Orion Energy Systems Inc (OESX) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Orion Energy Systems Third Quarter Fiscal 2017 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call may be recorded.

I would now like to introduce your host for today's conference, Keith Radeke. Please go ahead, sir.

Thank you and good morning everyone, and thank you for joining Orion Energy Systems' fiscal 2017 third quarter conference call. Participating in today's call are John Scribante, Orion's Chief Executive Officer; and Bill Hull, Orion's Chief Financial Officer.

Following the review of Orion's Safe-Harbor statement, John will open today's call by providing comments related to Orion's quarterly results and business outlook. Bill will then provide further detail regarding Orion's third quarter financial results and then we will open the call to investor questions. An archived replay of this call will be available later this evening in the Investor Relations section of Orion's corporate website.

This call is taking place on Wednesday, February 8, 2017. Remarks that follow, including answers to questions, include statements that the Company believes to be forward-looking 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 than anticipated. Those risks include, among others, matters that the Company has described in its press release issued this morning and in its filings with the Securities and Exchange Commission. Except as described in these filings, the Company disclaims any obligation to update these forward-looking statements.

With that, I'll now turn the call over to John Scribante.

Good morning. Thank you everybody for joining us today. By now I hope everybody has seen our third quarter financial results, which reflect our team's continued execution over the past two years on repositioning Orion for growth, improved margins and a transition into the solid state lighting industry.

Orion's quarter three revenue rose 23% year-over-year to $20.6 million, driven by solid execution in sales from our enterprise accounts with additional contribution from our distribution channel. We met our target and achieved a gross margin of 30% in the third quarter, up 180 basis points from the year ago quarter and in line with our full year target. Margin was favorably impacted by our sales mix, as well as our supply chain and product designs. We have additional margin leverage potential as we execute on our design and tooling initiatives over the next few years.

And from a cash flow standpoint, we consumed $368,000 in cash from operating activities during the quarter. We ended the quarter with a strong balance sheet and net working capital of $31.3 million, including $19.1 million in cash and $6.3 million in total debt.

As we've discussed on previous conference calls, the second half of our fiscal year is typically stronger than the first half. Based on where we are today and being this close to the end of our fiscal year, we are narrowing our guidance to a revenue growth of 10% to 15% over fiscal 2016, while keeping gross margin guidance at or near 30% for the rest of the year.

With that overview I would like to now discuss our products and sales initiatives. For the past two years, we have focused on developing best-in-class LED fixtures for the commercial, institutional and industrial market, with a particular focus on making the most energy efficient fixtures from a lumens per watt stand point. We believe that our demonstrated ability to constantly innovate gives us a significant edge over our competition.

As you may know, Orion achieved an industry record of 214 lumens per watt with our ISON class High Bay fixtures that we released in September. The importance of this measure, beyond the fact that Orion was the first to cross that milestone of 200 lumens per watt and noteworthy that even today, six months later, no manufacturer has even come close to Orion's achievement is that it enables customers to generate a higher return on investment on their projects, using a Orion product and to be able to use those returns to fund new solutions that solve meaningful business problems. The product launch advanced the technology envelope and our leadership from the prior efficiency benchmark we had achieved at 179 lumens per watt in October of 2015. And even today, virtually all of our competitors struggle to even get close to this prior achievement.

Place this in context, most of our competitors including those that are far larger, still sell high-end solutions that are 20% to 40% less efficient. And why somebody would purchase a competitive product that costs the same, yet is one-third less efficient, is rational, and is where Orion intends to exploit through our expanded sales channel.

I'm proud to say that our engineering and product development team has not only achieved this record-breaking performance and market leadership, but we have done so in a large competitive market. We estimate that the market for building retrofit and renovation of lighting that is in Orion's sweet spot has a $200 billion installed base.

