On Thursday, Orion Energy Sys (NASDAQ:OESX) discussed fourth-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Orion Energy Systems reported a year of growth in FY26, with revenue reaching $86 million and achieving $2 million in positive adjusted EBITDA, marking six consecutive quarters of positive adjusted EBITDA.
The company set and achieved key milestones including maintaining NASDAQ listing, implementing growth and cost containment initiatives, and surpassing revenue goals.
For FY27, Orion projects revenue between $95 and $97 million with continued positive adjusted EBITDA, driven by growth in LED lighting and electrical contracting segments.
Operational highlights include entry into the data center market with a new customizable linear lighting fixture and expansion in EV infrastructure and electrical contracting.
Management noted significant improvements in gross margins across segments and highlighted a strong backlog and distribution channel growth, pointing to ongoing market opportunities.
Full Transcript
OPERATOR
Good morning everyone and welcome to Orion energy systems fiscal 2026, fourth quarter and full Fiscal Year conference call. At this time, all participants are in a listen only mode. In this call, Sally Washlow, Orion CEO, and Pierre Rodin, its cfo, will review the company's fourth quarter and full fiscal year results, as well as its fiscal 2020 outlook. Then we will open the call to Investor questions. Today's call is being recorded. A replay will be posted in the Investor section of the company's [email protected] I will now turn the call over to Pierre Rodin, Orion cfo.
Sir, please go ahead.
Pierre Rodin
Thank you, Michelle. First, as a reminder, prepared remarks and answers to questions include statements that are forward looking under the Private Securities Litigation Reform act of 1995. Forward looking statements generally include words such as anticipate, believe, expect, project or similar words. Also, any statements describing future objectives or goals, company plans and outlook are also forward looking.
These forward looking statements are subject to various risks that could cause actual results to differ materially from current expectations. Risks include, among other matters, those that Orion has described in its press release issued this morning and in its SEC filings. Except as described therein, Orion disclaims any obligation to update or revise forward looking statements made as of today.
In addition, reconciliations of certain non GAAP financial metrics to their nearest GAAP measures are also provided in today's press release. Now I will turn the call over to Orion's CEO Sally Washlow.
Sally Washlow (CEO, Member Board Of Directors)
Thank you Pierre Good morning everyone and thank you for being with us today. I am pleased to report Our results for Q4, our sixth consecutive quarter of positive adjusted EBITDA, and for the full fiscal 2026 year. Fiscal 26 represents an exceptional year at Orion Energy Sys. It was a year of growth in revenue and newly achieved profitability. It was a year of strengthened incumbencies in some of our most largest customers. And it was a year of product and market expansion.
You may recall from earlier calls that we discussed three milestones for Fiscal Year 26 Milestone 1 to maintain our NASDAQ listings and maximize our opportunity for growth in shareholder value, we achieved this goal. Milestone 2 By the end of the third quarter, the enactment of a growth, profitability and cost containment initiative that enables Orion Energy Sys to become a recognized long term market leader. We achieved that goal as well. And milestone three by the end of the fourth quarter, 84 million in revenue at or near positive adjusted EBITDA.
For the full fiscal year we beat this goal with 86 million in revenue and 2 million in positive adjusted EBITDA Looking forward, Orion Energy Sys's FY27 outlook expects revenue of 95 to 97 million, with potential upside in the number of opportunities based on our enhanced operating discipline. Our growth outlook should once again enable Orion Energy Sys to achieve positive adjusted EBITDA for the full fiscal year. We have come a long way to get to this point.
Fiscal 26 marked the first year in some time that we experienced growth and positive adjusted EBITDA. Fiscal 26 represented a pivot point for this company, a year in which we embarked on a course of increased revenue, expanded profitability and elevated prominence in our competitive market. When I arrived as CEO of Orion Energy Sys at the beginning of Fiscal Year 26, I was immediately inspired by the team that greeted me. We agreed that Fiscal Year 26 could be more than just a transition year of writing the ship.
