Orion Energy Systems, Inc. Stock

Good morning, everyone, and welcome to Orion Energy Systems Fiscal 2027 First Quarter Conference Call. [Operator Instructions] In this call, Sally Washlow, Orion's CEO; and Per Brodin, its CFO, will review the company's first quarter results as well as its fiscal 2027 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 website over at orionlighting.com. I will now turn the call over to Per Brodin, Orion's CFO.

Thank you, Stephen. 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 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.

And 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 '26 came in at $86 million in revenue and $2 million in positive adjusted EBITDA, results that outperformed our guidance. Fiscal '26 was a year in which we put ourselves on a path of profitable growth.

And in the current fiscal 2027, we expect to achieve revenue of $95 million to $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.

And 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. And 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 '27 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 1, the reshoring, refurbishment and resurgence of U.S. industrial facilities ranging from manufacturing to retailing to government. Number 2 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 3, the building boom of AI-driven data centers typified by the multimillion-dollar engagement we announced in Q1 with our multi-purpose 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 our 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 United States.

Whether deployed independently or in a combination with our partners, Orion's discrete, 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 United States. 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 '27 revenue of $25.7 million, as compared to $19.6 million in Q1 '26, an increase of over 30%. LED lighting segment revenue in Q1 '27 was $17.7 million, compared to $12.9 million in Q1 '26. Q1 '27 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 Q1 '27 gross margin of 37.8% versus 31.8% in Q1 '26. Maintenance segment revenue was $4.1 million in Q1 '27, up from $4 million in Q1 '26. We achieved a Maintenance segment gross margin of 28.3% in Q1 '27 versus 22.4% in Q1 '26.

EV charging solutions revenue was $4 million in Q1 '27 compared to $2.7 million in Q1 '26, reflecting relative strength despite sector-wide uncertainty regarding the market environment in the United States. EV achieved a gross margin of 26.9% in Q1 '27 versus 33.8% in Q1 '26. Our overall gross profit margin was 34.6% in Q1 '27 versus 30.1% in Q1 '26. Q1 '27 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 '27, though it will likely vary on a quarter-by-quarter basis due to revenue mix and volume changes.

Total operating expenses were $6.8 million in Q1 '27, down from $6.9 million in Q1 '26. Reductions in compensation costs and 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 '27 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 '26. Adjusted EBITDA was positive $2.5 million in Q1 '27 versus $200,000 in Q1 '26. 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 '27 with positive adjusted EBITDA on revenue between $95 million to $97 million. And this concludes our prepared remarks. Operator, would you please commence the question-and-answer session?

[Operator Instructions] Our first question comes from the line of Amit Dayal of H.C. Wainwright.

Congratulations on the win in the AI data center space. It looks like a pretty significant market has opened up for you over there. So in that context, Sally, are you being conservative with the outlook for fiscal 2027 revenues?

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. So I think we're in the pretty early innings of data centers, and we have conversations going on with others, but we'll wait until later in the year to provide any further updates.

Okay, thank you. And then can you talk about some of the pipeline, I guess, that you are building for that market? What kind of activities are you undertaking? What kind of discussions are you having with potential customers? Just any color on how that sales pipeline is being built up? And do you expect to convert some of that pipeline in the next few quarters? Or will it take a little bit more time for you to start getting more momentum with orders from this space?

Yes, so particularly in this space, we think a lot of it will come in our next fiscal year in terms of revenue. We are starting to ship product. Oftentimes, how we're winning in this arena is you're winning building by building on a data center campus. And as they grow, we're winning more and more. I'm not going to say we're single-sourced as well. Most have mitigated the risk. So we believe that the pipeline will continue to grow as we continue to deliver in that channel.

Just one follow-up on that. Should we assume the deployments at a single data center could be significantly larger or multiples of what a typical deployment for a single facility is usually for you guys?

Yes, buildings often represent 7 figures per building.

Our next question comes from the line of Eric Stine of Craig-Hallum.

Just curious, I mean, obviously, a pretty positive commercial environment on the demand side. I know last quarter you did provide a backlog number. And I also know that was because you were entering the fiscal year. But curious whether it's being more specific about backlog or just commentary on where backlog stands, exiting the quarter. The positive order trends that you saw end of fiscal '26, presumably those have continued into the first quarter and what you're seeing here in the second quarter.

As we exited the first quarter, our pipeline was right around $24 million -- or I'm sorry, our backlog. As Sally mentioned, the strength of our pipeline, we think continues to improve. So we expect to see some significant conversions as we move forward, but that's where we sit today.

Got it. And I know that backlog at a point in time can be -- there's a lot of timing to that specific number, but that's helpful.

Then maybe you talked about the guide $95 million to $97 million. I know that at least to this point, you've not been including anything from the potential opportunity with Home Depot, the stores where you're doing the outside lighting, but there's that inside opportunity. So just curious where that stands. I know you'd made progress. I think you were the only company that was really in the mix for that. It was more about dialing things in. But maybe where that stands and could that still be fiscal '27 revenue? Or would that be more fiscal '28?

We're still in play on opportunities like that and, quite frankly, some others as well. So there's testing that goes on and final product selection, but we're still pretty positive about that opportunity.

Our next question comes from the line of Gowshihan Sriharan of Singular Research.

My first question is on the exterior lighting program, you sized it at $14 million to $15 million and it was supposed to be complete by the end of the first half. How much of that ran through Q4 and Q1? And what's left to deliver?

You might be confusing a couple of different announcements we had about our largest customer. The $45-ish million opportunity we mentioned with them was a 3-year contract for the maintenance services that we provide that will occur over fiscal years beginning April 1, 2026, so fiscal '27, '28 and '29. And we had also discussed previously an exterior project, which we said was in the $15 million range, most of which has been recognized in Q4 and Q1. So we're pretty much through most of that.

And then to the previous caller's questions, we still have an opportunity that we've talked about for an interior project, but we do not have that order yet, but do believe it's progressing and are optimistic that will come through -- I'll call it, in the relative near term.

Okay. And on the gross margin sustainability, if we ex the $300,000 of tariff benefit and as you guys have indicated that services are going to trend towards 50% of revenue as you indicated in your deck, where does the consolidated gross margin kind of actually settle at the end of fiscal '27?

We still foresee that it would settle in the 30-plus range. But there are -- to your comment in my script, there was a 130 basis point benefit related to tariffs and the previous quarter had some onetime type benefits in it. So I think in the 30% to 32% range is how we're thinking about things at this time.

Okay. I know you guys are still maintaining $95 million to $97 million and with positive EBITDA. We are already in the positive terrain. So what kind of drop should we assume on the roughly $70 million of revenue left in the year? What kind of risks are there?

Yes. I'm sorry, did you say risks?

No, what kind of, I suppose, pullback on the EBITDA numbers that will drag it into just the negative territory for the $70 million?

I think it'd have to be some type of unexpected performance from a -- I mean, assuming we achieve the top line guidance, then there'd have to be something that would happen from a negative basis on gross margin rate that would impact that or some unexpected expense that we don't -- operating expense that we don't anticipate.

Okay. And I'll just sneak in one last question. You know on your June -- you said in June that the data centers, the distribution typically with being in the low margins. But if we are to look at the CapEx that is required for these data center roadway volumes to come through as you hope, at what revenue level does the plant require any kind of investment?

The investment required to support any of these programs would be very minimal and would primarily come through as a component of gross margin because any related asset would be amortized over a period of time, but we don't foresee any significant fixed asset investment needed for either of those programs that you mentioned or at all.

[Operator Instructions] Our next question comes from the line of Bill Dezellem of Tieton Capital.

Relative to the data centers, have the shipments begun to that first data center customer? Where are you at in that delivery process?

They have started, but it is -- initial product going into the data centers. We don't expect the ramp until late next year in our fiscal year and then into next year.

That's helpful. Tell us a little bit about the sales lead time to get the lead to close the order.

I'm sorry, let me repeat, it got a bit broken up. Did you want insight into the sales and how we achieved this win?

No, I'm sorry, Sally. And hopefully the quality here is better, but I was looking for just the regular sales cycle with data centers in terms of number of months to close a deal.

I hate to answer a question with "it can vary", but I will start with that. In terms of this product, we had in the works working with this particular partner and end user being the data center for several months, fine-tuning the product and making sure it was easy to install. What could we take and do at our factory here in Wisconsin to make it easier to install as well? So I think that cycle might have been a bit longer because of the product development involved in it.

As we go to a wider array of customers, a lot of it's going to depend on their build-out schedule as well, which we know can vary. So we have the product ready and we can customize it to the data center needs. And we're pretty flexible in that capacity. But I think that most of the revenue ramp, all that being said, will be in the following years. This year, so it takes a bit to get them up and running.

That's helpful. And then, Sally, relative to new data centers versus replacement data centers -- excuse me, replacement product within the data centers, which do you see as a bigger opportunity? And I guess the spirit of the question is, is the lighting that's in existing data centers outdated enough or you are enough more efficient that there's a whole other opportunity in the replacement arena?

We see most of the opportunity in the new build-out right now. Many of the data centers are relatively new, so they're not ready for that replacement cycle yet. So most of what we are pursuing is new build-out.

Great. That's helpful. And then I'm going to shift, if I may, to the maintenance side of the business. So the gross margin improvement that you have experienced there, is that structural? Or was there something special in this quarter?

I would say it's relatively structural. There will always be some variance because we have within the segment, quarter-to-quarter basis, the mix between product and service does vary. And in that segment, product margins are higher than the service margins themselves. So I would say it's -- there was nothing unusual in the quarter other than there's probably more, I'll say, continued gains in efficiencies as well as mix impact.

That's helpful, Per. And I know that you have been working for a couple of years now to improve that gross margin. Is there more improvement still -- more structural improvement still to come? Or are we essentially in the range at this point?

I think we're pretty much in the range. I would consider this quarter a very good quarter for them from a rate standpoint.

Great. And then one additional question relative to maintenance and this comes from a point of ignorance. So you had really good LED revenue growth. You had good EV charging revenue growth. And then the maintenance revenue was essentially flat, the $4.1 million versus $4 million. So the question is, is there a timing issue here where maintenance revenue follows product revenue by whether it be 1 year or some period of time before you all start seeing some maintenance activity on product that you had sold?

I don't think there's a real true correlation to be made there.