Now I'd like to point out that since virtually all of our products are made in our United States manufacturing facility, Orion has an additional competitive advantage in controlling our costs, which drives margin, but also ship product in the less than 10 days following receipt of order, which is an imperative for the building retrofit space. This domestic manufacturing strategy gives us a clear sales edge in fulfilling orders weeks faster than most all of our competitors. And when you are focused on the retrofit market, having the ability to custom package, label and provide site logistics delivers a competitive advantage that only a domestic manufacturer can provide and one that only Orion has the experience of doing.

Another area of opportunity for Orion is the connected ceiling technology that enhances building management and utilization. The market for smart lighting is projected to be worth approximately $20 billion today. And these solutions allow building managers to provide access control, fire and safety, space utilization, asset tracking and energy management functions, among others.

Orion has a portfolio of smart building patents and product technology, originally developed for our fluorescent platform. And over the next year, we expect to be reintroducing these products for use in the digital world. Our innovation team is working to develop new and enhanced products to meet these and future needs in an effort to keep Orion ahead of the smart building curve.

During the third quarter, LED revenue represented 82% of our total lighting product revenue. This exceptionally high conversion rate is driven by market demand for our top-performing High Bay and LDR products. In dollar terms, third quarter LED fixture revenue rose 29% to $15.5 million compared to $12 million in the year ago quarter. This level of market acceptance underscores the strength of our product offering, channel penetration and the rapid fulfillment from our US manufacturing facility.

Beyond offering the most efficient product in the market at a competitive price, we believe we must also provide best in class customer experience. Orion is committed to delivering our products with just a few days of order receipt, which is critical in the building retrofit world. And we're uniquely serving the retrofit market and it shows in our operational performance.

Given our retrofit focus, designs and job site management platform, we enable very low job site expenses with minimal disruption to the customer. This helps make the installer more profitable and leads to happy customers. When everybody wins, it gives us a real competitive advantage in the marketplace.

It is also important to note that we've realized margin expansion from our prior generation of High Bay product without any of the contribution yet from our 214 lumen per watt products just recently released.

Let me now spend a few moments on our sales efforts and our progress in migrating to an agency driven distribution channel. We initiated our plan a little over a year ago and started with just a few agents. We rolled out the plan broadly towards the end of January 2016, and by late April, we had agencies in place that gave us relatively comprehensive national coverage. And in the third quarter, we continued to see strong growth from the agency channel with approximately 44% of our sales coming from these agents. This compares to approximately 3% in sales from the agents in the year ago third quarter. While there has been a learning curve in implementing our new sales strategy, our results confirm that this channel represents a key driver in Orion's long-term growth outlook.

During the quarter, we moved to shrink certain agent territories to ensure they could provide proper focus and service levels and are pleased with our new distribution framework. We look to build on this base in coming quarters and have targeted to roughly double our current agent base to approximately 50 agents by the end of fiscal 2018. We're very pleased with the progress we are making and we're confident that it puts us on a stronger position going forward.

As for our direct sales efforts, we focused our national account team to continue to drive vertical sales opportunities across the Fortune 1000 and similar companies, and fulfilling that business through the agency and distribution channels. We continue to ramp our investment in sales and marketing resources and sales support personnel for our growing agent channel. These investments, along with increasing sales commissions, are reflected in the sales and marketing line of our P&L statement.

So in summary, we are focused on two things; growth in our business through expanding our channel presence and product innovation. And two, a disciplined capital allocation strategy to maximize shareholder return on invested capital. These strategies are paying off, as seen in our revenue growth, leadership in LED fixture performance, growing market penetration, improving gross margins, and the success of our new channel strategy.

So to sum up, we've come a long way over the past few years. We believe we are gaining momentum. We want to thank you, our shareholders, for your support. We promise that we'll maintain a disciplined focus on achieving further operational excellence, incremental growth and enhanced cash flow and profitability.

So with that, I will turn the call over to Bill to provide more insight on our financial results. Bill?

