, Chairman and CEO; Jim Kackley, President and COO; and Scott Jensen, CFO.

Before we begin, I'll read the Safe Harbor statement. Our remarks that follow, including answers to your questions, include 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 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 materially be different. Those risks include among others matters that we have described in our press release issued this afternoon and in our filings with the Securities and Exchange Commission. Except as described in these filings, 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'd like to turn the call over to Neal.

Neal Verfuerth

Thank you, Victoria. Welcome everybody to the Orion Energy Systems' fiscal 2010 third quarter conference call. As you saw in the press release we issued this afternoon, we exceeded both our top and bottom line guidance with revenues of 19.3 million and earnings per share of $0.04 and generated positive operating cash flow for our fiscal third quarter.

Our third quarter bookings which we begun which we began providing last quarter as a key metric for our business were 21.4 million. This included 3.4 million in financing deals both on the demand side which includes our OVPP contracts and a supplier side which include our financing agreements for our photovoltaic or PV solution.

During the quarter we completed our first solar purchase power agreement or supply side contract which accounted for 1.7 million of our total bookings. These deals similar to our OVPP contracts create additional recurring revenue streams for Orion. Scott will go into further detail on how these supply side financing deals are structured in his comments.

As Jim discussed last quarter we continue to focus on building out our renewable technology offering, which includes our PV solution. Today, some PV integrators are actually paying for just the option to have access to customers' route. With the installed base we built up through our integrated lighting solution we already have that access and the trust as an energy expert for our customers. After completing a few test sites in the second quarter, our first supply side finance agreement as well as our first sizable cash PV deal with Coca-Cola Enterprises in the third quarter are further validating the emerging opportunity for our renewable energy supply solutions created for Orion.

Revenues in the quarter were driven by increasing order volume as we ramped up our wholesale and partner driven side of the business. In the third quarter we saw a mix between retail and wholesale near the 50-50 mark. We continue to dedicate resources to building our wholesale network, providing our partners with the tools necessary to drive growth within our businesses. These investments continue to payoff as we secured some sizable deals with industry leading customers that have just substantial facility footprints creating a beachhead into even a broader opportunity.

We have historically experienced the level of seasonality or saturation following a very successful quarter in our wholesale channel as our partners and resellers look to complete projects that were closed in the previous quarter. As the revenue contribution of this channel grows, we will expect to see some of that seasonality continue on a quarter-to-quarter basis. That said, this channel brings significant value to our business in terms of favorable margin contribution as well as its ability to allow Orion to broaden its geographical footprint more economically and efficiently.

We will continue to enhance the effect into some of our partners and resellers through training programs at Orion University and teaching them to sell and integrate the technology the Orion way. On the national account side, we continue to make headway completing sizable projects for new and existing customers.

During the third quarter, we added a number of new national accounts that maintain leading market positions across industries, which included a major retailer with stores throughout much of the United States and Western Canada. Again these initial projects represent a significant opportunity for potential revenue in the future.

The customers' wins we saw in the third quarter continued to demonstrate our market leadership as an energy expert, in addition they evaluate the compelling value proportion of our solutions by saving our customers, significant dollars and energy cost and helping them achieve their sustainability goals.

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