We had a stellar reputation for quality along with a track record of growing our business with large Fortune 50 global leaders. We had an unrivaled built from the ground up proprietary supply chain that served to insulate our customers from much of the brunt of exogenous shocks. And we had tailwinds from a multi year invigoration of US Manufacturing facilities, private and public sector vehicle fleets and AI driven data centers like the data center product that we announced last week.
To put it simply, we planned, measured and executed and the results of Fiscal Year 26 represented not only a marked improvement over the previous fiscal year, but a jump above our originally announced expectations. Fiscal Year 26 was indeed a year of right sizing as we enacted a sustained and necessary cost containment initiative. It was a year of sharpened focus on profitable growth illustrated by our six consecutive quarters of positive adjusted EBITDA through the end of the fiscal year and it was a year of maintaining our NASDAQ listing and bolstering our balance sheet.
Through it all we received a demonstrable show of support in the market by existing and new shareholders. The results and expectations we report today are testimony to Orion Energy Sys's success on a number of fronts, including renewed aggressiveness in acquiring and expanding within large customers, a quantum improvement in the size and quality of our sales funnel, disciplined cost containment and an ongoing build out of our robust proprietary supply chain.
Today's report also speaks to some key growth sparks that put us on this up and to the right trajectory our focus on expanding opportunities and revenues within new and existing large customers in the automotive, retail and public sectors, whether by deployments of LED lighting systems, electrical infrastructure or EV charging infrastructure our focus on maximizing our service to long term EV charging customers, which is enabling us to manage our adjustment to the present environment in the sector and our focus on adding capabilities such as battery energy storage systems and electrical contracting.
Adding capabilities continues to be a theme here at Orion Energy Sys, as last week's entry into the booming data center market demonstrated. As you undoubtedly know, there is an immense amount of new construction of data centers being driven largely by exponentially increasing demand for artificial intelligence and cloud computing. About 3,000 new data centers are being planned in the United States. ABI Research expects more than 10,000 to be operational by 2030, with another 2,000 coming online before 2035.
Orion Energy Sys fully intends to be the LED lighting provider of choice for many of these thousands of data centers. And as we announced last week, we have the product to do it. Orion Energy Sys's multipurpose linear lighting fixture brings to the current data center building boom a customizable product designed specifically to fit the architecture and floor plan of data centers. We listen to our customers and we developed a product that fits the needs of these hyperscale data centers and ensures the flexibility and shortened lead times that come with building in house right here in our Wisconsin manufacturing facility.
And the needs of data centers are significant. Energy efficient lighting is a priority in data centers whose AI driven applications impose unprecedented demands on energy, requiring unprecedented levels of power. Data centers are prioritizing solutions to minimize their electricity consumption and carbon footprint. Hyperscale data centers emphasize three particular themes that we address squarely in the development of the product. AI workloads are increasing power density and uptime requirements across data centers expanding demand for infrastructure solutions that can improve efficiency and lower total operating cost for operators and investors
alike. Solutions that reduce energy consumption can offer meaningful economic value when deployed at scale across large footprint facilities. As AI driven data center construction accelerates, products that combine performance, scalability, cost effectiveness and ease of integration may be positioned to benefit from a long term infrastructure upgrade cycle. Hyperscale data centers can count on Orion Energy Sys because we are known for delivering on these points.
We are reliable, durable and scalable. We are on time and on budget and we do it with our own proprietary supply chain which serves to reduce customers exposures to choke points, lengthening dwell times and market disruptions. Data centers are now learning what other large industrial facilities in retail, automotive and public sectors already know. Orion Energy Sys can provide the most energy efficient and reliable LED lighting solutions in the marketplace.
We intend to become a provider of choice in this growing and long term market opportunity. We have the same ambitions for incumbency and data centers that we have in our longtime historic markets. Decade after decades, longtime customers stay with us and expand their scope of work with us because we are consistently deliver unsurpassed quality, unsurpassed reliability, unsurpassed scalability, and unsurpassed roi. Again, today's report marks a milestone for Orion Energy Sys and I am extremely optimistic about our future.
With that, let me turn to Orion Energy Sys's CFO Pear Brew Dean to review our financial performance and outlook.