Thanks John. Orion turned in solid quarter three financial results with revenue increasing 23% to $20.6 million versus last year's quarter three of $16.8 million. Product revenue was 93% of sales and services was 7%. Our product revenue from enterprise accounts was 36% and our product revenue from ESCO and distribution partners is 64%. As we mentioned in previous earnings calls, we also service as enterprise accounts to distribution channel partners in many cases.

During the third quarter, we shipped approximately 2,400 customer orders, including 43 transactions over $100,000. Our average deal size also increased, as quarter three fiscal 2017 had an average size of more than [$8,400] and that's up 32% from quarter three fiscal 2016 average size of approximately [$6,400].

Orion's backlog rose 28% to $9.6 million versus $7.5 million in Q3 2016, a decline versus our backlog of $14.6 million at the close of quarter two fiscal 2017. We do expect our backlog levels to fluctuate from quarter-to-quarter based on the timing of large customer orders and related shipments. However, the general trend over time should reflect our revenue growth.

Third quarter gross margin rose 180 basis points to approximately 30% versus 28% in quarter three 2016. The margin improvement primarily reflects continued manufacturing efficiencies and a more favorable product mix versus the same period last year. Also note that the third quarter represented the eighth consecutive quarter of quarterly year-over-year margin expansion for Orion. As indicated in our financial guidance, we expect gross margin to remain at or near 30% for the balance of fiscal 2017. And that's up from a gross margin of 25% in the fourth quarter of fiscal 2016.

We maintained tight controls on our spending during the third quarter, resulting in an 8% reduction in general and administrative expense versus the prior year period. We are however continuing to invest in our sales and marketing activities, as we build out the agency and distribution channel that John discussed earlier. We also continued to invest in our research and development efforts. Our quarter three net loss improved to $1.1 million or $0.04 per diluted share, compared to a net loss of $2 million or $0.07 per diluted share in quarter three fiscal 2016.

Non-cash expenses in the third quarter were $1 million, consisting of depreciation, amortization and stock-based compensation. On a cash flow basis, we used cash of approximately $400,000 from operating activities during Q3 fiscal 2017 and ended the quarter with a strong cash balance of $19.1 million. As Orion continues to make progress on the profitability front, investors should be aware that Orion has $61.3 million net operating loss carry-forwards. This could potentially offset future taxable income and consequently could benefit free cash flow.

And that concludes my prepared remarks. So I'll turn it back over to the operator to begin the question-and-answer session. Thank you.

(Operator Instructions) Steve Dyer, Craig-Hallum.

I was just wondering if you could talk a little bit about what you've seen post-election, sort of, what are you sort of hearing from customers' sentiment. ISM has kind of bounced nicely the last few months. And then secondly sort of vis-a-vis your competitors, do you feel like with some of the taxes slashed, tariffs et cetera, that's been talked about, do you feel like you're better positioned just given your manufacturing base?

Well, post-election, I think people have reassessed some of their plans. I think it's still very favorable for the lighting industry in general. Anytime manufacturing strengthens as indicated through ISM and other industrial production measures, that helps Orion. Now it still isn't necessarily all the capital isn't freeing up in a free flow yet. And probably it's going to take a while for that to happen, but we're very optimistic with the trends that we're seeing in both the macroeconomic side, but also as you look at having a domestic US manufacturing facility, I guess we've an advantage in the event that there would be tariffs and other remedies that the administration puts on import. So we've always felt that the right strategy for retrofit is US manufacturing, it actually made us a better Company, because we've had more pricing pressures, and so we had to get very good at the manufacturing and keeping our manufacturing costs down, building up our margins. So doing that in the US environment, still being competitive, still delivering 30% margins with the expectation that we can continue to grow that higher, I think that's just for doing it -- doing it over the last couple of -- many years, has made us a better company. So as others have struggled to figure out their strategy bringing it back, they're going to have to learn that US manufacturing.

