Orion Energy Systems Inc (OESX) 2014 Q3 法說會逐字稿

Good day, ladies and gentleman and welcome to the Orion Energy third-quarter fiscal 2014 conference call. (Operator Instructions). As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Chris Witty. Mr. Witty, you may proceed.

Thank you and welcome to Orion Energy's fiscal third-quarter conference call. With me today is John Scribante, Chief Executive Officer and Scott Jensen, Chief Financial Officer. As a reminder, the earnings press release issued today once again includes a section that briefly describes the supplemental information document that was posted to the Company's website. This supplemental information provides further details and analysis on Orion's financial performance for the fiscal third quarter ended December 31, 2013.

I will now read the Safe Harbor statement. Remarks that follow, including answers to 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 be materially 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. I'd now like to turn the call over to John Scribante, Chief Executive Officer of Orion Energy. Please go ahead, John.

Great, thanks, Scott and good afternoon, everybody and thank you for joining our call today. Let us start by going over our results for the quarter beginning with the revenue. Sales were down slightly year over year at $27.7 million reflecting a number of factors. First, as we stated in the past, we are not investing time or money into growing our solar business and consequently as progress continued with our Brick Township project, revenue fell both sequentially and in comparison to the 2013 third quarter.

Total solar revenue was $6.8 million for this year's fiscal third quarter versus $9.1 million in the second quarter and $9.6 million in the third quarter last year. This trend will continue sequentially given that the project is scheduled to be completed during the first half of fiscal 2015 or in the middle of this calendar year and will not be replaced with additional solar work. I won't belabor this point, but just wanted to mention again that we don't believe that the solar market is one in which we should be investing or participating. It hinders our dedicated focus towards growing our LED business, which is where we see the greatest opportunity for Orion. So even while solar margins were actually up this quarter due to some higher service revenue components, as Scott will review in a moment, this nevertheless is not an attractive growth area for the Company and we are not seeking new business here.

Beyond the impact of declining solar revenue on the quarter, we also reported about $2 million less in sales than anticipated due to the government shutdown and some year-end order delays. For the most part, these shipments have been pushed into future periods.

As is our continued strategy, we maintain our focus on bottom-line operating performance resulting in an overall gross margin of 29.4% that is roughly flat with the prior year. Even after one-time severance expenses as we transitioned Harris production into our manufacturing facility in Manitowoc. Orion's operating income was $0.9 million for the third quarter, up from $0.6 million in the prior year and we reported net earnings of $0.05 per share. Excluding any expenses related to the Harris acquisition and severance costs I just mentioned, the adjusted earnings were $0.07 per share, right in line with our guidance.

With regard to Harris, as we announced in our last earnings call, we ceased manufacturing in Florida during the quarter and reduced headcount accordingly and subsequently have transferred the equipment to our plant in Manitowoc. We have, therefore, completed virtually all of the integration activities and are extremely satisfied with the new combined manufacturing facility, as well as a stronger salesforce now in place at Orion. We will continue to look for additional synergies and expect further savings later this calendar year once our lease in Florida expires. As we have said before, we anticipate total cost synergies of $1 million on an annualized basis by the end of calendar 2014.

So we continued our focus on cash flow this quarter generating just north of $1 million due to the fact that while reducing inventory by another $2 million we saw an uptick in accounts receivable tied to timing of our December shipments and an increase in prepaid expenses due to our solar projects. That said, we've generated $10.8 million in cash from operations during the first nine months of fiscal 2014 versus a slight usage of cash during the same period in 2013. We ended the quarter with $19.3 million in cash, cash equivalents and short-term investments, leaving our balance sheet strongest it has been in years.

Now before I move into a review of our markets and outlook, let me just touch on something that has generated questions from a few of our investors. We filed a universal shelf filing on Friday, January 17 for the issuance of up to $75 million in debt and equity. Given the significance of this filing, I wanted to clearly state for the record what this means and what it doesn't mean. It does not mean that Orion management or our Board has taken its eye off the ball in terms of being almost singularly focused on improving shareholder returns. When I became CEO, we made it our business to cut costs, focus on our core markets, improve cash flow, drive growth and achieve higher returns for our investors. That focus has clearly not changed.