Great. Thank you for helping clear that up and congratulations on a great quarter. Actually, I'm going to ask one more question, if I may, before I hop off. How would you characterize the typical seasonality of the business at this point?

There's not a lot of seasonality. Some of our businesses get a bit more impacted by weather, if you think snowy days in the Northeast and sub-zero temperatures can encounter some timing shifts of things, but -- which could affect the quarter, but not a lot of seasonality. It's more the projects.

Part of where I'm going with that question is over the last few years you have seen revenues ramp over the course of the year, first quarter being close to the lowest quarter and then ramping as the fiscal year moved forward. And relative to your guidance, I'm trying to -- I guess I'm trying to relate those two factors, which seem a little bit at odds with each other.

Yes, I think maybe the thing to keep in mind for the recent quarter is, as we had disclosed, we had a significant project that had a pretty fair amount of revenue associated with it, this exterior lighting project we've talked about. So that helped bolster the first quarter. We had other projects that are also helping. So I think that, to Sally's point, there's not necessarily an overall seasonal pattern you can look to. It really depends on the timing of projects, when the customers want to complete those projects, when they can commence and bring them to completion.

So it's -- there will always be some variability on a quarter-to-quarter basis. And I think as we even said on the previous call, we're not expecting that ramp in the current fiscal year that we've seen in previous years.

Thank you. This concludes the question-and-answer session. I'll now turn the conference back to Sally Washlow for concluding remarks.

I want to thank everyone again for taking the time to join us today. We look forward to updating investors on our second quarter fiscal '27 call in November. We also 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 or 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.

Thank you. This concludes today's conference call. You may now disconnect.

Good day, and welcome to the IAccess Alpha Virtual Best Ideas Summer Investment Conference for 2026. Our next presenting company is Orion Energy Systems, Inc. [Operator Instructions] I'd now like to turn the floor over to today's host, Sally Washlow, CEO of Orion Energy Systems, Inc. Please go ahead.

Thank you, and good day, everyone. I will be presenting on behalf of Orion Energy Systems. And with me today on the call is Per Brodin, our CFO, who will also be available during the Q&A portion of the session. So I'll go through our presentation and then happy to take any of your questions. An overview of Orion is that we are in the LED lighting and controls market, lighting maintenance and EV charging. I'll move to our organizational mission is that we help our customers achieve their sustainability, energy savings and carbon footprint reduction goals through innovative technology and exceptional service. And I'll share with you today how we accomplished this.

Our 3 main business segments are Lighting, Maintenance and Technical Services and EV charging systems. Within Lighting, we design, manufacture and install energy-efficient LED lighting systems. We have multiple go-to-market models within our Lighting segment, and that is either going direct to end users and doing a full turnkey solution with them. We have a distribution channel, and we also work with energy service companies, also known as ESCOs. We've completed over 25,000 projects in the Lighting segment, and our focus is mainly on commercial and industrial retrofit business. In our Maintenance and Technical Services group, this is what has enabled us to deliver reoccurring revenue and services across Lighting and EV systems. We provide preventative and reactive maintenance in these segments.

We also have special projects that we deliver for our customers through the segment. And as I've mentioned, we have reoccurring revenue in this segment with 3-year contracts. So we are in and out of customers daily with long-term contracts. In EV charging systems, in this segment, we are providing end-to-end commercial EV charging solutions. We don't focus on the residential market. In that segment, we would do multifamily, but not pure-play residential. We are a full turnkey provider of EV charging systems with site design, installation and commissioning. And we also work with some of the leading equipment suppliers, which I'll share in a couple of slides as well. We work with Level 2 and DC fast charge that is mainly Level 3 charging for fleets. And we have national execution capabilities within the segment as well.

Something that is unique about Orion is really our turnkey capabilities. We bring discrete and bespoke turnkey capabilities to projects large and small for our customers. This can start with a facility audit, then working on the design to help them achieve the most energy-efficient solution. We can then manufacture the product in our warehouse and also manufacturing facility in Manitowoc, Wisconsin. We will install the product. We work with our customers on rebates and warranty work as well along with maintenance. So because of these capabilities, we serve as a preferred U.S. provider for Fortune 100 and other global leaders in industries ranging anywhere from manufacturing to retail and logistics as well. I'll share in a couple of slides who we're proud to call our customers.

Within Lighting, as I've noted, and you can see some pictures here of our facility in Manitowoc, Wisconsin. We have 266,000 square feet of manufacturing and warehousing capability. Through this, we have a proprietary manufacturing approach using our facility here in Wisconsin, along with a global partner network of contract manufacturers. Our supply chain enables us to maintain significant component, material and finished goods inventory for quick turnaround projects. Often in the lighting segment of the business, those that can turn around a project the quickest and have very high service levels will win the project award. Our custom manufacturing capability for specific national accounts and rollouts has also enabled us to win a large amount of the projects and customers we serve. And we are BAA and BABA compliant by utilizing our facility based here in Manitowoc, Wisconsin.

Here's a case study of a turnkey project that we did in our Lighting segment. The customer was Element Materials Technology. They are a global leader in product testing, inspection and certification services. Their challenge was that their 83,000 square foot flagship testing facility relied on fluorescent and metal-halide lighting systems consuming a significant amount of energy. Their goal in working with Orion was to maximize their energy savings while also enhancing the lighting performance and improve the light quality and distribution across their testing areas, office spaces and parking lots. We were able to do a facility audit and work with them to deliver a system that not only worked for the interior, but also the exterior of their facility. We are able to reduce their maintenance costs and also implement a sustainable solution.

This solution saved them close to $50,000 of annual energy cost reduction. And this is just one example of the turnkey work that we do day in and day out with many of our global customers. Within maintenance and managed services, this provides an opportunity of reoccurring maintenance revenue. As I've mentioned, we are in day in and day out with our customers providing preventative and reactive lighting, electrical services and EV maintenance. Working with our nationwide network of skilled and certified lighting and electrical professionals, our customers can count on us for dedicated 24-hour response for any emergency or nonemergency lighting and electrical services issue that they might encounter. And our EV charging segment came to us through an acquisition when we acquired Voltrek, a company based in the Northeast, and they had 16 years of EV expertise and experience.

We are now a premier reseller of leading EV charging stations, and we're also a full turnkey service provider. We are a contractor and a preferred equipment supplier for companies such as ChargePoint, ABB and others such as Alpitronic as well. There are 8,000 charging points under management that we have worked on. And in this segment of our business, there is an opportunity for networking maintenance and reoccurring revenue as well. Here's a case study of a client that we are proud to call a customer of ours, the Boston Public School Systems. In support of Boston's Green New Deal initiative, the Boston Public Schools decided to electrify its entire school bus fleet and the charging infrastructure was needed to support these buses.

We have won several projects installing EV charging systems within the Boston Public Schools fleets and their bus yards. They came to us because the charging needed to be reliable, efficient and handle the energy demands of multiple buses charging simultaneously. We have been able to move their fleet to a more sustainable and environmentally mode of transportation. And we're also able to install user-friendly, reliable state-of-the-art charging stations. So it is easy for the bus drivers to pull into the depot and easily charge their systems. This has also enabled a reduction of fuel and maintenance costs for their school bus fleet. And we've had a couple of announcements just this past year within the Boston Public School systems and the work that we continue to do to support this infrastructure need.

Overall, Orion is leveraging our long-term customer relationships to diversify. We are adding new and additional capabilities to fuel revenue growth, as I've mentioned, from new and existing customers. Within LED lighting, we provide high-efficiency LED fixtures, and we do retrofits and new installs. And we can work at the beginning with these customers for their lighting design and layout needs. In maintenance and technical services, we are providing preventative maintenance programs, and we also go beyond that and provide system upgrades and repairs as necessary. This has also led us into electrical contracting, where we are doing electrical contracting work for many of our customers, whether it's in new construction, in retail and industrial or also leveraging and installing battery storage and energy systems for our customers as well.

Often, many of these electrical contracting projects have come from existing relationships that we have and customers asking us to provide more work once we're already on site. And within EV charging, we work within the infrastructure space, and we're providing not only site planning and installation, but we also provide network integration support as well. With our entrenched blue-chip customer base, as I noted earlier, we are proud to call many of these brands long-term customers. A thing to point out with many of these customers is that it often started as a single fixture sale that subsequently expanded to other offerings and long-term relationships. As I demonstrated on the slide before, we are often brought in to do one scope of work, and then it has expanded into electrical contracting and maintenance as well.

With many of these brands, we are the leading or sole provider of design, installation and maintenance of their LED lighting systems. And with our recent business transformation, we are offering electrical contracting and other services such as battery storage systems to increase the lifetime value of each of these customers that we service. Our product portfolio is expanding as well. Over the past few weeks, we have recently introduced our data center product that we have been working for months behind the scenes with one of the hyperscalers to bring to them a solution that provides them energy efficiency and is also customized to meet their needs.

We are proud to call this a customer of ours as we work closely with them to make sure that not only were we able to customize this to meet their needs, but also build it in our Wisconsin facility to offer shorter lead times as well. Another area that we've expanded into lighting is the roadway products, which you'll see on the streets and highways of America. This is a new line that we are announcing this year as well. And this is another product where customers came to us and asked us to build this product. And in the services realm, as you can see, there are 3 new areas here, whether it's maintenance, project management or electrical contracting, these are all solutions that have been based out of customers coming to Orion because of the great work that we do, they're coming to us asking, can you provide and deliver more services to us.

So why we win and why we consistently win versus our competitors is we apply unique and reliable capabilities to, as I mentioned, many long-term partners. We provide industry-leading technology and design. We develop through our own engineering team, the highest energy efficiency LED and smart design to deliver the highest ROI to our customers. Our unique turnkey capability enables us to execute a project from its concept, completion and then wrap that around with ongoing maintenance and services. We have design and manufacturing flexibility. We have a flexible and cost-effective supply chain. We can go to global partners as part of our contract manufacturing network or we can utilize our own facility in Wisconsin to provide U.S.-based manufacturing for shortened lead times and also to be compliant with the Buy American Act.