So I think we feel very good. The macro stuff certainly have to settle down and get some clarity, but I think the indicators are that all this manufacturing continues to strengthen and we get some decent tax policy in United States to start building things back here. Our customers will benefit from that, and as they benefit, they'll spend their money and move forward on efficiency projects.

Great. And then I was just wondering if you could give us a little color. Last summer you announced a pretty sizable multi-year contract with a retailer. Just kind of wondering where we are with that? Are you starting to see evidence of that yet? Is that in the backlog, is that running through revenue, maybe just any kind of color since then.

So it's not in our backlog, because we book those as the capital gets allocated on a per site basis and we did have a bit of a step back just due to floods in the Southeast and hurricane last fall. And that did slow that project down a bit, because all that clients resources, pretty much all fled to the repairing stores and getting that stores back online. So we believe that we are back on track now and those will continue to flow through. It's a multi-year project, it's good base business for us, you are not going to see it in any one quarter. It is just going to flow through pretty regularly, consistently over the next 24 months or so, 24, 30 months. That's on track and solid contributor.

Craig Irwin, Roth Capital Partners.

As we look down the runway, first quarter -- first calendar quarter of 2017, I guess that your fourth fiscal quarter is a little bit unpredictable. So in past years, you have been both up and down in the March quarter. I realize what we're only -- just starting six weeks in now for the quarter. Can you give us an update on whether or not you expect to be sequentially up or sequentially down for the March period?

Yes, even though you would think we're halfway through the quarter, it's still a go get business and we still turn our orders very, very quickly. So I really can't comment on whether it's going to be sequentially up or down. I think as we continue to build out our channel and we've reset the deck a little bit this last quarter, we made some changes in our channel. There is -- that revenue to predict it to a quarter end is very, very difficult. And as you know, we do have a history of large project orders that sometimes slip from quarter to quarter. So, even if my predictions did come true, there's still a reality of site access and labor issues at the end of a quarter that can slide projects one to the other. So I just do not make any comment on that.

So then if we could talk a little bit about the agency strategy, you say you want to double your current list of agents from 25 to something in 50 agency range. It's obviously been a very nice component of revenue, about $8.6 million higher year-over-year. If we look on the absolute revenue growth, it's obviously trailing, if you're new channel is only resulting in moderately higher revenue. So can you describe for us anything that may be is de-emphasized and your logic for de-emphasizing that if this is a cost to serve issue with prior channel commitments. And can you maybe describe whether you would expect to see a more additive contribution to your topline from doubling the agency base?

So we do expect additive. So when we moved our business to an agency driven distribution model, we converted a lot of revenue. So you take our base business of ESCOs and electrical contractors that had been purchasing directly from Orion. And even national account business, because we've got a set list of enterprise accounts that we continued or allowed to buy direct from Orion at the customers' demands. But everything else we start moving through an agent. And so in a short period of time as we're ramping up what you're seeing is more of a conversion of revenue from our traditional customers into the agents distributors with the intent then on having the distributors and agents adding to that mix. So, migrating from ESCO and contractor business pushing that through a distributor, really doesn't add a whole lot to the value, but then that agent distributor has now a base of business that they build from and we are starting to see that growth develop in a fair amount of our agents. As I had briefly mentioned in quarter three, we made some adjustments. We had some non-performing, we had some that weren't the right mix and fit and so we've made adjustments to those that we believe now have a greater impact and then doubling that again is really where you'll start to see more growth, because now you're starting to build off a base and adding more salespeople in the mix; sales people that are focused on renovation and retrofit, primarily on the retrofit side and project business. So they're out hunting for retrofit projects, much like our ESCO customers did, much like our national account people do. It's not an agent that is selling new construction is right now for Orion, that's not our best play. So finding those retrofit agents took us a little while. But we believe that we now identify them and move into the [50] mark by the end of the fiscal year is going to add revenues. And it also I think brings in -- we are starting to bring in some, what we would call, enterprise accounts that are coming from the agents, new business that we didn't know about that we're helping manage, even though it still grow through the channel, they're relying on our turnkey capabilities, Orion is unique in having this turnkey capabilities on our enterprise side. We're seeing now agents, distributors coming to us with large projects and say, look we want to sell the product through our distribution channel, but we want to hire Orion to do the turnkey construction work because they don't have the capabilities do that. So I think we're really starting to find our stride and find a good mix of agents that we're putting in place now and as we enter into the next fiscal year, I think we got to dial then.