What the shelf filing allows for, as we have said in the past, is the potential to look at other possible game-changing acquisitions that can bolster our technology and provide size and scale to our lighting operations. For Orion to stay a leader in the space, we not only need to constantly focus on R&D and customer service, but also build scale and expand our offerings as the marketplace comes to recognize the benefits of solid-state LED lighting. The acquisition of Harris has proven that we know how to find good, underutilized assets and leverage them for the growth of this Company. So that is why we filed the shelf, to be ready in case we find another attractive, accretive and market-building transaction that can bolster our position in the industry and provide access to new products and new channels. But we have not forgotten our shareholders nor will we ever as long as I am the CEO.

So now let's -- let me review our lighting operations and some of the recent customer wins. As our industrial customers are presented with the choice of investing in either linear fluorescent versus LED technology, we are experiencing some longer sales cycles as they work through those decisions. Nevertheless, we expect to see demand for our LDR products within the commercial space while over time increase even with such delays. Albeit the timing of this transition is not perfectly clear.

As our salespeople adjust to these market dynamics, the next several quarters may experience some sales volatility. However, we are seeing a great deal of traction with a number of new national accounts that will positively impact growth later this year, this calendar year. We also announced an expansion of our LDR productline in January building on our success in offering LED solutions that can be installed quickly in existing troffers with no tools required. And since almost a billion troffers are currently installed in the US market alone, the outlook for energy saving using our LDR products is enormous. Our applications can reduce the Company's energy consumption by up to 70% and we are proud of this technology and the leadership position that we have in the industry.

Remember, unlike large lighting companies, which sell products through retail stores or traditional distribution channels, our lighting solutions are sold on a retrofit project basis to corporations often across multiple locations encompassing various types of fixtures and installation challenges making the sales leadtime longer and the customer investment higher, but the reward in terms of margin and potential for reoccurring revenue and multiyear contracts is obviously very attractive to us.

Let me give you a few examples of some of the projects that we have been awarded in just the past months. First, as I mentioned last quarter, we recently won a three-year retrofit agreement with a large multi-national food conglomerate and the North American rollout is going very well. We're working on several other facilities at the present time providing both LED and fluorescent solutions and anticipate that this will be one of our top accounts heading into 2015. This customer was already one of our largest accounts in the quarter we just ended.

We also completed an LDR pilot program last month with a major North American financial institution, which I mentioned on last quarter's call. The customer was very pleased with the pilot and we expect orders shortly that could eventually encompass hundreds of locations across the US. The initial release will be approximately 7000 LDR fixtures. Meaning that this is another customer expected to drive significant growth in our fiscal 2015 and beyond.

In addition, we recently won an LDR order from a leading retail fast food chain, which should result after the pilot stores complete and over 400 locations being retrofitted this coming year. The opportunity could be even larger as the concept rolls out to thousands of their franchise operators after the company-owned stores are complete. This multiyear project is an exciting development that also is not reflected in the current quarter's numbers.

And lastly, I wanted to mention that a large automotive OEM has just selected Orion for a broad array of lighting products to be installed in factories and other locations across North America. The size of this order is still being determined, but will likely include several facilities representing over 4.5 million square feet of industrial and office space and be completed during this coming fiscal 2015.

So overall, the lighting retrofit market continues to show strengthening demand and attractive industry growth trends, which we expect to accelerate going forward. LDR unit shipments are increasing sequentially every month and are expanding national account business and indirect channels will support top-line growth for both this year and next.

At the same time, we continue to believe that, as our Company grows, this will translate into margin enhancement opportunities driven by greater volumes at our high capacity plant in Manitowoc, Wisconsin. We clearly have room to grow without any significant capital expenditures, so things are looking pretty good for us heading into 2015. We will continue to work on margin growth and cash generation while supporting our sales channel and expanding with new customers and new markets. We are excited by the recent wins with several national accounts and will invest further in business development while keeping an eye on costs, inventory and supply chain managing.

But before turning the call over to Scott, let me just touch on a couple of other housekeeping items that took place after the end of the third quarter. First, we not only completed our transfer of production from Harris' Florida facility to Manitowoc, but also closed our warehouse and operation center located in Plymouth, Wisconsin during January and moved that staff and equipment to Manitowoc as well. The Florida site is now for sale and given the synergies for bringing these two locations together, we expect annualized cost savings in the neighborhood of $100,000 going forward worth about a $0.005 cent per share pretax.

