Orion Energy Systems manufactures a cutting edge portfolio of award-winning commercial and industrial LED lighting and Smart Building systems designed primarily for the building retrofit market. Many of the company’s trade secrets and nearly 100 granted and pending patents relate to lighting systems that provide exceptional optical and thermal performance, driving financial, environmental, and workspace benefits for a wide variety of customers.
CEO John Scribante explains, “My vision is to build a company that uses digital lighting to solve the major business problems companies face. Today, the digital ceiling has become some of the most valuable corporate real estate and Orion has developed the capability to bring convergence between multiple building systems and solid state LED lighting. We can eliminate the labor cost and equipment needed for virtually all access control, asset tracking, space utilization, security, fire, and safety systems and build all of these capabilities into an intelligent lighting system.”
Once considered a “Darling of Wall Street,” Orion enjoyed a period of positive media and investor interest soon after its public offering in 2007. However, the honeymoon period quickly passed and the next few years were challenged by financial instability, fragmented product strategy, a major drop in market demand for its legacy linear fluorescent product offering, and replacement of its original founder and CEO. This put the company on the brink of collapse.
In September 2012, Orion’s Board appointed John Scribante CEO. Mr. Scribante was previously the Division President credited for a significant portion of the company’s early revenue generation including customers such as Coca-Cola and SYSCO. Scribante knew a turnaround would require decisive, deliberate action and rose to the challenge. Historically, Orion’s core products consisted of fluorescent high bay lighting for factories and warehouses. The product line was severely outdated and cash was tight.
Recognizing the urgency of Orion’s predicament, Scribante acted quickly to improve working capital and generate cash flow. In his first nine months, he shored up the cash balances and acquired Harris Manufacturing. This move provided Orion with a new solid state LED lighting platform, a seasoned and talented management and sales team, and incremental cash flow that would accelerate its speed to market. The acquisition also provided the intellectual property needed to expand LED offerings with the subsequently patented LDR® Troffer Retrofit fixture for commercial applications.
The next challenge was to address manufacturing strategy. Prior to 2013, Orion fabricated, coated, and assembled virtually all of its products in company owned and operated facilities. Recognizing that LED would require an entirely new supply chain, fab equipment, casting and extrusion tooling investments, and assembly processes, the company quickly consolidated its operations from Florida and Plymouth, WI into its facility in Manitowoc, WI. At the same time, the company began sourcing metal parts from local metal fabricators.
An influx of orders pressured margins due to design and supply chain inefficiencies, but Scribante’s focus on capital allocation, talent acquisition, and financial discipline allowed the company to turn around and position itself for growth in a massive market adoption punctuated by increasing shareholder value. A LEAN production system was implemented and the company exited all non-core business endeavors, allowing the sale of $3.5M in real estate with the resulting cash invested back into growing the business. By 2016, the company was realizing over 80% of its sales from solid state LED lighting and returned to its historic profit margins.
Highest performing LED lighting products in the market. In 2014, Orion launched its second generation LED high bay fixtures, building on its innovative leadership in this market segment. In 2015, LED offerings were expanded to include task lighting, industrial strip fixtures and exterior product options to meet the evolving needs of retrofit customers. Orion also recognized that as the LED market became more established, three fairly distinct customer classes with different needs and purchasing priorities were developing. Quick to launch a three-tiered branding approach, Orion’s line now offers products that meet key customer needs from those looking for low cost, to those seeking a mid-tier line balancing performance and value, to customers more concerned with long term total cost of ownership.
In 2016, Orion introduced a new line of products to the underserved agribusiness and foodservice markets. Then the subsequent launch of its third generation ISON™ high bay fixture, which delivered industry-leading performance of 214 lumens per watt (LPW), was a real game-changer. To that point it was believed that an LED high bay fixture would not be capable of delivering even 200 LPW, but Orion accomplished what its competitors could not. The Generation III fixture was 20% higher performing than Orion’s own industry-leading Generation II fixture and 40% higher than virtually all its competition. This performance gives Orion customers a funding source (in the form of energy savings) to invest further into Smart Building technology that is integrated into the Orion fixtures. As such, Orion’s customers benefit from insightful data and tracking capabilities that are important to managing a facility in today’s competitive environment. Executive VP Scott Green, who oversees Product Innovation, tells us, "Orion LED products cost less to operate than our competitors’ fixtures. If someone purchases another company’s LED High Bays, they are simply choosing to spend more on their utility bill. Base fixture performance is paramount. The more energy savings delivered from the fixture, the more cash flow is available to fund Smart technologies.”
Orion has launched multiple expansions to its offerings including a patented modular fixture designed to be upgradable and compatible with developing third party sensor technologies such as wireless, Bluetooth and Internet of Things (IoT) architectures. These technologies can transform a company’s lighting system into a platform that captures real-time data like occupancy, daylight harvesting, thermal sensing and energy consumption, and translates it into useful insights to help analyze data received and make smarter decisions about energy consumption, space utilization, maintenance requirements, security, climate control, and fire and safety systems.
Competing in a fragmented market with dominant players. Orion has unique competitive advantages. First, the company predominantly sells into the building retrofit market, a complex solution that provides a natural barrier to entry. Retrofitting a building requires working in occupied spaces and accepting the existing building conditions, which may mean working with an electrical system that is decades old. Orion provides custom labeling, packaging and kitting, along with logistical services, factory assemblies, returnable recycling containers, and custom mounting and bracket kits to address these complicated facilities. Moreover, Orion prepares and stages orders for customers so they are labeled for the area where they will be installed, allowing contractors to move only the product needed into the space where they are working. This improves install times, increases contractor profits, reduces waste and limits facility disruption. These services are rarely found with other lighting companies who manufacture overseas.
Second, Orion ships orders in less than ten days when its competitors are quoting months, delivering products with thousands of options with a 97% or better on-time reliability and allowing customers to realize the benefits sooner. Executive VP Marc Meade notes, “Our operation is committed to delivering on-time, with high quality and service flexibility, to meet the dynamic needs of our product development team and our customer base.”
Third, innovation leads to pricing power. Orion delivers a higher ROI than any other product for the same price. Since the primary focus for retrofit is ROI, Orion benefits from its performance advantage.
Lastly, Orion typically develops its new products in a four-month cycle from concept to delivery, as compared with 15-18 months for most LED manufacturers. Quickly identifying market needs and developing products to meet them gives Orion a key time to market advantage over its competition.
Explosive growth in the LED Market
Focus on shareholder value. There is a renaissance at Orion. The company has developed the best products for customers with different budgets and different needs. The price and performance of products lead the industry in virtually all categories where the company competes. Moreover, one of the most flexible business models of any lighting company allows it to flourish in the most dynamic market segment - commercial and industrial LED retrofit lighting.
Orion’s financial performance is back on the rise. Gross margins are showing meaningful increases, cash flow generation is strong, and GAAP profitability is within reach. Mr. Scribante says, “Capital allocation and cash flow generation are the primary management priorities.” Financial excellence is a process and the company is well underway.
It should be clear - Orion has a bright future. The next time you go to the grocery store or the mall, look around. LED is everywhere, but you’ll notice there is still a long way to go and Orion is a great way to get exposure to the next generation of intelligent lighting systems.
For more information about Orion Energy Systems, Inc., please visit: www.orionlighting.com
The company paid consideration to SNN or its affiliates for this article.
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