So just a point of clarification, right. So one of the real strengths of Orion versus both your small and very large competitors has been the quick lead times that your capacity has afforded you over the last couple of years. Can you maybe just discuss if there is an inventory stocking requirement at your agents and obviously, the benefits there are lower airfreight costs and even shorter lead times than what you've been achieving to-date. And is this something maybe that could continue to benefit the inventory held on the balance sheet?

So as we look at our capital allocation, we're always looking to use other peoples' balance sheets to leverage. As we outsourced our fabrication, our metal fabrication, that strategy it prevents us from having to invest our capital in machine and equipment and tooling. So that's been a tremendous success. Taking that to the distribution side also has some value. But I think we're doing it a little differently. We are not putting the burden on the agents or the distributors, because quite frankly, as my inventory manager refers to it as we're managing essentially fresh fish. You've got inventory that is -- got to turn quick, because it will get obsolete. You've got issues you got to worry about there. And the agents don't want to take on that burden, nor do the distributors.

So what we do is, we are managing the inventory and we're actually -- we've got some initiatives this year to even further manage that. But we opened up a third-party logistics facility in Augusta, Georgia to serve our growing Southeast business and we'll continue to do that if we find pockets maybe out West, maybe in the Northeast, that allow us to ship full truckload freight into the markets and then distribute the last mile on the more expensive LTL freight. So, we're leveraging our transportation in a way that doesn't put the burden on distributors or agents, still cuts out costs and deals with the issue that you had in terms of freight costs, and still maintain those quick lead times. Net effect, it's improving the lead times and providing more of a white glove service to that end-user.

My last question really is about earnings breakeven, the past earnings breakeven. I know it's very difficult to really project revenue, but can you remind us what the annualized revenue run rate Orion would need to achieve today to achieve breakeven and whether or not there are any specific puts and takes that we need to consider as we look forward to that hopefully over the course of the next year?

Craig, it's Bill. So, as I've said before, so if you take a look at our business right now, we are talking about a $25 million per quarter run rate at a 30% gross margin hit breakeven. So, a couple of things to think about there. You can tell quarter to quarter things fluctuate a little bit, we were lower on our SG&A expenses this quarter. And if the margin goes up, you have those things to play with. So I think when you talk about going forward in the agency distributor model, we're going to have to put some more support for sales and marketing efforts in those lines. So that expense might go up, margins are going to go up. So if you look at the business right now, it's $100 million breakeven. As we go forward that's going to change slightly. Did I make sense to you?

Yes, that's completely clear. Thanks again for taking my questions.

Amit Daya, Rodman & Renshaw.

Just to follow up on these sales channel questions, is there any agent that is accounting for a larger portion of sales right now?

No, it's pretty distributed. We do have -- I guess if you look at -- if you take a year to-date over the last nine months, it's been very evenly distributed on the ones that are producing, and as I had mentioned in Q3, we had some lower producer agents that we have cycled out and now are replacing with some new. And so from that perspective, yes, some are producing more than others. But we don't have a single one that is contributing a disproportionate higher than others.

And, in your commentary, I think Bill may have mentioned you guys are looking at the Fortune 1,000 companies through the direct sales force. And should we be viewing that you guys are dealing with Fortune 1000 opportunities internally and then harvesting the other potential customers to the agencies.