We have a broad and diversified sales reach. I often like to say that we meet the customers where they're at, whether it's going directly through national accounts, through our agent network and working closely with ESCOs and resellers. We have a dedicated service team that provides white glove servicing to many of our long-term customers, and we have trusted long-term relationships that have enabled us to add on sales opportunities as an incumbent partner of choice to many of the customers that we have served for decades. Our growth drivers going forward is really taking a holistic approach to drive growth with a customer-centric focus to drive long-term sustainability. We are doing this 3 ways: leveraging our existing customer base. As I noted, oftentimes, a conversion on a single sales fixture often turns into multiyear initiatives. And revenue and margin growth is expected to come from not just new logos, but also existing accounts.

Within service expansion, we have multiyear maintenance and electrical contracting programs, which allows us to increase revenue per customer year-over-year and gives us line of sight into revenue every year. And with new products and bundled solutions, examples such as data center lighting, roadway lighting, project management and electrical contracting services, all products that have come to us through partnering with our customers asking what else can we do for them and what do they need Orion to provide. In summary, how we achieve our mission is that we are a one source solution for LED and EV charging projects. We provide substantial reduction in energy cost for LED projects that average a payback of 1 to 4 years. Our advanced product design and portfolio will provide the highest lumen per watt performance in the industry and our flexible supply chain and manufacturing footprint, including our U.S.-based manufacturing facility gives us a competitive advantage.

We have expanded our product portfolio, including exterior projects, products and a TritonPro contractor line, and we have multiple go-to-market models matching a customer's need and recent expansion into lighting maintenance services. Our management team is myself as the CEO. I joined from the Board in April of 2025. With me today to answer questions is Per Brodin, who has been our CFO since October of 2020; and Scott Green, who is not on the call, is our COO and came to Orion through our acquisition of Harris Lighting in 2013. Here is a snapshot of our revenue, margin, EBITDA and liquidity data. We just completed our fiscal '26 at March 31, and came in at slightly over $86 million in revenue with a gross margin of 32.4%, a nice increase over FY '25. Our adjusted EBITDA was $2.2 million, and our working capital and liquidity have remained strong.

This is the end of our presentation. I am happy to take questions now. So bear with me as I go to the Q&A section.

I'll start with fiscal '27 guidance calls for revenue of $95 million to $97 million. What are the primary drivers supporting that outlook today?

The primary drivers that support our outlook is, we announced recently, we came into this fiscal year with a backlog of $30 million. So that plays quite a bit into our backlog. Some of those are projects and won't necessarily get all recognized in this fiscal year, but $30 million is the strongest backlog that we've had in years. What also doesn't play into our guidance is our maintenance business, and that is around $15 million as well.

So that's about $45 million of our $95 million to $97 million that we have line of sight through our maintenance business and then also our backlog. And our long-term-standing customers that we work with day in and day out bring us strong confidence that we can hit the $95 million to $97 million in revenue.

Another question, and I'll have Per Brodin, answer this one, our CFO, is the company has delivered 6 consecutive quarters of positive adjusted EBITDA. What operational changes have been most important in driving that improvement.

I'd say the primary drivers of and changes we made relate to the costs that we took out of the business a little over a year ago. We took approximately $6 million of cost out of the business to help drive profitability at our current and expected near-term sales levels. Part of that effort included taking costs out of product by redesigning some of the componentry that goes into products and reduce those costs as well as taking out indirect costs associated with the projects we do as well as other OpEx savings. That has helped drive our improvement in gross margin rate, leaving more to flow through to the bottom line and put us back on the path of positive adjusted EBITDA over those 6 recent quarters.

Thanks, Per. There are a lot of questions regarding our recent entry into data centers. So I'm going to try to summarize them and answer it as one question with a couple of threads here.

So in regards to our new relationship with the data center customer and how we see it playing out in this fiscal year as well as future years is -- we expect much of the revenue from the data center customers to come toward the end of our current fiscal year. So we are in FY '27, our year-end is March 31. So more toward the back half of this year and then really ramping up in our fiscal '28. How this relationship came about and what was so exciting for us in this realm is that it was a mix of our experience in turnkey lighting and understanding not only how to bring the most energy-efficient lighting to data centers, which is obviously, a price of entry in working with any of these data centers because from day 1, they need to find a way to save energy, but how we were able to customize it for them to make it easier to install.

So when it shifts to the data center, it is just about as much plug and play as it can be for them and really taking out some of their installation cost as well. And that led to our ability to make it within our Wisconsin facility and customize it to their needs and really shrink the lead time to get that to them as well. So we think this could be a substantial opportunity for our company. Each data center campus has multiple buildings. And within each building is a 7-figure lighting opportunity. So there'll be a lot more to come as the products start shipping to these data centers and the build-out continues. But as I mentioned, more toward the back half of our fiscal '27 and then into '28.

There's a bit of questions about electrical contracting as well and how we see the mix of electrical contracting evolving in the revenue mix over the next couple of years.

We see -- and maybe I'll take a step back from this question. Lighting is a substantial portion of Orion's business. But then within lighting, we do full turnkey service. And then electrical contracting as well has grown out of a lot of the turnkey lighting that we've provided. So over time, I think that closer to 40% of our revenue could be from the services that we deliver, whether it's installing the lighting, the maintenance services and electrical contracting as well, maybe moving to even 50% of our revenue outlook as well as the need for electrical contracting continues to grow.

And just to give a more clear example of how some of this has evolved over time is that we'll start with a customer with a small lighting contract and to install the lights -- and we find out when we get there, the systems are out of code. And what might have happened in the past is that they contracted with someone else to bring their systems up to code, and they're turning back to us and asking if we can do that work, which then turns into 7-figure opportunities for us. So we think that there's a lot of runway in the future years for that type of work as well.

I'm just looking through there's a lot -- there's a couple of other questions here. I think most of them we have mentioned. The shifting of maintenance and revenue over time, again, as part of our services, we really believe that, that will continue to grow. And at one point, we could be at 50% product and 50% services. So with that, and so everyone can get to the next webinar, I would like to thank you all for joining us today, and I will turn it back to Kelly for closing remarks.

Thank you. That concludes Orion Energy Systems, Inc.'s presentation. You may now disconnect. Please consult the conference agenda for the next presenting company. Thank you.

Good morning, everyone, and welcome to Orion Energy Systems Fiscal 2026 Fourth Quarter and Full Fiscal Year Conference Call. [Operator Instructions] In this call, Sally Washlow, Orion's CEO; and Per Brodin, its CFO, will review the company's fourth quarter and full fiscal year results, as well as its fiscal 2027 outlook. Then we will open the call to investor questions.

Today's call is being recorded. A replay will be posted in the Investors section of the company's website at orionlightning.com.

I will now turn the call over to Per Brodin, Orion's CFO. Sir, please go ahead.

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 through 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 Q4, our sixth consecutive quarter of positive adjusted EBITDA and for the full fiscal 2026 year. Fiscal '26 represents an exceptional year at Orion. 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 3 milestones for FY '26.

Milestone one, to maintain our NASDAQ listing and maximize our opportunity for growth in shareholder value. We achieved this goal. Milestone two, by the end of the third quarter, the enactment of a growth profitability and cost containment initiatives that enables Orion 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 the score with $86 million in revenue and $2 million in positive adjusted EBITDA. Looking forward, Orion's FY '27 outlook expects revenue of $95 million to $97 million, with potential upside in the number of opportunities. Based on our enhanced operating discipline, our growth outlook should once again in [indiscernible] Orion 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 embark on the course of increased revenue, expanded profitability and elevated prominence in our competitive market. When I arrived as CEO of Orion at the beginning of FY '26, I was immediately inspired by the team that greeted me. We agreed that FY '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 serve to insulate our customers for much of the brunt of [indiscernible]. And we had tailwinds from a multiyear invigoration of U.S. 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 plan, measured and executed and the results of FY '26 represented not only a market improvement over the previous fiscal year, but a jump above our originally announced expectations. FY '26 was indeed a year of rightsizing as we enacted a sustained and necessary cost containment initiatives. It was a year of sharpened focus on profitable growth illustrated by our 6 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 demonstratable show support in the market by existing and new shareholders. The results and expectations we report today are a testimony to Orion'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 parts 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, weather 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 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 and with another 2,000 coming online before 2035.

Orion 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'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 imposed unprecedented demands on energy, requiring unprecedented levels of power data centers or prioritizing solutions to minimize their electricity consumption and carbon footprint.

Hyperscale data centers emphasized 3 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 costs. 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 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 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 long-time historic markets. Decade after decade long-time 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, and I am extremely optimistic about our future.

With that, let me turn to Orion's CFO, Per Brodin, to review our financial performance and outlook.

Thank you, Sally. Today, we reported fiscal Q4 '26 revenue of $25.7 million as compared to $20.9 million in Q4 '25. For fiscal '26 as a whole, we reported $86.3 million in revenue compared with $79.7 million in fiscal '25. LED segment revenue in Q4 '26 was $20.3 million compared to $20.9 million in Q4 '25. For fiscal '26 as a whole, LED lighting segment revenue was $55.9 million compared to $47.7 million in fiscal '25. Q4 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 line 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% and compared to 26.6% in fiscal '25. Maintenance segment revenue decreased to $3.2 million in Q4 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 noncash write-off of solar assets, while Q4 '25 included $0.5 million of earn-out 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 personnel expense reductions and the $1.7 million of earn-out expense and $1.1 million of noncash 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, FY '26 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 improved 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 positive adjusted EBITDA. 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 at 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 and revenue of between $95 million and $97 million.

And this concludes our prepared remarks. Operator, would you please commence the question-and-answer session.

[Operator Instructions] And our first question is going to come from the line of Eric Stine with Craig-Hallum Capital Group.

So I mean, obviously, strongest backlog that you've had in cash 4 or 5 years. 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 -- I mean your confidence level is quite high. I mean do you expect to see this these order trends in this backlog growth continue throughout fiscal '27?

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.

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 that was going to be split between Q4 and Q1 and maybe some in Q2. So maybe talk about the linearity of the revenues that you expect in fiscal '27 when you factor that in?

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. 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.

Yes. Those -- 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.

And when you say testing, I mean, is that testing is it you being considered versus someone else? Or is it just testing kind of the figure on next steps?

Good clarification point. Within locations. So we don't believe anyone [indiscernible] the mix.

Our next question comes from the line of Sameer Joshi with H.C. Wainwright.