Pierre Rodin
Thank you, Sally Today we reported fiscal Q4 Fiscal 26 revenue of 25.7 million as compared to 20.9 million in Q4 Fiscal 25. For Fiscal Year 26 as a whole, we reported 86.3 million in revenue compared with 79.7 in Fiscal Year 25. LED segment revenue in Q4 Fiscal 26 was 20.3 million compared to 20.9 million in q4.25. For Fiscal Year 26as a whole, LED lighting segment revenue was 55.9 million compared to 47.7 million in Fiscal Year 25.
Lighting segment revenue performance reflected increased project activity and distribution channel sales, partially offset by a decrease in Esco channel sales. Orion's expanded LED lighting project pipeline and efforts to drive growth in the distribution channel are continuing to contribute to higher expected revenues. In fiscal 27, Lighting achieved a Q4 26 gross margin of 40.4% versus 28.3% in Q4.25. Lighting margin benefited from a contract amendment payment of $1.3 million which did not have any associated cost of sales.
Excluding the effect of that payment, lighting segment margin would still have exceeded 30% for fiscal 26 as a whole. Lighting recorded gross margin of 33.8% compared to 26.6% in fiscal 25. Maintenance segment revenue decreased to 3.2 million in Q4.26 from 4.1 million in Q4.25, reflecting the timing of some seasonal work. We achieved a maintenance segment gross margin of 22.1% in Q4.26 versus 24.6% in Q4.25 for the entirety of fiscal 26. Maintenance segment revenue increased 6% to $16 million while gross margin came in at 23.7% in fiscal 26 versus 18.2% in the year ago period.
EV charging Solutions revenue was 2.3 million in Q4.26 compared to 5.8 million in Q4.25, reflecting the sector wide uncertainty regarding the market environment in the United States and a very strong performance in Q4.25. EV achieved a gross margin of 27.5% in Q4.26 versus 27.9% in Q4.25 for fiscal 26 as a whole the EV charging segment revenue was 14.4 million versus 16.8 million in fiscal 25, while gross margin came in at 37.7% in fiscal 26 versus 28.3% in the year ago period.
Our overall gross profit margin increased to 37% in Q4.26 versus 27.5% in Q4.25. For the entirety of fiscal 26, gross margin came in at 32.6% compared to 25.4% in fiscal 25. We expect our overall gross margin to remain strong throughout fiscal 27, although it will likely vary on a quarterly basis due to revenue mix and volume. Total operating expenses increased to 10.3 million in Q4.26 from $8.4 million in Q4.25. Q4.26 opex included 1.7 million of earn out true up expense and 1.1 million for a non cash write off of Solar assets, while Q4.25 included 0.5 million of earnout expense and 0.9 million for severance.
For the year as a whole, total operating expenses declined to 29.7 million in fiscal 26 from 30.8 million in fiscal 25 with fiscal 26 reflecting ongoing overhead and personal expense reductions and the 1.7 million of earnout expense and 1.1 million of non cash solar asset write off and 500,000 of executive sign on bonus. With stronger gross margin and lower operating expenses, Orion's Q4.26 net loss was 1.5 million or $0.39 per share compared to a net loss of 2.9 million or $0.88 per share in fiscal Q4.25.
For the fiscal year as a whole, FY26 net loss was 3.2 million or $0.89 per share compared to a Net loss of 11.8 million or $3.59 per share. In fiscal 25. Adjusted EBITDA approved to a positive 0.8 million in Q4.26 versus 0.2 million in Q4.25. As for the full year, adjusted EBITDA improved to positive 2.2 million in fiscal 26 versus a negative 2.9 million in fiscal 25, reflecting increased gross profit, cost control and financial discipline. As Sally mentioned, this was Orion's sixth consecutive quarter of a positive adjusted EBITDA here today, cash used by operation activities was 1.1 million in fiscal 26 compared to cash provided by operations
of 0.6 million in fiscal 25. During fiscal 26, we also had a net paydown on our revolving credit borrowings in the amount of $4 million. Net working capital was 11 million at Q4 26 versus 8.7 million year end fiscal 25. Available financial liquidity at the end of fiscal 26 was 15.4 million versus 13 million at the previous year. End of additional note, we raised net proceeds of 6.4 million in fiscal 26 through the issuance of 500,000 shares of common stock, which provides us with growth capital and the ability to pay down amounts outstanding on our revolving credit facility.