In addition, I am pleased to announce that we recently entered into an agreement subject to inspections to sell our corporate jet. In doing so, we can pay off our lease and save approximately $1.5 million of expenses on an annualized basis going forward or about $0.07 per share pretax. While the sale and lease payback will result in book expense of $1.8 million for the quarter, including a potential cash impact of $600,000, we believe this is an important strategic move to once again show our focus on fundamentals of business and reduce unnecessary expense wherever they lie.

Orion remains committed to improving long-term shareholder value while maintaining our position as a leading provider of energy-efficient lighting solutions. The trends are moving in our favor and we view the coming quarters very positively due to our order pipeline and ongoing business development initiatives. We've achieved bottom-line results that we said that we would and intend to continue delivering solid performance by focusing on margins, manufacturing execution and top-line growth. Scott will now review the quarter's results in detail. Scott?

Thank you, John and good day, everyone. After the market closed today, we reported results for the third quarter of fiscal 2014. Consistent with prior earnings announcements, we have provided additional content within a supplemental information document, which was posted to our website earlier this afternoon, covering our fiscal third-quarter and year-to-date performance. Accordingly, I will not walk down the P&L on a line-by-line basis, but I will address some of the key areas.

While we continued to grow profits and generated cash during the fiscal 2014 third quarter, our revenue of $27.7 million was down 4.8% versus our fiscal 2013 third quarter. Revenue from solar projects was $6.8 million in the quarter or approximately 24.5% of total revenue and Harris contributed $2.7 million of revenue during the period. John has already discussed the factors that impacted our national account sales and the Harris government projects.

Wholesale revenue was 62% of total third-quarter efficiency revenue and 64% of our fiscal 2014 year-to-date efficiency revenue. For the fiscal 2014 year-to-date period, revenue of $76 million was 19% ahead of the same period last year. Revenue from our solar projects of $20.8 million for the first nine months of fiscal 2014 was predominantly due to the Brick Township landfill project and accounted for 27% of total revenue. Year-to-date revenues from lighting projects amounted to $55.2 million, 13% ahead of last year's lighting revenue driven by the acquisition of Harris and growth within our wholesale channel. Our backlog at the end of December was $4.1 million, which included $2.2 million of solar projects. The decline in backlog was due to continuing construction on our solar landfill project.

Turning to gross margins, during the third quarter, we saw lower expenses on our solar landfill project and the completion of some higher-margin services tied to this program, which resulted in solar gross margins of 34.6% for the quarter bringing our year-to-date solar gross margins to 25.8%. Our lighting efficiency gross margin for the quarter was 27.8% compared to the prior year's comparable margin of 32.3%. Margins during the quarter were negatively impacted by severance expenses related to the reduction of Harris' manufacturing workforce as we transitioned production to our Manitowoc facility.

Additionally, the reduction in product volumes created by our customers' purchasing delays had a negative impact on the Company's gross margin performance. On a year-to-date basis, our gross margins from our lighting efficiency projects was 29.6%. Operating expenses were $7.2 million for the fiscal third quarter compared to $8 million in the prior-year period, a reduction of 10%. We achieved this reduction in spending despite the additional expenses resulting from the acquisition of Harris, which included amortization of acquired intangibles and the incremental expenses from Harris for SG&A, R&D and integration.

For the fiscal year-to-date period, operating expenses were $21.4 million compared to $25.9 million in the prior-year period, a reduction of 17%. This decrease in total operating expense was a result of our cost containment initiatives, including headcount reductions and discretionary spending cuts across all areas of our business. As a reminder, during fiscal 2013, we recorded approximately $2.1 million in reorganization expenses related to the management change that occurred that year.

We reported income from operations of $900,000 for the third quarter of fiscal 2014 compared to $600,000 for the third quarter of fiscal 2013. And for the third quarter of fiscal 2014, we reported net income of $1 million or $0.05 per diluted share versus net income of 700,000 or $0.03 per diluted share in the prior-year period. For the first nine months of fiscal 2014, we reported income from operations of $300,000 compared to a loss from operations of $7.1 million during the first nine months of fiscal 2013. For the fiscal 2014 year-to-date period, we reported net income of $2.6 million or $0.12 per diluted share compared to a net loss of $10.9 million or a loss of $0.51 per share in the comparable period of fiscal 2013.