Congratulations on a strong year and outlook are pretty good as well. On the fourth quarter '26, the LED lighting revenue, in particular, were pretty strong $20-plus million related to $11 million to $13 million in the prior 4 quarters. Was this because of some contract timing? Or are we seeing this strong performance and expecting it for the next few quarters?

I'll start with this question. So the -- 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.

Yes, I'm glad you mentioned the electrical contracting business. I think you have around $21 million in array of those projects with 7 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?

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.

Understood. And then you -- earlier this week or last week, you announced the entry into the base center AI domain. And you highlighted it on this call as well. Does the backlog that you spoke of include any of this? I know it's early days, but should we expect upside to this $95 million to $97 million based on your success potential success in the data center market?

So our backlog really reflects that -- 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.

Okay. And just last one. I think you have mentioned in the commentary in the press release, but is the Voltrek earn-out payment done -- are all the payments done and no more earn-outs should be expected in coming quarters?

Yes. And Per can expand on it.

Yes. All payment requirements are fully satisfied so that you'll see none of that carrying into fiscal '27 or beyond.

Congrats on the progress and good luck.

Our next question comes from the line of Gowshi Sri with Singular Research.

Sally, congratulations to you and your team completely in your first year as CEO [indiscernible] getting turnaround is in progress, impressive set of results. I just wanted to ask a few questions. 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. It looks like it's on 33%, 34%. But even if it without around 31%. As we think about fiscal '27, is that 31%, 32% 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?

I think we can sustain that what would be a high level for us, and we think we're very proud of the margins we achieved in fiscal '26. In '27, I think 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.

Got you. And net-net, is Orion exiting the solar business, is there -- will there be any noise still embedded in the fiscal '27 numbers?

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 carryforward activity in that area.

Yes. 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?

Yes. It's really something we haven't thought about breaking up 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 they -- the orders are received.

Got you. And I'll sneak 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 -- for '27? And is it embedded in the 95%, 97%? Or is it kind of still an upside to it?

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.

Congratulations and good luck.

Our next question comes from the line of Bill Dezellem with Tieton Capital Management.

Two questions to begin with. First of all, I have never gone into a data center and looked at the roof 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 4-wall box that has a ceiling?

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 -- the interest from data nurse 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.

Great. 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?

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.

Great. And then relative to the [indiscernible] and partner deals. You -- in the last several quarters, enhance the leadership in that arena, would you bring us up to speed as to those activities? And what -- where we're at in the process of bringing that back to a well-oiled machine?

So Bill, you cut out at the beginning of your question, but I think it is rounding that channel specifically the distribution channel?

It is, and the leadership changes that you made and the implications.

Yes, yes. So month-over-month, we're growing in that channel. And 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 the channel as well. So we think there's a lot of opportunity there.

Sally, I will follow up on that last comment relative to products to service that channel. Their gaps at our meaningful revenue opportunities that you all are in process of addressing with your product lineup?

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 as 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.

This concludes our question-and-answer session, and I will turn the call back to Sally Washlow for concluding remarks.

I want to thank everyone again for taking time today to join us. We look forward to updating investors on our first quarter FY '27 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.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Good morning, everyone, and welcome to Orion Energy Systems Fiscal 2026 Third Quarter Conference Call. [Operator Instructions] In this call, Sally Washlow, Orion's CEO; and Per Brodin, its CFO, will review the company's third quarter results and its fiscal 2026 and fiscal 2027 outlook. We will then open the call to investor questions.

Today's call is being recorded. A replay will be posted in the Investors section of the company's website, orionlightning.com.

I will now turn the call over to Per Brodin, Orion's CFO. Please go ahead.

Thank you, Michelle. First, 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 our 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'll 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 delighted to report our results for Q3, our fifth straight quarter of positive adjusted EBITDA.

In our last investor call, I said that we were on track to achieve 3 milestones in FY 2026. Milestone one, maintain our NASDAQ listing and maximize our opportunity for growth and shareholder value. As our shareholders can attest, we have checked that box. Milestone two, by the end of third quarter, the enactment of a growth, profitability and cost containment initiative that enables Orion to become a recognized long-term market leader. As today's earnings report can attest, we have checked that box too. And milestone three, by the end of the fourth quarter, $84 million in revenue at or near a positive adjusted EBITDA for the full fiscal year. As we announced 2 weeks ago, we believe we are on track to meet or exceed this milestone.

The most illustrative way to bring you up to date about Orion is to review the 2 news items we announced a couple of weeks ago. First, we upticked our guidance range for our current fiscal year and set expectations for increasingly profitable growth in our next fiscal year, which begins April 1. We raised our FY '26 outlook to a range of between $84 million and $86 million in revenue at positive adjusted EBITDA. Again, that's up from our previous outlook of $84 million in revenue at or approaching positive adjusted EBITDA.

Our guidance range increase was sparked by our Q3 expectations of about $21 million in revenue and our fifth straight quarter of positive adjusted EBITDA, which are indeed the results that we are reporting today. Additionally, we now expect positive adjusted EBITDA for the full FY '26, which ends March 31. We expect continued up and to the right profitable growth in FY '27 with positive adjusted EBITDA on revenue between $95 million and $97 million.

We based our uptick on increasing orders and the success of our recent cost structure improvements. A few of these recent orders include an exterior lighting project valued between $14 million and $15 million beginning now in our current Q4 with the bulk of it completed in the first half of our FY 2027. This is an example how we expand our scope of work within our current customer base. We expect more of this expansion in FY '27, along with more new customer wins as well.

Our strategy to expand the products and services we provide is exemplified by the recent 3-year renewal of a maintenance contract as well as our growing backlog. We grow our business by listening to our customers and developing the products and services they need.

Another area of focus that we are continuing to quote and win more and more work is within electrical infrastructure, which we define as integrated offerings within our LED lighting and EV charging lines of business. An emerging example of this for some customers is our initial integration of a localized battery storage solution that enables facilities to minimize cost and maximize efficiency by drawing on stored energy.

Another example is the Orion Voltrek announcement just this week of our latest work for the Boston Public School System, a $4 million installation of 105 EV charging stations and related infrastructure. Orion Voltrek is a recurring partner in the BPS initiative to electrify 100% of the district's 750 school buses, the largest school bus electrification program in the Northeast.

As I've said before, a number of industrial, commercial and public sector facilities operated by some of the largest enterprises in the United States rely on Orion. Year after year, our largest long-time customers stay with us and grow with us because we deliver unsurpassed quality and unsurpassed ROI on an ongoing basis. One reason that they rely on us is that we are reliable, in part because our proprietary supply chain enables us to maximize efficiencies, minimize dwell times and avoid choke points. As they also know that our built from the ground-up supply chain also helps insulate us from the risk factors associated with the headlines of the day.

Another reason our customers rely on us is that we earn more of their confidence the more we do with them. That includes retailers, 2 of the largest automakers on earth and one of the biggest school systems in America. Customers require the most demanding standards of efficiency, reliability and compliance, repeatedly increase our scope of work because we deliver on time and on budget.

We see increasing market -- customer and market demand ahead of us as evidenced by our uptick expectations of growth and profitability through FY '27. We expect to benefit from market tailwinds, especially in building, reshoring and refurbishing industrial facilities ranging from data centers, to manufacturing plants, to big box retail stores and public sector buildings. EV fast charging continues to be an area of opportunity according to Paren research.

While the U.S. EV charging market faced uncertainty in 2025, the most recent Paren report expects 8% growth in 2026. Paren also cites growth trends in ports per site and rip and replace of existing EV charging infrastructure. It foresees what it calls a private-led expansion and improved CPO economics. The report puts a premium on execution, quality and asset efficiency.

We believe we have rightsized and recalibrated Orion for that environment that Paren describes, and we believe that puts us in position for market expansion, product extensibility and profitable growth. We could not be more energized about the remainder of the current fiscal year and the entirety of the next year.

With that, let me turn to Orion's CFO, Per Brodin, to review our financial performance and outlook.

Thank you, Sally. Today, we reported fiscal Q3 '26 revenue of $21.1 million compared to $19.6 million in Q3 '25. LED lighting segment revenue was $12.1 million compared to $13.2 million in Q3 '25, reflecting decreased project activity and ESCO channel sales, partially offset by an increase in distribution channel sales. Orion's expanded LED lighting project pipeline and efforts to drive growth in the distribution channel are expected to continue to contribute to higher revenues in Q4 '26 and into fiscal '27.

In addition, we are expecting a very strong Q4 from the turnkey Group. Lighting achieved a Q3 '26 gross margin of 30.6% versus the 30.2% in Q3 '25 with pricing increases, cost reductions and sourcing initiatives amplified by a more favorable Q3 '26 project and revenue mix contributing to this performance.

Maintenance segment revenue increased 13% to $4.4 million in Q3 '26 from $3.9 million in Q3 '25, reflecting the benefit of new customer contracts and the expansion of some existing relationships. We achieved a maintenance segment gross margin of 25.5% in Q3 '26 versus 26.4% in Q3 '25.

EV charging solutions revenue was $4.7 million in Q3 '26 compared to $2.4 million in Q3 '25, reflecting the expected completion of a significant project within the quarter. EV achieved a gross margin of 36.7% in Q3 '26 versus 30% in Q3 '25. Our overall gross profit margin increased to 30.9% versus 29.4% in Q3 '25, reflecting pricing and cost improvements in all segments, particularly LED lighting and EV. We expect our overall gross margin to remain strong in Q4 '26 and throughout fiscal '27 that will likely vary on a quarterly basis due to revenue mix and volume.

Total operating expenses declined to $6.1 million in Q3 '26 from $7 million in Q3 '25, reflecting ongoing overhead and personnel expense reductions.

Reflecting stronger gross margin and lower operating expenses, Orion's Q3 '26 net income was $160,000 or $0.04 per share compared to a net loss of $1.5 million or $0.46 per share in Q3 '25.

Adjusted EBITDA improved to positive $761,000 in Q3 '26 versus $32,000 in Q3 '25, reflecting continued cost control and financial discipline. As Sally mentioned, this was Orion's fifth consecutive quarter of positive adjusted EBITDA. That puts our trailing 12-month adjusted EBITDA at $1.6 million on sales of $81.5 million.

Year-to-date cash provided by operating activities was $400,000 through Q3 '26 compared to $1.3 million in the prior year period. During the year, we have also had a $1.3 million net paydown of our revolving credit borrowings.