Plus, effective in May, we extended the maturity of our credit facility from June 30, 2027 to June 30, 2030. Regarding our outlook, as Sally noted, we have increased our expectations for growth and profitability for our current fiscal year which began April 1, having announced that we expect a continued increase in profitable growth in fiscal 27 with positive adjusted EBITDA on revenue of between 95 and 97 million. And this concludes our prepared remarks.
Operator would you please commence the question and answer session?
OPERATOR
Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11. Again we ask that you please limit yourself to three questions. If you have additional questions, please re enter The Q&AQ. One moment for our first question. And our first question is going to come from the line of Eric Stein with Craig Hallam Capital Group. Your line is open.
Eric Stein (Equity Analyst)
Please go ahead. Hi Sally. Hi Per. Good morning.
So I mean obviously strongest backlog that you've had in cash four or five years. I'm just curious if you can give any commentary on what you're seeing early in fiscal 27. And I know things are hard to predict, but is it fair to say that your confidence level is quite high? Do you expect to see these order trends and this backlog growth continue throughout fiscal 27?
Sally Washlow (CEO, Member Board Of Directors)
Yes, fiscal 27 as noted in our backlog and we're optimistic about it. It started strong and when we look at the backlog it's pretty distributed amongst our various segments as well. So we think we're off to a good start and we'll continue to grow that backlog and execute the projects that we need to deliver on.
Eric Stein (Equity Analyst)
Yep. Okay. And maybe just on the you're executing on the outdoor lighting opportunity with one of your long term customers. Maybe just an update on, you know, that was going to be split between Q4 and Q1 or and maybe some in Q2. So you know, maybe talk about the linearity of the revenues that you expect in fiscal 27. When you factor that in,
Sally Washlow (CEO, Member Board Of Directors)
I guess I'll take that as speaking to overall revenue expectations for the year. I think we just completed Q4, which had revenue north of 25 million. And if you look at our guidance for 26, I'm sorry, for 27, I think our expectation is the revenue will play out relatively evenly over the year. Okay, got it.
Eric Stein (Equity Analyst)
And I guess for my last one, I'll just ask about. I know that this is an opportunity with a long term customer. You've done 2,000 plus sites and I know that there was some opportunity that you could expand in these specific 200 plus locations and maybe expand to some indoor work. Just any commentary on where that stands?
Sally Washlow (CEO, Member Board Of Directors)
Yeah, that opportunity continues to move along in what I'd say a positive way. There's testing going on to finalize selections and we're optimistic that we'll continue with that opportunity.
Eric Stein (Equity Analyst)
And when you say testing, I mean is that testing? Is it you being considered versus someone else or is it just testing, you know, kind of to figure out next steps.
Sally Washlow (CEO, Member Board Of Directors)
Good clarification point within locations. So we don't believe anyone else is in the mix.
Eric Stein (Equity Analyst)
Understood.
Okay, thank you.
OPERATOR
Thank you. And one moment for our next question. Our next question comes from the line of Samir Joshi with H.C. wainwright. Your line is open.
Samir Joshi (Equity Analyst)
Please go ahead. Hey, good morning, Saliper. Congratulations on a strong year and the outlook is pretty good as well on the fourth quarter 26, the LED lighting revenue in particular were pretty strong. 20/million relative to 11 to 13 million in the prior four quarters. Was this because of some contract timing or are we seeing this strong performance and expecting it for the next few quarters?
Sally Washlow (CEO, Member Board Of Directors)
Good morning. I'll start with this question. So we expect this strength to continue within the segment, not only from the fourth quarter, but the coming quarters as well. And it was really from a mix of the projects that we delivered. Some of the electrical contracting that we've been talking about was in there and along with the services that we deliver within the segment as well. So our expectation is for this to continue in the coming quarters.