Well, the way that -- so Orion has always had an ability to go out and capture and user, direct, large national account business and we've never given that. But what we have done is we've engaged the channel, so that we support the channel through those endeavors. So we'll have vertical sales managers that call on trucking, transportation and trucking. We have a vertical that calls on automotive, we have a vertical that calls on government. We have one on retail, we have one on cold storage. So they're going out and driving demand with these end users in their verticals and then they will fulfill that business through the agency, through the traditional channel. We have a very -- you can count then on two hands, a very small lift of enterprise direct accounts. But that doesn't stop us from continuing to market and generate demand and then we just fulfill that through the channel.

What are the plans for the legacy business now. We are in sort of a steady state of over 80% of revenues coming from LED sales. Is the legacy business dragging margins potentially, how do we deal with the shift that has now come to fruition basically for you?

Our legacy fluorescent has -- actually the margins are maintained at the levels at are above where we've been in the past. So it really doesn't have any dilutive effect on our margin at all. And what we've been able to do is we've been able to build universal assembly lines across all of our entire platform, including fluorescent, so that no matter what order comes down to the shop floor, they are able to run that product on the same assembly lines with the same team, the same people and whether they're pushing a fluorescent product on that line or an LED product, they still produce as if it was all the same. So we don't see any need to shut that down. We don't see any reason financially or operationally to close that down. As long as we continue to still get orders for it, it is a very good business for us. And in some regards on some of our lower-end products, the tooling for the fluorescent lighting and the tooling for the LED lighting, many of the parts and components to build those fixtures are identical. So we have even been able to manage our inventories across those lines as well.

And just maybe one final question on the product development side, we introduced the 200 lumen per watt product last year. I mean for calendar 2017, what should we be looking for in terms of new products?

We are going to continue to out our performance line of products, because we believe that having the high lumen per watt, it forces the decision at the job side, at a customer site. It forces their decision to consider Orion when they -- we are a smaller company than a lot of the bigger ones, we have don't have the same channel strength, as a lot of the others. But having that performance advantage forces a decision that the customer decides do they want a high return on investment. The other thing is that the Orion advantages that we talked about a little bit in the commentary around job site management and lower costs for installers, all of that innovation we believe gives us pricing power in the marketplace.

Now with that said, we also realize that the lumen per watt performance is just the ticket in. And having our smart controls and technologies, it's a small piece of the market today, but it's becoming a talking point that is becoming more and more important in the market. Customers are starting to realize value that a connected lighting system can bring. We've mentioned some of our large automotive customers have adopted our smart building technology to solve business problems, material handling problems and other things. So you will start to see a -- well you'll see a continuance of the performance leadership from Orion, and you will see more of these connected ceilings, smart building technologies start to flow.

And I guess I'll comment one other thing on that. You'll just start to see an expanded product line as well. We continue to build out additional retrofit products horizontally on our product lines. So you'll see some more industrial products come out, more commercial products to just broaden the product line as well.

(Operator Instructions) [George Gaspar], private investor.

Just a follow-up on the sales, cost structure, S&M. Based on the $20.6 million that you ran and your S&M was $3.5 million plus, and that's a 17% range overall. Now if you look at the LED part of that -- from the previous year, it was running 14.3% on S&M relatively speaking someplace in there. So now, you've got this increase coming about in S&M cost as you're moving more into the agency action area and I figured it to be about $19.4 million, the increase in S&M cost for the quarter on your sales increase of $3.8 million. Are you going to continue to experience an S&M factor increasing sales that would create an S&M cost that would be in the 20% range?

I'll let Bill follow up on this, after I make just one comment is we made a comment about increasing sales marketing expense, but we see that really is a one-time step increase to prepare for the additional burden of having 50 agents in the marketplace. So that's customer service that some inside sales support -- little bit of extra field support. So there is a one-time component to this and then there is the ongoing just commissions that shouldn't increase, other than proportionate to revenue increase, because I would just be paid commissions on sales. So we're anticipating a one-time job. We think we can pay for a lot of that through other efficiencies in the business, both in G&A reductions and possibly other places. So there is a one-time component and there's an ongoing. So I'll let Bill perhaps explain a little bit further on that.