Net working capital was $8.9 million at Q3 '26 versus $8.7 million at year-end. Available financial liquidity was $11.8 million versus $13 million at year-end. Notably, we recently raised net proceeds of approximately $6.4 million 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.

Regarding our outlook, as Sally noted, last month, we increased our expectations for growth and profitability for our current fiscal year and set expectations for increasing growth and profitability in our next fiscal year, which begins April 1.

We raised our fiscal '26 outlook to a range of between $84 million and $86 million in revenue at positive adjusted EBITDA. That's up from our previous outlook of about $84 million in revenue at or approaching positive adjusted EBITDA. And now we expect positive adjusted EBITDA for the full fiscal year '26, which ends March 31.

We also announced that we expect a continued increase in profitable growth in fiscal '27 with positive adjusted EBITDA on revenue between $95 million and $97 million.

And this concludes our prepared remarks. Operator, would you please now commence the question-and-answer session.

[Operator Instructions] Our first question comes from the line of Eric Stine with Craig-Hallum Capital Group.

So maybe just starting with the external lighting project, the $14 million to $15 million, obviously, very good to see. Just curious, I know some contribution in Q4, but maybe just for help on our side, any early thoughts on kind of linearity of revenue 1Q, 2Q of fiscal '27. And then it also sounds like you're pretty optimistic that -- I know you've been doing work with -- significant work with Home Depot over time, but that this $14 million to $15 million has some expansion potential with it as well.

Eric, it's Per. I think maybe the way to think about it is we did start with some of those projects in, say, late January of this quarter. We expect that effort to ramp in January, February and March and have said we expect the majority of that revenue to hit in the first half. And actually, we expect to be complete by the end of July. So I would think that there's some initial revenue ramp in the fourth quarter here of '26, then I would expect that over those first 5 months of fiscal '27, it will be a little bit more of a steady earnings on revenue.

Got it. That's helpful. And then the expansion potential [indiscernible] that project, if there is some, then maybe expand on that.

Yes. Eric, we think that there's potential expansion, as we've noted with -- in this customer. We work closely with them day in and day out. That probably would not be in the, we'll call it, the first half of the year as we continue to be a partner with them.

Okay. And then just second one quick. Very good to see the OpEx come down again. Per, I believe you termed it as a result of ongoing cost reduction initiatives. So where could that potentially go? I mean is this kind of a quarterly run rate we should think about? Or is there a potential further reduction?

We'll continue to try to manage those operating expenses as closely as we can. I think a lot of that effort, as you would suspect, ends up being finding cost savings to mitigate other cost increases. So I would think that ongoing expenses would be at that level or potentially slightly more, but probably at least in Q4 that that operating expense number would start with a 6.

[Operator Instructions] Our next question comes from the line of Gashi Rowe with Singular Research.

Can you hear me?

Yes.

Congratulations on your quarter. On the maintenance side, you clearly had some big win at a large retailer. I'm curious as to about the next tier of customers. Are you seeing those smaller midsized enterprises adopt a similar preventative maintenance model? Or is this still more of a one customer phenomenon at this stage?

Thank you. So no one to the scale that this large retailer is for us in that division, but we are seeing increases month-over-month within some of our other customers and continue to pursue new customers and contracts within the space.

Got you. And with the strong run of contract wins with a handful of large customers, can you talk about how you are underwriting the execution risk? I know in the past, you've seen some -- experienced some delays. Any kind of orders or penalties? How much room is there in your margins and guidance if one of these programs experiences the kind of delays that you have seen in the past?

I think that risk exists on an ongoing basis, and we say, temper our outlook with that potentiality. So I would say that we have tried to take into account any issues that might arise that we have at least some visibility to at this point.

Our next question comes from the line of [ Matt Dunn ] with Tieton Capital Management.

Great. That's Matt Dane with Tieton Capital. I wanted to ask about the distribution segment. You referenced that you're seeing some success there. Just wanted to get a little bit more color around that. What's driving that success? And what type of runway do you see with that as well?

Matt, so driving that success, we're out there with the customers expanding our relationships. As noted, we expanded the team that calls on that channel earlier this year, and that's proving to bear fruit. And also, we're looking at developing products from the request of customers in that channel as well. So we expect to engage further in the channel and deliver the products that they're asking for us to deliver as well.

Great. I did also want to ask about the infrastructure opportunity, electrical infrastructure opportunity. How much revenue are you getting from that newer area of your business to date? And I guess I just have a hard time really sizing how large the opportunity is over time. What can you share around all that?

So the shape of the revenue that we get is certainly evolving from what traditionally we'd say product sales and some of that even comes from the EV segment and the installation that we do there. But where -- and we're developing this. So I guess I don't have a hard number for you. But where we're getting some of these projects from is expansion within maybe an installation job that we had and there's expanded work to do on site. We're there, and they're requesting us to do that expansion of work, which can be 7 figures in terms of the scope of those jobs that they ask us to do. So initially, when we got there, we didn't expect it, and then it's further grown.

Okay. And so is it -- how significant is the revenue that is contributing so far? Or is it still -- it's really not a huge amount of revenue and it's more of a future expected additional revenue that is going to add?

Yes. We're continuing to build it. And as we build out our plans for next year, we look at what the potential of this could be.

Maybe a different way to think about it, Matt, is we have had some good wins on that standpoint, both from, I'll say, an overall win on a couple of jobs. And we've also had, to Sally's point, a couple of expansions on what started as lighting projects that is not yet fully in our results through the end of Q3. A lot of that is, I'll say, one business, but some of that will be recognized in Q4, and some of that will go into fiscal '27, and we're hoping to build on those successes as we go. So it's a little hard to size it at this point.

This concludes the question-and-answer session. I will turn the call back over to Sally Washlow for concluding remarks.

I want to thank everyone again for taking time to join us today. We look forward to updating investors on our fourth quarter call in early June. Between now and then, we look forward to meeting with many of you or to meet whether it's in person or virtually.

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 or 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.

Thank you. This concludes today's conference call. You may all disconnect. Everyone, have a great day.

Good morning, everyone, and welcome to Orion Energy Systems Fiscal 2026 Second Quarter Conference Call. [Operator Instructions] In this call, Sally Washlow, Orion's CEO; and Per Brodin, its CFO, will review the company's second quarter results and its fiscal 2026 outlook. Then we will open the call to investor questions. Today's conference is being recorded. A replay will be posted in the Investors section of the company's website, orionlighting.com.

I will now turn the call over to Per Brodin, Orion's CFO.

Thank you, Rica. 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.

Thank you, Per. Good morning, and thank you for being with us today. I am extremely pleased to report our Q2 results, highlighting a year-over-year increase of more than 1/3 in gross profit. This is also our fourth straight quarter of positive adjusted EBITDA. We recorded incremental growth in total revenue and significantly more than that in maintenance services, even as we unburdened ourselves of an unprofitable contract. And we saw a welcome bounce back in EV charging as the sector-wide uncertainty of the earlier part of the year began to dissipate.

When we last convened, I said that we are on track to achieve 3 milestones in fiscal 2026. Milestone 1, by the end of the second quarter, a positive resolution that enables a publicly traded Orion to maximize its opportunity for growth in shareholder value. We achieved that by maintaining our NASDAQ listing. Milestone 2, by the end of the third quarter, the enactment of a growth, profitability and cost containment initiative that enables Orion to become a recognized long-term market leader in its core businesses. This is already contributing in the second quarter as we reported 34% higher gross profit and the fourth straight quarter of positive adjusted EBITDA.

Milestone 3, by the end of the fourth quarter, $84 million in revenue at or near a positive adjusted EBITDA for the full fiscal year. We are on plan and our expectation for the fiscal year is unchanged. We have only just begun, and we are demonstrating building towards sustainable and profitable growth beginning in the second half of this year. Even in these early innings, it is gratifying to see that our work is being increasingly recognized and not just by our shareholders. Our partners and customers have long recognized Orion as their go-to partner for installation, ongoing maintenance and managed services for LED lighting and EV charging.

We are also seeing an increase in activity related to quoting and winning work within electrical infrastructure. As I noted in our last call, industrial, commercial and public sector facilities operated by some of the largest enterprises in the United States rely on Orion. With products made in America, along with the global supply chain and now in our fourth decade, Orion serves as a go-to provider to Fortune 100 corporations and other global leaders in sectors ranging from manufacturing to government to retail. A recent illustration is last month's announcement of a major retailer's 3-year renewal with us, representing reoccurring revenue of between $42 million to $45 million. Our largest long-time customers stay with us year after year because we deliver unsurpassed quality and unsurpassed ROI.

Whether deployed independently or in a combination with our ESCO and distribution partners, Orion solutions deliver unrivaled ROI to industrial facilities requiring the most demanding standards of efficiency, reliability and compliance. That recognition serves us particularly well at this pivotal moment. Just in Q2 alone, we saw an upswing in the lighting market with the recent Dodge Momentum Index report that commercial, industrial and public sector construction planning is 33% ahead of year ago levels. We see an improved outlook in the EV charging market with the confidence boosting federal declaration reassuring the availability of $5 billion in government EV charging funds. We are beginning to see increased opportunities for electrical infrastructure installation and maintenance with megatrends from reshoring to refurbishing to replacing manufacturing and other industrial plants in the United States. All of these tailwinds mean that Orion has a multi-sector reoccurring revenue win at our back, whether it is in lighting, EV charging or maintenance services. As I promised on our first call, we will continue to keep you apprised with increasing frequency and with increasing granularity throughout this fiscal year and beyond.

Now drilling down further on the second quarter. Once again, Q2 featured solid stability and progress in our 3 business lines as well as positive guideposts for the rest of the fiscal year. The quarter resulted in enhanced margins, reduced costs and meaningful progress on the bottom line. We remain in a solid position for the full fiscal year. Orion's Q2 '26 revenue was $19.9 million versus $19.4 million in Q2 '25. Q2 '26 gross profit grew 800 basis points to 31% versus 23.1% in Q2 '25, and we achieved our fourth consecutive quarter of positive adjusted EBITDA. Per will provide details in a minute.