As a result of the acquired assets of Harris and related tax liabilities, our year-to-date net income includes a benefit of approximately $2.3 million or $0.11 per share against income taxes, which have been previously reserved [for us]. Eliminating this $0.11 per share benefit and the $0.05 of acquisition and integration-related expenses, our adjusted EPS for fiscal 2014 year to date was $0.07. Our prior-year net income was impacted by a $4.1 million income tax expense or approximately $0.19 earnings-per-share charge related to a valuation allowance established against our deferred tax assets.

During our second-quarter earnings call, I discussed at length an amendment to the Harris purchase agreement and the impact of purchase accounting expenses that we recorded during that quarter as well. The amendment fixed the value of future shares issued at $3.80 per share and I am pleased to report that this amendment has helped to reduce dilution based upon the December 31 closing share price of $6.80 per share.

Turning to the balance sheet, we ended the fiscal 2014 third quarter with $18.3 million in cash and cash equivalents. This equates to a 28% increase from our March 31, 2013 fiscal year-end cash balance despite the $5 million cash purchase price paid to acquire Harris early in our fiscal 2014 second quarter. We generated $1.2 million of cash from operations during the third quarter bringing our fiscal 2014 year-to-date cash flow provided by operations to $10.8 million. We ended the quarter with $23 million in combined current and long-term inventory and excluding the impact of acquired Harris inventory levels, our core Manitowoc inventories have declined by $4.7 million or approximately 18% since the beginning of fiscal 2014.

Our minimal capital expenditures during fiscal 2014 have been related to IT initiatives and investments in new product development and related tooling. Debt service for the quarter was approximately $900,000 reflecting the quarterly debt service payments due on the seller-provided debt from the Harris acquisition. There were no borrowings outstanding under our revolving credit facility as of December 31, 2013, which has availability of $13.3 million. With a strong balance sheet and a continuing focus on cash from operations, we have no liquidity concerns related to managing our business.

Let me now turn to our guidance for the fourth quarter. For the fourth quarter of fiscal 2014, the three months ending March 31, 2014, the Company anticipates revenue in the range of $21 million to $24 million and earnings per share in a range between a loss of $0.02 and earnings of $0.01 per diluted share. Our earnings guidance incorporates the impact of government pushouts, the foreseeable decline in solar revenue and our expectations that our existing LED pipeline will begin to convert to purchase orders during the back half of calendar 2014, but excludes the impact of the aviation lease and facility exits. I will now turn the call back over to John for some closing remarks. John?

Great, thanks, Scott. Before opening the call for questions, let me reiterate that while Orion has made great strides over the past year, growing revenue 19% year to date and growing earnings 124% year to date, our sales efforts are just beginning to scratch the surface of what remains to be a huge market for the LED retrofit sales both here and abroad. We are winning new national accounts every quarter and our brand is clearly known as a leader in the space. At the same time, we sense further momentum going forward and demand and order trends accelerating on a sequential basis. And we are responding to this need as a cohesive organization with a great sales staff and highly trained people.

We need to continue investing in our people and our products to bring the best, unique offerings to the market and stay ahead of the competition while delivering the most value to our customers. We will also continue looking for strategic acquisitions that can broaden our productline, bring us new customers and provide superior shareholder returns through better asset utilization and economies of scale. I am personally excited about the future of Orion and see a great deal of potential due to our technology, our position in the market and most of all our people. We remain well-positioned and will continue to evolve in a way that best serves our customers and our shareholders. With that, operator, we will now open up the call up for questions.

(Operator Instructions) Steve Shaw, Sidoti.

Can you guys just provide some color on stepping away from the solar business? I know you guys were working on a big project in Brick. Is it a process that happened rather quickly, over a quarter or two or is it going to be a slow phaseout?

Sure, in terms of the infrastructure and the back-office part of that business, it is very scalable. The resources we have deployed for solar for the most part came out of our lighting business and so redeploying them is a pretty seamless activity for us. In terms of burning through pipeline, we do have a couple of open projects that we are winding down and that might take the next three quarters or so, but revenue becomes significantly lower. So it is not a difficult process for us to do that.

Okay, thank you.

I don't know, did that answer your question?

Yes.

Carter Driscoll, Ascendiant Capital.

Wanted to talk about some of the older pushouts. Maybe you could characterize -- I'm sure you don't want to identify the customers, but maybe some of the end markets and whether this is kind of more trepidation on global growth and people maybe pushing out some of their CapEx positions or whether it was a specific end market or a specific customer that you could -- any characterization I think would be helpful and then I have a couple follow-ups.