Samir Joshi (Equity Analyst)
Yeah, I'm glad you mentioned the electrical contracting business. I think you have around 21 million in array of those projects with seven customers. Can you give us a little bit insight into what that electric contracting work entails? And also do you have working capital to service this kind of a backlog?
Sally Washlow (CEO, Member Board Of Directors)
So yes, we have the working capital to service the backlog in terms of more color on what some of these contracts look like. Examples are with some of our larger customers work that we had not been doing before, but in terms of new store build out and doing all of the electrical contracting within their new stores. Other examples are expanding work that we have within EV infrastructure and doing electrical contracting work in that realm as well.
So we're seeing it from logistics customers, retailers, within some of the EV contracts that we had as well, where we're adding on additional work to those contracts.
Samir Joshi (Equity Analyst)
Understood. And then you earlier this week or last week, you announced the entry into the data center AI domain and you highlighted it on this call as well. Does the backlog that you spoke of include any of this? Meaning I know it is early days, but should we expect upside to this 95 to 97 million based on your success potential success in the data center market?
Sally Washlow (CEO, Member Board Of Directors)
So our backlog really does not reflect that. Currently we do have high expectations for this segment. As you can imagine though we developed the product, we've been working closely with customers on this product. But we think that a lot of the revenue will come later in the year as these come online. Sorry, later in our fiscal year and then in the coming years as well.
Samir Joshi (Equity Analyst)
And this last one, I think you have mentioned it in the commentary in the press release. But is the Woltrec earn out payment done? Meaning are all the payments done and no more earnouts should be expected in coming quarters?
Pierre Rodin
Yes, and Per can expand on that. Yeah, all payment requirements are fully satisfied so that you'll see none of that carrying into fiscal 27 or beyond.
Samir Joshi (Equity Analyst)
Thanks a lot. Congrats on the progress and good luck.
Sally Washlow (CEO, Member Board Of Directors)
Thank you.
OPERATOR
Thank you. And one moment for our next question. Our next question comes from the line of Gaussi Shri with Singular Research. Your line is open. Please go ahead.
Gaussi Shri (Equity Analyst)
Good morning everyone. Can you all hear me fine? Yeah. Fine.
Sally Washlow (CEO, Member Board Of Directors)
Good morning.
Gaussi Shri (Equity Analyst)
Good morning, Sally. Congratulations to you and your team completing your first year as CEO. Seemingly a genuine turnaround is in progress. Impressive set of results. I just wanted to have a few questions. Yes, a few questions designed to kind of stress test the momentum going into fiscal 27. I know the gross margin came in at 37. If we strip out the solar revenue, looks like it's around 33, 34.
But even if it's around 31%, as we think about fiscal 27, is that 3132 still kind of the right structural flow or does the mix shift towards electrical contracting? Larger LED projects give you confidence that it can be sustained at a higher level?
Pierre Rodin
I think we can sustain at what would be a high level for us. And then we think we're very proud of the margins we achieved in fiscal 26 and 27, I think, you know, a round number of 30% is probably the way to think about this as we enter the year and as I mentioned, somewhat subject to quarter by quarter mix shifts that can occur.
But based on our say, the infrastructure we put in place a year or so ago, plus some of the other changes we've made with the increases in sales volume, we believe that we can achieve margin at that level. Gotcha.
And net net. Is Orion exiting the solar business? Will there be any noise still embedded in the fiscal 27 numbers there? That was the last remaining bit of solar business we had left. That was a 30 year contract that we amended to essentially stop any further activity in the solar business. So there will be no carry forward activity in that area.
Gaussi Shri (Equity Analyst)
Yeah, I know you guys in your last call you were still at the early stages of electrical infrastructure. This seems like kind of a genuine segment now. Are you at a point where you're considering reporting it separately? And what kind of revenue run rate should we think of as we kind of think about fiscal 27 and beyond?
Pierre Rodin
Yeah, it's really something we haven't thought about breaking out separately at this point. It certainly has some momentum behind it. As we've stated in different releases that we put out, that is managed largely in our services group, that's part of the turnkey services. So at this point we think that would remain managed by that group and reported.
And to the extent we have significant projects that come along, we would announce those as the orders are received. Gotcha.