Let's look at a quick snapshot of some of the highlights from Q2, which featured solid accomplishments in our 3 business lines. In Lighting, we had some significant new business wins exemplified by $11 million in government lighting and up to $7 million in LED lighting for facilities belonging to some of the biggest names in the automotive industry. In EV charging, we saw a welcome bounce back from the uncertainty that the entire EV sector experienced in the first few months of the year. A particular Q2 highlight was the $8.5 million in EV charging work in Massachusetts. We also saw the continence boosting federal clarification reassuring the availability of $5 billion in government EV charging funds.

In maintenance, these and other engagements featured ongoing managed services that ramp reoccurring revenue and ensure a close, continuous and expanding relationship with our enterprise customers. It's also important to note a couple of particular points about Q2. One is that our maintenance services achieved significant growth even while allowing the lapse of an unprofitable contract. Another is that EV charging showed a welcome bounce back from the uncertainty that the entire EV sector experienced in the first few months of the year.

Our Q2 gross profit now at 31%, a year-over-year jump of more than 1/3 was also a standout. This was largely achieved by continuing reductions in LED lighting fixture cost via our ongoing improvements in reengineering, plant efficiency and improved sourcing as well as via both margin and volume increases in our maintenance services business. We continue to benefit from the success of our cost control initiatives, and we expect to see ongoing improvement throughout the rest of the fiscal year. On the new business front, we continue to build our expanding pipeline of contracted LED lighting projects even as we penetrate and radiate within existing maintenance services customers. We are laser-focused on increasing sales in our LED lighting distribution business.

On the new product front, we continue to gain traction with our value-based LED lighting fixtures. The marquee name here is Triton Pro designed and engineered in response to popular demand from both customers and channel partners. Triton Pro is a competitively priced LED lighting line that is getting traction with a number of customers. We also continue to partner with our customers to bring together seemingly discrete products and services into the connective tissue domain of electrical infrastructure, a name we've been dropping lately, you may have noticed. Electrical infrastructure integrates offerings like LED lighting, high-voltage EV charging stations and a high-impact array of maintenance and managed services. We'll have more to say about this initiative as well. For now, suffice to say that it is in response to requests from our customers as well as those megatrends I mentioned earlier: data centers, AI, manufacturing, retail, electrification, industrial and complete commercial fleet management and others. These are the headlines of the day. You see these headlines in the Wall Street Journal, in Barron's, in your hometown paper. You may have noticed that you see them in Orion press releases, too. Orion sits squarely in the confluence of these megatrends, and it has solutions to not just serve them, but to accelerate them.

With that, let me turn to Orion's CFO, Per Brodin, to review our financial performance and outlook.

Thank you, Sally. Today, we reported fiscal Q2 '26 revenue of $19.9 million as compared to $19.4 million in Q2 '25, with 2 of Orion's 3 segments growing year-over-year. LED lighting segment revenue decreased 2% to $10.7 million compared to $10.8 million in Q2 '25, reflecting increased project activity and distribution channel sales, offset by lower ESCO channel sales. Orion's expanded LED lighting project pipeline and efforts to drive growth in the distribution channel are expected to contribute to higher revenues in the back half of fiscal '26 versus fiscal '25.

Lighting achieved a Q2 '26 gross margin of 27.5% versus 25.4% in Q2 '25, with pricing increases, cost reductions and sourcing initiatives being amplified by a more favorable Q2 '26 project and revenue mix. Maintenance segment revenue increased 18% to $4.5 million in Q2 '26 from $3.8 million in Q2 '25, reflecting the benefit of new customer contracts and the expansion of some existing relationships. We achieved a maintenance segment gross margin of 23.7% in Q2 '26 versus 15.3% in Q2 '25, as there was a significant inventory charge recorded in Q2 '25 as part of the segment restructuring. EV charging solutions revenue was $4.8 million in Q2 '26 compared to $4.7 million in Q2 '25, reflecting the expected completion of a significant project within the quarter.

EV achieved a strong gross margin of 45.8% in Q2 '26 versus 23.7% in Q2 '25 due to a strong improvement in sales mix. Our overall gross margin increased 790 basis points to 31% versus 23.1% in Q2 '25, reflecting pricing and cost improvements in all segments, particularly LED lighting and maintenance. We expect overall gross margin to remain strong in fiscal '26, though it will likely vary on a quarter-by-quarter basis due to revenue mix and volume.

Total operating expenses declined to $6.4 million in Q2 '26 from $7.7 million in Q2 '25, reflecting ongoing overhead and personnel expense reductions and earnout expense of $0.6 million in Q2 '25 that did not recur in 2026. We expect operating expense to approximate Q2 levels in the remaining 2 quarters this year.

Reflecting stronger gross margin and lower operating expenses, Orion's Q2 '26 net loss improved to $0.6 million or $0.17 per share from a net loss of $3.6 million or $1.10 per share in Q2 '25. Adjusted EBITDA improved to a positive $0.5 million in Q2 '26 versus a negative $1.4 million in Q2 '25, reflecting cost control and financial discipline. As Sally mentioned, this was Orion's fourth consecutive quarter of positive adjusted EBITDA that puts our trailing 12-month adjusted EBITDA at $0.9 million on sales of $80 million. Year-to-date cash provided by operating activities improved to $1.3 million in Q2 '26 from a use of cash of $2.5 million in the prior year period, primarily due to the improved bottom line performance. During the year, we have also had a net paydown of our revolving credit borrowings by $1.25 million.

Net working capital was $8.1 million at Q2 '26 versus $8.7 million at year-end, primarily reflecting the use of cash to pay down on the revolver. Available financial liquidity was $13.5 million versus $13 million at year-end. During the quarter, we issued $1 million of common stock and made $875,000 of cash payments to partially satisfy the Voltrek earn-out obligation.

Turning to our fiscal '26 outlook. We have reiterated the fiscal '26 revenue growth expectation of 5% to approximately $84 million that we initiated in June. We have also reiterated that our revenue growth outlook positions Orion to approach or achieve positive adjusted EBITDA for the full fiscal year, depending on revenue mix. This growth outlook anticipates modest growth in LED lighting and electrical maintenance revenues and flat to slightly lower EV charging revenues. And this concludes our prepared remarks.

Operator, would you please commence the question-and-answer session?

[Operator Instructions] Our first question comes from the line of Eric Stine of Craig-Hallum Capital Group.

So maybe just starting on the EV business. I mean, clearly, a positive development with clarity from the government. And I know that a lot of your business there has been through utility programs. But I guess I'm curious what you are seeing with some of your customers. And I think this maybe goes hand-in-hand with the energy infrastructure initiatives and a bundled offering. But I do know that part of the reason that you made this acquisition a while back is because your customers were requesting these capabilities. So just curious what you're seeing from your enterprise customers.

Eric, yes, we're absolutely seeing some of that from our enterprise customers, bringing whether it's an LED lighting project that would have started out as that, but bringing then EV charging into their parking lots as well. So that is some of the things that we're seeing in that. Our business was -- had a lot of utility programs, but I think you've seen in recent announcements, further expansion of the work with Boston Public Schools, MassDOT, as well as the state continues to build out its infrastructure and then hiring additional salespeople. We hired gentlemen based in our Florida office to help further expand our geographic reach as well. And we have a couple of other areas targeted that we're investigating right now and more to come on that.

Okay. And then, I mean, I guess, segue to energy infrastructure, is this something where you feel like you can accelerate some of that traction if you are going to the market with more of a bundled offering? Or maybe that's -- I'm not sure if that's how you think about it or not, but a bundled offering where, again, a customer just has one point of contact for everything that they want to do.

Yes. We're certainly looking at that, and a lot of it has been developed through customer requests. We're on site. They see the work that we do. An example of this would be it started as an LED lighting project, but maybe they need help bringing their facilities up to code. And then they turn to us to say, "Can you do that and manage that project for us as well?" So those are where the work in electrical infrastructure is expanding, and we're at the very beginning of this as well, but even energy storage so that they look to offload the peak time, so working to develop relationships to bring energy storage into their facilities as well.

Got it. Okay. Maybe last one. Just you had the maintenance agreement renewal. I think we can all kind of guess who that customer is. But just curious, maybe not to that size, given who that customer is, but what are you seeing on that front? Clearly, you are sounding more positive, although modest growth this year, certainly long term on the maintenance side. What are you seeing in terms of demand there from other enterprise customers?

So we have some other customers as well. It's a little bit of a slower build as we work with them. But month-over-month, that revenue is growing with them as well and the trust that they have in us. So we think that, that will continue to expand.

Our next question comes from the line of Sameer Joshi of H.C. Wainwright.

Just a little bit more on the EV outlook. I know you are expecting flat or slightly lower year-over-year growth there. But in terms of the strategy going forward, given that these funds are now -- the $5 billion are being made available, do you expect or are you planning to have some kind of a geographic expansion or maybe a roll-up with some other similar businesses that might increase the size of your EV offering?

Sameer, we are certainly looking at a geographic expansion. And of note, hiring a sales gentleman to lead our Jacksonville office and then other areas of the country as well. The teams are working on mapping out where we best have personnel and then also where there's a lot of EV infrastructure work going on. So we certainly expect further geographic expansion.

Understood. Switching to lighting. I think one of the things I may have misheard, but just making sure the $42 million to $45 million recurring revenue potential, is that over the life of the contract? Or what do those numbers represent?

Yes. It's a 3-year contract renewal. So that's over the life of the 3-year contract.

Okay. And then, of course, I should have started with congratulations on the cost control efforts and the results. But I also heard during the commentary from both of you, the word ongoing. Should we expect further improvements in gross margins to like mid-30s or near that level? And on the operating expense front, I have noticed in the last couple of quarters, your sales and marketing expense as a percent of revenues have reduced. Are there some synergies you are seeing there that we may have missed?

Yes, Sameer, I think a couple of thoughts on those questions. I'll try to catch all of them. On the expense line, I think what I tried to convey is that the Q2, the most recent quarter that we completed from an OpEx standpoint is the level that I think we expect for the next 2 quarters. We are -- I think some of the other comments are aimed at saying that we will continue to look for savings opportunities that are out there. But at the same time, we'll also look for opportunities that we may need to invest a little bit of money as we did with the salesperson in EV because we think that will have a good payback for us as we expand sales in the EV segment.