Sure. So what we have been experiencing is our customers, our industrial customers, so that is our more legacy factory and warehouse facilities that today they are looking at LED as an option versus linear fluorescent and the linear fluorescent is still very economical. LED is getting to the point where we are making sales into that space, but we are experiencing some longer leadtimes just due to [evaporating] back and forth as to do I wait a little while and get better pricing after the new year or in a few months on the LED versus on fluorescent. Am I investing in a technology that I may need to replace in a few years down the road? So it is adding more layers of questions into the sales process. That is on the industrial side.

On the commercial side, on really the front office and retail, which is really a newer market segment for us, it came with our LED fixture. That actually is -- we are seeing the opposite and that is a much faster adoption, much faster growth in that segment but because it is a smaller portion of our total sales, it is having less of an impact.

So I am seeing the LDR segment, the commercial office, the retail store, retail restaurant, retail banking, drugstore, all of the commercial spaces that the LDR is very well-positioned for is a very fast-acting space right now. So industrial on the inside and in factory and warehouse just a little longer leadtimes. And then some of the specific pushbacks, one was government shutdown, which impacted a fair amount of business and even though the shutdown was only for, I don't know, whatever it was, four or five weeks, the impact was that we are just now getting back on to those job sites. You can't just walk back in through the gates after a shutdown. There is a lot of other impact. So there is that and then we also experienced some large customers that went through acquisitions, just getting through -- some December acquisitions that put a hold on a whole lot of business for us too.

Okay.

Does that help?

Sorry to interrupt. Would it be fair to characterize that on the commercial side because typically the opportunity or the size of the facility is smaller relative to the industrial customer that it is quicker and therefore it might be easier capital decision, there might be a smaller total dollar layout versus the industrial customer and therefore a smaller sales cycle versus the industrial customer?

I think there is two -- you can split the commercial really into two segments. One is that small local buyer that is picking up smaller orders, but more significantly the large high-rise office buildings that are controlled by property managers. And so you really got both ends of that spectrum to where -- but the good news is that those guys are very open to discussing this topic, the property managers are. We are having a lot of discussions around that. There is some adoption rate. We are seeing orders that are coming in on that, mostly pilot orders right now but with a tremendous amount of upside. I think you can really split commercial into two -- the small laundromat, grocery store type business all the way up to the Sears Tower.

Can you remind us again kind of the rough split between industrial and commercial and then maybe how you expect that to evolve say over the next several quarters in terms of contribution to sales?

Carter, you are asking industrial versus commercial?

Right, correct. And therefore -- and then how you expect that potentially to change as you --.

Got it, got it. Yes, a small portion of our revenue right now is on the commercial side. John talked about pilot orders. So predominately our revenue on the lighting side has been either in exterior, parking garages, automotive dealerships or in a commercial industrial application.

But it does have the greatest potential to grow on the upside.

The commercial side.

Commercial.

Yes. So, moving forward, we could easily see that split moving more towards a balanced 50-50 ratio and commercial even outgrowing our existing commercial industrial business.

You're again stating that could potentially happen over the next several quarters or do you think that will take a multiple year process?

I think it is longer into the calendar 2014. A lot of this is seeding the clouds, getting pilots out there, the owners being able to evaluate the performance and the energy savings of the picture and then deploying capital. Again, to John's comments, at a smaller level, that decision is quicker. At a corporate level, that may take a little longer time for them to deploy the capital. I would tell you two to three quarters out is our expectation before it is meaningful.

Okay, thank you. That is helpful. Shifting gears a little bit. The Harris contribution is down, at least on a percentage basis fairly substantially. Q2 obviously largely impacted by the government side. Is that your typical type of government impact looking from what they did last quarter to this quarter and was there any other (inaudible) business outside of the government side?

No, the government business has been roughly a third historically and that has been pretty consistent to their run rate and that's about what it was impacted in the quarter.

That essentially just went away in the quarter. Is that fair?

Yes, just the deferrals.

Yep, Okay, okay. Of the pushouts you characterized winning, I'm assuming a significant majority of those back in later quarters, would you care to put a rough percentage around what was pushed out and what you think you have a good chance of recovering say over the next several quarters?

