Orion Energy Systems, Inc. 2027 Q1 Earnings Call

Thank you, Steven. 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. 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 things, 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.

Thank you, Per. Good morning, everyone, and thank you for being with us today. I am pleased to report our results for Q1, our seventh consecutive quarter of positive adjusted EBITDA. The first quarter of fiscal 2027 represents an excellent start to the year. In Q1, we delivered on the growth we established in the previous year. Fiscal 2026 was a successful turnaround year for Orion, marking a return to growth in both revenue and profitability. Fiscal 2026 came in at $86 million in revenue and $2 million in positive adjusted EBITDA, results that outperformed our guidance. Fiscal 2026 was a year in which we put ourselves on a path of profitable growth. In the current fiscal 2027, we expect to achieve revenue of $95 million-$97 million and positive adjusted EBITDA for the full fiscal year.

As to Q1 fiscal 2027, year-over-year, Orion recorded a 32% jump in revenue, coming in at $25.7 million. A 15% increase in gross margin, coming in at 34.6%. Net income of $2 million, up from a negative $1.2 million, and adjusted EBITDA of $2.5 million, up from $200,000 year-over-year. Today's earnings report is also further illustration of the improving quality of our sales funnel, the impact of our cost containment initiatives, and the continuous strengthening of our proprietary supply chain. Automotive, retail, and public sector engagements continue to show notable strength and continued growth. With customers like public bus fleets, the Orion Voltrek EV charging segment is recognized widely for its ability to complete complex EV charging infrastructure projects. We are focused on scaling this business across a broader customer base and geographic footprint.

We are especially confident about this business with our recent appointment of industry leader, Karen Peck, to head EV charging infrastructure sales. Furthermore, the hyperscale data center market looks especially attractive now that we have made our initial entry into it. Our customers recognize that we meet them where they are, whether we deliver a product-only solution or provide complete turnkey, full-service electrical infrastructure powered by our own products that are designed, engineered, and made in Manitowoc, Wisconsin. Over the decades, Orion has built a well-earned reputation for quality products, on-site service, and an ability to scale no matter how big the customer or project. We have a reputation for unmatched reliability with a proprietary supply chain that includes a Made in America facility, enabling us to deliver on time and on budget.

We are widely known for our unsurpassed ability to deliver turnkey installation and services for electrical infrastructure and EV charging stations. Today's Q1 fiscal 2027 earnings report is a further validation that Orion is prepared to meet this moment when we have a confluence of three growth drivers in the electrification of industrial America. Number one, the reshoring, refurbishment, and resurgence of U.S. industrial facilities, ranging from manufacturing to retailing to government. Number two is the electrification of vehicular fleets of major enterprises in both the private and public sectors, ranging from nationwide logistics to school districts. And number three, the building boom of AI-driven data centers, typified by the multimillion-dollar engagement we announced in Q1 with our multipurpose linear lighting fixture, designed specifically to integrate quickly and easily into the floor plan of data centers. Today's report also highlights several growth initiatives.

Our focus is on expanding opportunities and revenues within new and existing large customers in the automotive, retail, and public sectors, whether by deployment of LED lighting systems, electrical infrastructure, or EV charging infrastructure. Our focus on maximizing our service and maintenance to long-term EV charging customers. And our focus on adding capabilities such as data center lighting solutions, battery energy storage systems, electrical contracting, and a recently announced LED roadway lighting product. Delivering efficiency and cost-effective solutions at scale to industrial America at a time of unprecedented need, we believe that Orion is an emerging provider of choice for AI and IoT-driven electrification to Fortune 100 corporations and other global leaders. Orion designs, installs, and maintains LED lighting systems, EV charging stations, and the complete footprint electrical infrastructure for some of the largest enterprises in the U.S.

Whether deployed independently or in combination with our partners, Orion's discreet, bespoke, and turnkey solutions generate unrivaled ROI to industry facilities requiring the most demanding standards of efficiency, reliability, and compliance. Made in America for its fourth decade, Orion is meeting the moment for an industrial build-out that is reshoring, refurbishing, and reasserting leadership throughout the U.S. With that, let me turn to Orion's CFO, Per Brodin, to review our financial performance and outlook.

Thank you, Sally. Today we reported Q1 2027 revenue of $25.7 million as compared to $19.6 million in Q1 2026, an increase of over 30%. LED lighting segment revenue in Q1 2027 was $17.7 million compared to $12.9 million in Q1 2026. Q1 2027 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 2027. Lighting achieved a Q1 2027 gross margin of 37.8% versus 31.8% in Q1 2026. Maintenance segment revenue was $4.1 million in Q1 2027, up from $4 million in Q1 2026. We achieved a maintenance segment gross margin of 28.3% in Q1 2027 versus 22.4% in Q1 2026.

EV charging solutions revenue was $4 million in Q1 2027 compared to $2.7 million in Q1 2026, reflecting relative strength despite sector-wide uncertainty regarding the market environment in the U.S. EV achieved a gross margin of 26.9% in Q1 2027 versus 33.8% in Q1 2026. Our overall gross profit margin was 34.6% in Q1 2027 versus 30.1% in Q1 2026. Q1 2027 included a benefit of approximately 130 basis points for the net effect of tariff changes and refunds. We expect our overall gross margin to remain strong throughout fiscal 2027, though it will likely vary on a quarter-by-quarter basis due to revenue mix and volume changes. Total operating expenses were 6.8% in Q1 from $6.9 million in Q1 2026. Reductions in compensation costs in general and administrative expenses were mostly offset by increased commission expenses, including in sales and marketing costs.

Reflecting stronger gross margin and lower operating expenses, Orion's Q1 2027 net income was $2 million, or $0.47 per diluted share, or $0.48 basic per common share. Compared to a net loss of $1.2 million or $0.37 per share in Q1 2026. Adjusted EBITDA was positive $2.5 million in Q1 2027 versus $200,000 in Q1 2026. As Sally noted, this was Orion's seventh consecutive quarter of positive adjusted EBITDA. Regarding our outlook, as Sally highlighted, we expect a continued increase in profitable growth in fiscal 2027, with positive adjusted EBITDA on revenue between $95 million-$97 million. This concludes our prepared remarks. Operator, would you please commence the question and answer session?

Good morning, Amit, and thank you. I don't think we're being overly conservative with our revenue. We're certainly bullish on the year. With entry into the data center, as we announced, we worked with a customer to really build the right solution that we could scale to other customers as well. I think we're in the pretty early innings of data centers, we have conversations going on with others, we'll wait till later in the year to provide any further updates.