I think John, got that, the best way to say it, so we need to build the infrastructure to support the agency network and some of that will be fixed costs, so you talk about sales planners, customer service, we want to make sure we maintain that type customer relationship. And then you're going to have commissions, which will be more of a variable-type cost as we look to that model.

Next question would be on the R&D side. John, if you could cover that? Can you describe your emphasis going forward on R&D objectives, or anything cooking in the systems for communications in the lighting system?

So, I think we covered a little bit of that, but I'll expand it a bit. So, the High Bay the industry -- the remainder of the industrial lines, (inaudible) and other industrial products in the commercial, we feel that today other than some expansion and some new products that expand those product lines. We're going to stay focused in the areas that we traditionally have.

In terms of building connected lighting systems, as you know, we've been doing that since 2009 on the fluorescent side. We had cloud enabled technologies far back as 2010 timeframe. And so, now it's really just we took a couple of years where we've got the rest of the business straightened out to let the market shake out, figure out where that was going and we believe now this coming year is the year that you'll start to see us to rebuild our presence. The good news is that while there's been a lot of discussion in the marketplace, there has not been a lot of adoption of that technology. You're starting to see that come this year, you're starting to see some steps that companies like our automotive companies, they're starting to see the value of that. I think having those case studies in the marketplace is going to start to accelerate this. Some of the costs are coming down on the infrastructure side to achieve this. So it's becoming more affordable.

So Orion is I think at a good turning point, because we've got the base technology, we've got the intellectual property, we have patents that cover a lot of the stuff that people want to do in this marketplace. And now it's building out that offering. And that's really where a large part of our R&D focus is going forward at least this next fiscal year is going to be in the connected ceiling space. Again, we've got a lot to build upon. We've got an interim offering today that we're providing to customers, but we believe that we're going to have a much more sophisticated and robust system available later this year. So combined with continuous performance on lumen per watt, which really drives the economics and finances, and as long as we win in that battle, we will always have a more -- a greater financial returns on the connected ceiling, because of the base savings that the lighting offers. So even if our connected controls cost the same as everybody else's, we're going to be at an advantage, because the base fixture performance is generating more savings, fund those. So the customer will still win with Orion.

John I ask this question about every quarter, but could you just highlight your employment situation, a focus on changes in, say, the past quarter and maybe into the current quarter that you are in operation on now. Have you added people?

Yes. In the manufacturing, we announced a month or so ago that we were adding 30 people into our manufacturing facility. We haven't made all those moves yet, but we have started making those moves. We feel that we need to continue to invest in our US manufacturing. And now is the time that the demand is picking up for us. In the Chicago office, we are seeing some more adds in terms of sales support and then in our Jacksonville] office, it's been pretty stable with a few adds in the field support.

And then one last question if I may. Just looking at customer exposure, I don't know if you would comment directly on if Amazon is a customer, they seem to be continuing to just break out all over the place and new facilities. And then secondly, in terms of power generation structure, Florida power and light is going to do $2 billion they approved going forward. In Florida, the Carolinas maybe going west. Two significant power generation systems will be included in that. This year product apply, do you do business with the utility power generators at all?

Well, the way that we do business is we engage the utilities as part of our projects. And so we will benefit from the incentives that they provide and also access to facilities that they may be interested in providing more efficiency measures. So whether it's FPNL or any other utility, our regional sales managers are continuously working with those representatives to understand what's happening in the marketplace and how we can help them fulfill their goals for either -- well, for energy efficiency. And the utilities, as demand -- as the economy builds and grows and see more strength from a macro point of view puts more demand on the utilities to provide more efficiency incentives.

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

Okay, well, great. Once again I thank everybody today taking the time to listen to our progress and for your continued support. So we look forward to speaking with you in a few months. And have a great week. Thank you.

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.