Gaussi Shri (Equity Analyst)
And I'll sneak in a last one on the EV side. With the battery energy storage deployment in California, what is the approximate revenue per site and do you have a target number by 427? And is it, is it embedded in the 9597 or is it kind of still an upside to it?
Sally Washlow (CEO, Member Board Of Directors)
It's part of our 95 to 97. We think there's a lot of opportunity within that segment, whether it's through the EV work that we do or other work that we do with customers as well. But we're pretty early in that solution.
Gaussi Shri (Equity Analyst)
Awesome. Thank you guys and congratulations and good luck. I'll jump back in the queue.
OPERATOR
Thank you, thank you, thank you. And as a reminder, if you would like to ask a question, please press Star one one on your telephone. Our next question comes from the line of Bill Dzellum with Teton Capital Management. Your line is open.
Bill Dzellum (Equity Analyst)
Please go ahead. Great.
Thank you for clarification. That's Tieton Capital Management two Questions to begin with, first of all, I have never gone into a data center and looked at or the ceiling as the case may be. Would you walk us through what's different about your data center product and why they need anything different or special than any other four walled box that has a ceiling?
Sally Washlow (CEO, Member Board Of Directors)
Well, I won't get too technical on the call, but what we've done is we had a multipurpose linear light that we worked closely with the end users to make sure that it was hitting the right efficiency that they needed as well as some certain other requirements that they had that were under NDA for some of it. And so it's a product that we've made that we have customized for data centers.
And then another part of the interest from data centers was our ability to customize and make it within our Wisconsin facility to shorten the lead times as well as their rollouts and their needs grow.
Bill Dzellum (Equity Analyst)
Great, thank you. And that sales effort, is that taking place through Esco Partners or are you going direct? How does that sales process look like it will unfold?
Sally Washlow (CEO, Member Board Of Directors)
In particular, this started with our distribution channel and the partners within that channel. Although because of our manufacturing and ability to customize, we think that this solution could be utilized by our other channels as well.
Bill Dzellum (Equity Analyst)
Great, thank you. And then relative to the and partner channels, you in the last several quarters enhance the leadership in that arena. Would you bring us up to speed as to those activities and
where we're at in the process of bringing that back to a well oiled machine.
Sally Washlow (CEO, Member Board Of Directors)
So Bill, you cut out at the beginning of your question, but I think it is surrounding that channel, specifically the distribution channel.
Bill Dzellum (Equity Analyst)
It is. And the leadership changes that you made and the implications.
Sally Washlow (CEO, Member Board Of Directors)
Yeah, yeah. So month over month we're growing in that channel and you know, specifically working closely with customers that the leader of that channel brought this opportunity to us and we've been working obviously for quite some time to bring it together.
And it is leadership like that that will help us expand in that channel and continue to grow and have the right strategy to not only the strategy to service that channel, but then also what other products do we need to bring to help us be stronger in that channel as well? So we think there's a lot of opportunity there.
Bill Dzellum (Equity Analyst)
Sally, I will follow up on that last comment. Relative to products to service that channel, there gaps that are meaningful revenue opportunities that you all are in process of addressing with your product lineup.
Sally Washlow (CEO, Member Board Of Directors)
I think another product to speak to that we've talked about is a roadway product. And that's another opportunity that we're working through the distribution channel. Well, so that's a product that goes on the streets and highways of America. So we think that there's opportunity as well there.
Bill Dzellum (Equity Analyst)
Great. Thank you and look forward to watching the future quarters unfold.
OPERATOR
Thanks Bill thank you. This concludes our question and answer session and I will turn the call back to Sally Washlow for concluding remarks.
Sally Washlow (CEO, Member Board Of Directors)
I want to thank everyone again for taking time today to join us. We look forward to updating Investors on our first quarter FY27 call in August. We look forward to meeting with many of you, whether in person or virtually between now and then. We will be presenting at a number of conferences, so please watch for our forthcoming announcements regarding scheduling.
Please also reach out to our investor relations team to set up a meeting for any other information. Their contact information is at the bottom of today's press release. Many thanks again for your interest in Orion. I look forward to continuing to update you on our progress.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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