From a margin standpoint, I don't think in the near term, we have an expectation of getting into the mid-30s. I think being in the neighborhood of the high 20s to 30% is probably more realistic. As I mentioned, there will definitely be some fluctuation there depending on mix as well as sales volumes that cover fixed costs within our COGS structure. So hopefully, that clarifies those two.

Yes, understood. Just last one maybe and just a clarification. The $875,000 paid during the quarter, were they part of -- on a GAAP accounting basis from a previous quarter? Or are these $875,000 included in the OpEx that are for the September ending quarter?

The $875,000 that was paid had been accrued as of March 31, as was the $1 million that was paid in equity. So we had the larger accrual at March 31, we made those two payments. And then there's still a remaining balance that as we've disclosed separately, is subject to arbitration. So we expect that to play out over the next quarter or so.

And has that been accrued or is that pending the settlement?

We've accrued what we believe is the appropriate amount, and that was accrued as of March 31.

[Operator Instructions] Our next question comes from the line of Bill Dezellem of Tieton Capital Management.

I have a group of questions. I'd like to start with the Lighting business. You brought in some talent to reignite ESCO distribution revenues. Would you please discuss whether there's been any tangible benefit yet? And I recognize it's very early to ask the question or whether that pipeline is still developing.

Bill, it's Per. Yes, I think in my remarks, I mentioned that in the quarter, our distribution channel revenues increased, and that's where the, I'll say, the main talent addition that we discussed back in the June time frame was mentioned. I think that he has landed on solid ground and with a running start of some sort because of his connections within the industry. And we think that he will continue to build that. That was consistent with another comment I made in my commentary. So I think the ESCO channel, we've not made recent investments from a sales standpoint in that channel, but that is a channel that we will also press on to ensure that we can maximize the opportunities on all 3 of the lighting channels.

So in spite of his short tenure, there already has been a benefit. So if that's the case, presumably one doesn't hit their full stride and at maximum performance in just a few months. So presumably, that business builds and that's part of what your comments were alluding to relative to the remainder of the year?

That's correct. And we have high expectations as we move forward into the next 2 years.

Great. And Per, did I hear you in response to my question, also say that you will be adding additional sales talent in the distribution arena? And if that is the case, are you essentially waiting for a little higher revenue so that you can pay for that individual who will then generate the next level and start layering on top of layers?

No, I did not say that. I'd say that it's something that would certainly be considered as the current executive continues to perform and as we evaluate other opportunities to grow that channel. But no firm plans at this time.

Okay. That's helpful. And then I'd like to shift to maintenance real quick. The quarter you said had a headwind because you had unprofitable maintenance contract that you walked away from. How much of a revenue headwind was that in the quarter?

So we -- I don't have the exact number right now at my fingertips, but it was from last quarter. So quarter-over-quarter as that -- or last year, I apologize. As those contracts lapse, then we're growing the business in other areas was the intent of that.

Last year, we essentially were wrapping up that contract in Q2 of fiscal '25. So there was headwind of a tough comp, but it was not -- I'd just say round numbers, it would have been less than $0.5 million.

Okay. And then did you add any notable business beyond your largest customer in the maintenance arena this quarter specifically?

We have continued to add some customers or growth within customers beyond the large customer. The large customer does take up a significant portion of it. So they're of note to us because they are growing every month, and we'll continue to watch their growth and further partner with them and gain more customers in that area.

Maybe another way to think about it, Bill, is we've gained new customers over the past year, and the business we're doing with them has expanded as we've moved forward in that relationship.

Per, I'm going to build off of that. Do you see an opportunity with those customers to continue to build further as you execute? Or are you now reaching kind of a steady-state run rate with them and you'll be needing to add additional -- not that you don't want to already, but you'll need to add additional customers to build revenue further?

I think it will be a little bit of both. The -- we don't believe we're at run rate with some of these newer customers. So we think that will continue to expand, and we think we will continue to attract new customers as we move forward.

Right. Okay. That is helpful. And then at a high level, do you see the maintenance business as a lead generator for product sales, whether it be lighting or EV?

I mean we are seeing some of that with the maintenance products. Product sales within that segment are increasing. So certainly, we look to all customer touch points as potential lead generators into other areas.

I guess, Sally, where I was going with that is, does it give you a special insight that you may not otherwise have if you weren't inside the customers' 4 walls doing the work?

Yes. So I guess to answer that part of it, absolutely, we see some of that with the expansion of some of the services that we're doing. Had we not been within the 4 walls of the customer and maybe doing work in other areas, and they're asking, "Can you project manage this part of bringing some of our systems up to code as well?" We wouldn't have gotten that business had we not been there working side-by-side with them.

That's helpful. And then I know I'm taking up a lot of time, but one additional question or clarification relative to the EV business. I heard I thought 2 different things in terms of your commentary. One is some level of caution for the remainder of the year for sales there, but that there's also more clarity on the EV rules and that bodes well for the future. So let me try to put a fine point on it here that the Q1 EV revenue was $2.7 million. Here in Q2, it was $4.8 million. Are you anticipating approximately holding at this $4.8 million for the next couple of quarters? Or do you continue to see some level of growth from the $4.8 million?

Yes. I think we're cautious on our guidance for the year because we ultimately lost a couple of months there with all the uncertainty at the beginning of the year. But our expectation is to be flat to a little bit down in EV for the year. But I think your numbers are right in the realm of what we expect to do for the next couple of quarters to deliver on that and start to regain some momentum from what was basically lost or at a standstill in the first quarter.

Our next question comes from the line of Steve Rudd of Blackwall.

Very encouraging results. Can you talk about the cost containment? I mean, obviously, we're seeing top line trend of growth from a cost containment and cost leveraging point of view or infrastructure leveraging point of view, how much more room do we have to go?

If I interpret your question properly. We think we have -- I'll step back. Earlier in the year, we think we rightsized the business so that we could be at or above breakeven in the $80 million to $83 million of revenue standpoint. And that's on an adjusted EBITDA basis. I think now that we have 4 consecutive quarters of positive adjusted EBITDA and $80 million of trailing 12 revenues, I think that's holding true. So -- and then if you look at our guidance, we obviously are expecting a little bit stronger performance in the second half compared to the first half to get to the $84 million.

In terms of what we can deliver with the infrastructure that we have, we think that we can leverage this infrastructure quite a bit. There certainly are some variable costs such as commissions on sales. We always are happy to pay increases in commissions because that means our sales are increasing. So there'll be some things like that, that will come to us. But we think on an overall basis, we'll be able to leverage this infrastructure with a fair amount of revenue growth.

So it's your assessment at this point that you have your baseline costs exactly where you'd like them to be and not much more to be done there?

I'd say in general, yes. But to my -- one of my previous comments, you're always looking for opportunities for savings. And some of that you may need to try to find money to invest in growth opportunities, and that's the balance that we'll continue to work on as we move forward.

This concludes our Q&A session. I'll now turn the conference back to Sally Washlow for concluding remarks.

I want to thank everyone again for taking time to join us today. We look forward to updating investors on our third quarter call in early February. In the interim, we hope to have an opportunity to meet with many of you either in person or virtually. We will be presenting at a number of conferences, including the Craig-Hallum Alpha Select Conference on November 18. Details will be coming out tomorrow and the Singular "Best of the Undercovered" (sic) [ Uncovered ] conference on December 11. We will announce details via press releases. Please also reach out to our Investor Relations team with any questions or to set up a meeting. Their contact information is at the bottom of today's press release. Thank you again for your interest in Orion. I look forward to updating you on our progress next quarter.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and welcome to the iAccess Alpha Virtual Best Ideas Fall Investment Conference 2025. The next presenting company is Orion Energy Systems, Inc. [Operator Instructions] I'd now like to turn the floor over to today's host, Sally Washlow, Chief Executive Officer with Orion Energy Systems, Inc. Ma'am, the floor is yours.

Thank you, and thank you all for joining us today. Alongside me today is Per Brodin, our CFO as well, and we will be available to answer any questions you might have after our presentation.

So again, thank you for joining us today. I will go to our next slide, our safe harbor and really start on Slide 3, our organizational mission. We help our customers achieve their sustainability, energy savings and carbon footprint reduction goals through innovative technology and exceptional service, and I'll walk you through that today.

At a glance, Orion provides optimally efficient LED lighting systems, commercial and industrial EV charging infrastructure solutions and lighting and electrical maintenance and managed services. We believe we are an attractive investment opportunity. Noting some of our recent share price, we're a little bit north of $7.40 today, and our market cap is slightly higher than $26 million.

The last trailing 12 months of sales have been just around $80 million. Some of the investment merits that we'd like to highlight are that we provide diversified revenue streams in EV, lighting and maintenance. We have opportunity for reoccurring revenue capabilities. We have completed over $6.5 million in annualized overhead reductions and believe we have an optimized cost structure that unlocks our operating leverage.

We have a strong and long-term customer base, which I'll share some examples in coming slides. We have nimble engineering and can customize many solutions for our customers, along with a proprietary supply chain with manufacturing flexibility. And over 10% of our ownership is held within directors and officers.

Our business segments contain Lighting, Maintenance & Technical Services and EV Charging Systems. Within Lighting, we have the ability to design, manufacture and install energy-efficient LED lighting systems. We have completed over 25,000 projects with a strong focus on the commercial and industrial retrofit business.

We are involved in interior and exterior applications, and we have deep control options, including IoT to deliver to our customers, along with multiple go-to-market models, including full turnkey service, which I'll touch upon in the coming slides, and we have several repeat clients.

In our Maintenance & Technical Services group, we have the ability to deliver reoccurring services across our lighting and EV systems. We provide preventative and reactive maintenance, along with special projects that come about while we're on site with our customers. And many of these services are held within 3-year contracts, which provides a nice opportunity for reoccurring revenue.

In EV charging, we are a provider of end-to-end commercial EV charging solutions. We will support site design, installation and commissioning within this segment. We provide the leading equipment within North America, specifically ChargePoint & ABB, and we mainly work with Level 2 and DC fast charge Level 3 for fleets. We have national execution capabilities in this segment and again, an ability for reoccurring revenue through maintenance and networking.

Orion has the unique ability to provide nimble technology and unrivaled ROI for our customers. Some of the value-add and competitive advantages that we bring are noted here. Our industry-leading technology and design enables us to have the highest energy efficiency and smart design delivered to our customers, which then turns into the highest ROI for our customers. In these areas, we can start early with our customers to meet the needs of their ROI as we're designing solutions for them.