I think we have a great chance of recovering all of the business. I can't tell you specifically on the timing, but the most difficult one is obviously the customer of ours who was acquired. Both -- actually both the acquirer and the acquired business have been customers of Orion. So they know us, but they have to work through their own evaluation of facilities and allocating capital. The other pushouts really were timing issues around deciding to defer allocated budget dollars into calendar 2014. So those are still on the table and we would expect to be able to win that business hopefully in the first half, but again customer decision.

Okay, I will step back into queue. Thanks, gentlemen.

Tom Kerr, Singular Research.

Going back to the deal (inaudible) with solar projects, just to clarify, is that pretty much everything that is in the engineered systems segment or are there other material things in there? Or is that pretty much that whole segment is going to be in like a runoff mode?

Yes, that has been -- the engineered systems segment has been predominantly solar. We are looking at moving that into complex projects, so incorporating any complex lighting system, third-party technology. So that will evolve going forward, but from a historical standpoint that has been solar.

So engineering systems will sustain itself; it is just taking -- it's taking the national account complex lighting projects and so our traditional business is more the wholesale and end market and engineered systems will pick up the national accounts and the more complex stuff. So it is changing its character a little bit going forward. So you will still see numbers rolling through there, but it will be more lighting than solar.

Does that come out of the energy management segment that requires a restatement or would it be new type of business?

No, going forward.

Okay. So those segments will remain the same, just not have any solar in the engineered systems part?

Correct.

All right, that is all I had. Other questions have been answered. Thanks.

Good. Thanks, Tom.

Thank you.

[George Gizbar], Private Investor.

Yes, thank you. Good afternoon there. Couple questions. First, John, could you make some comments on your recent announcements on staff additions or management additions, changes? How do you see this all coming together now and what do you anticipate from these changes as far as what your objectives are near and longer term?

Sure. Nice to talk to you, George. We have been, over the last year, year and a half, constantly been seeking out and looking for and identifying talented individuals and people that can help us build and grow the business. We have made a lot of internal advancements and positioning of staff within the Company to better serve our customer. We have identified a lot of talent within the organization that has moved into roles that -- they may have been overlooked in the past, so we are having a tremendous amount of success in just identifying internal opportunities to better the business. Stay lean, stay focused on customers and building out a better business.

In terms of the recent announcements, one was Marc Meade who we had elevated to Executive Vice President. Marc and I worked hand in hand building out our solar division. He was very instrumental in a lot of the project finance structures and the operations of the business. Very talented individual, has a tremendous amount of insight and ability to look forward into the business and help prepare us. So he is very strategic. And then Omar Rivera, who we recently announced last week, joined us from General Electric, GE. He was a product manager for their LED lighting business, been with the Company for six years or so. Had some prior businesses before that in lighting -- distribution and lighting. So he comes to us with a tremendous amount of experience. He is helping us build out our channel and make sure that we are structuring as we are expanding and bringing on more resale business and more distribution business. He has really guiding through that and bringing a vast amount of knowledge to the table. So those are the two more recent announcements, but internally we are positioning people to better serve the customer. We focus all of our efforts around the customer value streams.

Okay, thank you. And now I got a question on power cost shift that could really be very dimensional in the United States coming forward here within six months. I spend a lot of time analyzing energy cost structures and this natural gas price shift that has been experienced recently obviously is due to cold weather in many parts of the United States. Historically I measure that there is a lag of about six months in power generators getting to the customer and as they purchase their forward advancements of natural gas, for example, for power generation. Are you sensing anything or maybe it is early, but I think the United States is in for a reassessment of companies, of manufacturers, users of electricity are going to be shocked at what they could possibly see as natural gas shifts upward in such a demonstrative number to energy power markets? Do you -- what do you think about that?

Well, it kills me, but if electricity prices go up, that benefits Orion. It provides more reason for our customers to take action, take measures to reduce costs. And I think the infrastructure that we have in this country and the constraints and the inherent age of the systems is all putting pressure on electricity costs. And I think we will benefit. I think the bigger driver for us though is the solid-state lighting. And even though electricity costs will have its ups and downs, the massive market -- regardless of electricity costs, the massive solid-state lighting market is probably more significant to us.

Okay, thank you.

Thanks, George.

Thanks, George.

Thank you. And I am not showing any further questions at this time. I would like to turn the call back over to John Scribante for any closing remarks.

Well, great. We look forward to spending some time once again next quarter and updating you on our progress. So I appreciate you taking the time today and we look forward to another great quarter. Thanks.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.