We bring this through in our unique turnkey capability and the ability to execute the project from concept to completion for our customers. We have design and manufacturing flexibility, which has now been brought through in our flexible and cost-efficient supply chain. What you'll see on the left here in the picture is our U.S.-based manufacturing. We have 266,000 square feet of manufacturing capability out of our Wisconsin facility, which enables our customers to be compliant with the Buy American Act and the BABA compliance as well.

We also have accelerated product development and can bring product to market within 4 to 6 months versus 12-plus months, enabling market leadership. And we do this through our flexible supply chain, utilizing our manufacturing here in Wisconsin or through our global supply chain as well with manufacturers in Asia and Mexico as well.

We have a broad sales reach. We work in several channels, whether it be national accounts through agent networks and ESCOs and resellers. And we have a blue-chip customer base with repeat business, which provides access through retrofit and connected ceiling IoT opportunities.

Within Lighting, I'll share a bit more about our custom manufacturing and unrivaled response. Our proprietary manufacturing approach through our facility in Manitowoc, Wisconsin and our global partner affords us maximum flexibility. We are able to maintain significant component inventory and material and finished goods for quick turnaround projects through warehousing in our Wisconsin facility as well as custom manufacturing capability within our Wisconsin facility for specific national accounts and rollouts.

And as I've also mentioned, we are BAA and BABA compliant through our facility in Wisconsin. Within our maintenance and managed services, this provides reoccurring maintenance revenue. We also have preventative and reactive lighting, electrical services and EV maintenance. We work nationwide through a network of skilled and certified lighting and electrical professionals, and we also have a dedicated 24-hour response for any emergency or nonemergency lighting and electrical issues.

Within our EV charging segment, we bring over 15 years of EV expertise and experience. We are a premier reseller of LED charge EV -- of leading EV charging stations, and we are a full turnkey provider. We are the contractor preferred for ChargePoint, ABB, InCharge and others, meaning they're coming to us for some of their customers for the installation. We have 7,300 charging ports under our management, and we also support the networking maintenance, which affords reoccurring revenue. We're a partner to the utilities Make-Ready Programs, and we also provide national coverage. On the left here is one of the installations at Hilton in Watertown, New York. This is one example of the work that we do.

I've also mentioned our turnkey capabilities. Orion brings discrete, bespoke and turnkey capabilities to projects, both large and small. You can see in the wheel on the right, it starts with a factory audit, then we're working on design with our customers, manufacturing, installing the product, working to make sure that they are obtaining the proper rebates. We provide warranty coverage for our work as well as maintenance. So we are a full solution provider and preferred for Fortune 100 and other global leaders in industries ranging from manufacturing to retail logistics.

Here are some of the great customers that have partnered with us over the years from food and beverage, automotive, retail, sectors of the government, medical institutions as well as the Massachusetts Department of Transportation.

I want to share with you today the work that we did with Clarios. Their goal was to maximize energy savings and optimize the visual environment of a 100,000 square foot facility that they had in Florence, Kentucky. By replacing outdated and inefficient fluorescent technology, Clarios wanted a one-for-one fixture replacement for their fluorescent troffers and linear high bay fixtures. The result was that we installed over 800 fixtures, saving them substantial amount of energy cost reduction and energy reduction as well as 218 tons of annual carbon dioxide reduction.

Another client example is in EV charging, we focus mainly on the fleet business within this installation at the Haverhill High School supporting their EV transit vans. We installed 6 DC ChargePoint fast charging stations. This project was over $400,000 and fulfilled their needs. You might have also seen recently some press releases we have shared regarding the work that we do with the Greater Boston Public School Systems as they electrify their fleet of school buses.

In summary, how we achieve our mission is that Orion Energy Systems provides one source solutions for LED and EV charging. To highlight a bit more about that, just this morning, we have a press release regarding an $11 million electrical infrastructure project that was awarded specifically for exterior LED lighting and EV charging. This is a great example of how customers come to us for multiple solutions, and we have the ability to deliver. We provide substantial reduction in energy costs for LED projects averaging payback of 1 to 4 years. We have advanced product design with some of the highest performance in the industry.

And I've also mentioned our flexible supply chain and manufacturing footprint, including our U.S.-based manufacturing facility. We have an expanded product portfolio, including exterior products and a TritonPro contractor line as well as multiple go-to-market models, including Orion's turnkey project management to match our customer needs, and we are expanding our lighting maintenance services. Our senior management team consists of myself, recently appointed the CEO in April of 2025.

I have been on the Board of Directors since 2022. Per Brodin, our CFO, who is on the call today, has been with the company since October of 2020; and Scott Green is our COO, who has multiple years of experience in lighting and came to us in 2013 through our acquisition of Harris Lighting.

A summary slide here of our quarterly revenue margin and EBITDA and liquidity data. As I mentioned earlier, our trailing 12 months is just around $80 million, and we have had substantial gross margin improvement over the last several quarters, approaching 30%.

That concludes our presentation. I would now open it up for questions.

Bear with me as I go through our questions, and I will read them. Can you walk us through your strategy for driving reoccurring revenue? Absolutely. Our strategy for driving reoccurring revenue sits with -- really within every segment of our business. Maintenance is the best performer of reoccurring revenue because through the preventative maintenance that we do, we are constantly in there supporting our customers, preventing outages that they might have and then also looking at potential future needs of their organization, whether it's expanding EV charging capabilities that they need based upon usage of what's going on with the current infrastructure that they have or looking to partner with them in other sites.

The same goes for LED lighting. There's even talks now, the early years of LED lighting retrofits, there is now the opportunity to go in and what we'll say -- call re-LED of some of those prior projects that have occurred as well. And really then continuing to drive maintenance and service contracts within the EV and lighting segment. Along with the EV segment, there is the ability for reoccurring revenue from the actual operations of the stations themselves. Another question.

As you look to grow the business, does Orion face any significant capacity constraints? We don't foresee any capacity constraints in the future for our business because of our global supply chain. We can call upon our global manufacturers to support us from a product standpoint, along with our capabilities in Wisconsin. And then as we deliver and execute upon the business, we partner and subcontract with electricians throughout the U.S. so we can flex up and flex down our workforce as needed.

There is also a question regarding today's press release regarding the up to $11 million electrical infrastructure product we announced and how will this project work and play out over time? We expect that a substantial portion of this revenue will be recognized in our FY '26 fiscal year, which ends March 31.

Another question. How does the pipeline in your EV segment look? Have there been any change since the new administration took over? Do most of these opportunities come through the channel? Our EV segment, we have taken a conservative approach to EV this year based upon the first half of the year when the new administration took over. There was a lot of noise, pullback on funding as well.

So we did feel that there was a bit of a slowdown. But as things have settled down and even NEVI funding has been reinstalled, reinstated, we feel pretty confident about our EV pipeline and the segment. Not with a lot of growth particularly this year based upon some of the headwinds that we faced at the beginning of the year, but it certainly has been showing some pickup after things settle down with the new administration.

Another part of the question is the segment getting more competitive. It's been a competitive segment. We also expect that some players might not want to stay within the segment. So we also look for opportunities to grow in other regions and take advantage of what we see could be some fallout in the business as well.

To what extent does your U.S.-based manufacturing footprint provide pricing or compliance advantages versus import-heavy competitors? So we -- our U.S.-based manufacturing is extremely competitive on a like-for-like product when the needs require it to be made in the U.S. Many government projects, in particular, require that. So we are absolutely compliant, and we are quite competitive not only from a pricing standpoint but from a technology and product standpoint as well where some of these projects, the import-heavy competitors aren't even able to bid on this.

But so that we can deliver a full range of products to our customers, we do have partners and have imported product as well. And that's one of the great things about our flexible supply chain and product mix is that we can meet the needs of customers where they're at based on projects.

Bear with me while I refresh questions as well. There's quite a few coming in. We appreciate them. Given the $6.5 million Boston Public School award, how scalable are similar fleet electrification opportunities with other municipalities? We think that Boston Public Schools is a great example of investing in the infrastructure of EV charging, specifically for fleets and buses that go back and are sitting idle at night.

So we certainly have even expanded our sales team to go after other areas of the country as well. And the great work that we've done within Boston Public Schools, we think will be a great point of reference to then grow to other municipalities. I can't say we've won any others specifically yet, but we are investing and focused on growing that capability.

We have a question here about gross margins, and we also have our CFO, Per, on the line. So I think he can provide the best insights on this, and I'll add any comments. So Per, I want to make sure you can hear me, and we can hear you.

I can. I actually did lose the questions. If you wouldn't mind reading the question, I'll answer it.

I will. I will. The gross margins have bounced around a lot. What are the main drivers of this volatility? And where do you see gross margin going forward?

Okay. So I'll say the most basic cause of margins bouncing around, I'd say, are revenue volumes. We do have a share of fixed costs that run through gross margin, both in the -- on the product side as well as on the service side. So as we are at a low volume revenue quarter, those margins tend to be depressed by those volumes because of the fixed costs.

One other somewhat recent dynamic was in our maintenance business, which we restructured by eliminating some unprofitable contracts. So that business had gone into the negative margin stage for a lot of the business, particularly associated with the Stay-Lite acquisition. Those contracts all were eliminated. And so you've seen the improvement over the past year plus on the margins in the maintenance side. And then we have also tried to just improve the design of our products overall. So we're constantly looking for ways to reduce the costs associated with our products so that we can improve margins even on similar volumes.

Thanks, Per. This question feeds a little bit into that. I'll answer this one. Maintenance revenue grew over 20% last quarter, what is the trajectory and how will reoccurring contracts impact revenue stability? I'll add a little bit on to what Per said. When we restructured our maintenance business, many of the unprofitable contracts we did not renew. So we think that the reoccurring contracts are at good margin and provide a nice, stable base of business for us, and we expect to continue to grow that segment.

So on behalf of Orion, we really appreciate your time today with us and a great series of questions as well. There were a number of them, and I couldn't get to all of them. Please feel free to follow up with Per or myself, and I will turn it back over to the operator.

Thank you. Ladies and gentlemen that concludes Orion Energy Systems, Inc.'s presentation. You may now disconnect, and please consult the conference agenda for the next presenting company.