Q4 2021 Orion Energy Systems Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the Orion Energy systems fiscal 'twenty 'twenty, 1 first quarter conference call. At this time all participants on a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time as a reminder, today's conference is being recorded.
Jordan.
I'd now like to turn the call over to Bill Jones, Sir you may begin.
Thank you and good afternoon, everyone.
Mike All chemical Orion CEO and board share will open today's call with an overview and discuss the current business outlook.
Yeah Paul.
Dean will then review additional financial items, after which we will open the call to question.
An archived replay of this call will be available later today.
On the Investor Relations section of Orion's corporate website.
This call is taking place on Tuesday June.
2021.
Remarks that follow and answers to questions include statements that the company.
Before we book them.
Within the meaning of the private Securities Litigation Reform Act from 1995.
These forward looking statements generally include words, such as anticipate believe.
<unk> expense.
Or words of similar importance.
Likewise statements that describe future plans objectives or goals are also forward looking statements.
These statements are subject to various risks that could cause actual results to be materially different from that.
Expect it.
Such risks include among other matters matters that the company has described in its press release issued this morning.
And in its filings with the Securities and Exchange Commission.
Except as described the company disclaims any obligation to update forward looking statements, which are made as of today, you think only reconciliations of certain non-GAAP financial metrics.
Corresponding GAAP.
That's true also provided today comes from it.
This is available on the Investor Relations section of our Orion website, Www Orion lighting dotcom.
With that let me turn the call over to Mike.
Mike.
Thanks, Bill good afternoon, everyone and thanks for joining us today.
<unk> executed a strong finish to fiscal 'twenty, 1 with nearly 117 million in revenue and improved gross margin net income of $5.2 million exclusive of the tax benefit solid operating cash flow and a very strong balance sheet.
It was really a tale of 2 halves of the year with the first half severely impacted by the COVID-19 pandemic in the second half demonstrating a return to the true strength of the business platform we have built.
Revenue in the second half of fiscal 'twenty, 1 rose, 33% over the year ago period to nearly $80 million driven by pent up project demand as many customers returned to pre COVID-19 levels of activity.
Our strong rebound and full year performance was possible as a result of the hard work and dedication of the entire Orion team the per.
The variance of our people throughout the pandemic has been amazing.
Commitment of our people enable us to successfully navigate the pandemic challenges and to emerge as a stronger and more diversified company with a broader set of growth opportunities and long term potential on people are clearly what make Orion a successful company.
During fiscal 'twenty, 1 we've worked to expand and diversify our customer base and our business pipeline.
As a result of these efforts our largest customer represented about 56% for fiscal 'twenty, 1 revenues as compared to 74% in fiscal 'twenty, our first full year of business with this customer.
We believe this customer will remain an important but smaller parts of our business in the coming years, we could share of our annual revenue expected to be about 1 third of our total revenue in fiscal 'twenty 2.
We achieved this progress through our success in developing significant new national account relationships and our efforts to broaden our product and service offerings.
Our primary differentiator in our markets is our turnkey business model with a single source of accountability, our fiscal 'twenty..1 performance was largely driven by strength in providing these solutions to national accounts.
Orion turnkey solutions begin with an in depth dialogue regarding our customer's needs and objectives, followed by individual lighting and energy audits at each customer site. We then custom engineered products and services to achieve specific customer goals. Following with rapid order production via U S based manufacturing supported by.
Global sourcing experience with on time delivery to each site.
Orion than overseas installation and commissioning of lighting systems and controls providing overall project management every step of the way.
In addition, we are now able to offer the option of ongoing maintenance services.
Customers with extensive national operations appreciate the value and efficiency of centralizing their led lighting retrofit or new construction process with 1 highly experienced point of contact.
They also value Orion Ruben commitment to the highest levels of customer service, including on time delivery high quality components industry, leading energy efficiency as well as our ability to incorporate a wide range of technology not only for lighting controls, but also Iot data systems, which together provide a very <unk>.
Strong and compelling product offering and an even more attractive ROI to our customers.
The primary value proposition of energy efficient led lighting is reducing our customers' ongoing energy costs, which drive their ROI economics.
At the same time, we help our customers meet their environmental goals by reducing their carbon footprint.
Our growth opportunities and future success also dependent on our ongoing investment in new product development and continued enhancement of the design performance and capabilities of our led lighting fixtures innovation.
Innovation and smart product design are core to our strategy and competitive position, we strive to develop new and custom products that deliver improved performance, including reduced energy consumption better quality of light and safer work environment to meet the evolving needs of our customers in fact, helping our customers achieve.
Our mental safety and operational goals is core to what we do at Orion and also key to enhancing our overall margin profile.
Successful new product introductions over the past year included our next generation Star line High Bay Leds fixtures, several new OLED linear fixtures and a new line of exterior fixtures that combines smart design excellent illumination and energy efficiency in a competitively priced product line.
In an effort to expand our healthy safe and sustainable product offerings. We recently launched our new pure motion product line, which provides airflow solutions for healthier indoor spaces.
Pure motion line is designed for standard drops fueling panel systems and offers enhanced airflow solutions, including a standalone air flow solution and air flow plus Leds lighting solution in an air flow plus UBC solution that circulates air through a sealed UBC light right chamber.
In the ceiling to safely kill viruses germs bacteria and more.
Air circulation also helps to eliminate hot and cold spots, providing a greater comfort along with energy savings.
These products further enhanced our ability to provide safer and healthier work environments and are ideal for almost all indoor application, including health care education commercial and community facilities.
We expect the pure motion line to build on our reputation for non hoping safe and sustainable workplace solutions.
During fiscal 'twenty, 1 we launched Orion maintenance services, a lighting electrical and other services business, we identified both the need and the opportunity for this business through the execution of our turnkey solutions for major national accounts, and we gathered supportive feedback for the concept from several customers.
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Fiscal 'twenty 2 will be the first full year of operations for this new division and though it will start off small in scope relative to our other business lines. We are optimistic about its potential synergies in the long term opportunity to build a recurring maintenance revenue stream.
We expect fiscal 'twenty 2 to benefit from a growing base of large national accounts customers and projects, particularly large enterprises interested in the unique turnkey capability industry, leading products growing base of services and commitment to customer service that Orion provides.
Backing this up is our expanding track record of success in rolling out large national installation programs, both on time and on budget.
We remain very encouraged by new and existing customer dialogues and our developing pipeline of opportunities, particularly for energy efficient led lighting retrofit and new construction projects planned or contemplated over the next year or 2.
Given our strength as a company we expect our business could also benefit from the new administration's focus on clean energy and infrastructure as well as Orion overall focus on healthy safe and sustainable solutions that are of increasing interest to our customers.
With all of these tailwind benefiting our business. We nonetheless are facing a couple of headwinds.
Are experiencing some challenges on our supply chain.
Worldwide electronics shortages domestic and international logistics delays and other raw material and component shortages as well as general inflationary price pressures are creating some obstacles.
In addition, like many other businesses, we are experiencing some labor shortages. However, the Orion team continues to effectively worked through these challenges meeting the needs of our customers.
I will now turn to our future.
<unk> vision is helping our customers to achieve energy savings with healthy safe and sustainable solutions that enable them to reduce their carbon footprint and digitize their business. Our mission is to provide energy efficient led lighting systems, and turnkey project implementation, including installation and commissioning of fixtures controls Iot.
Systems as well as ongoing system maintenance and program management.
Our strategic plan has 5 initiatives.
First we will focus on direct sales with an emphasis on large opportunities in all of our market channels are single source of accountability turnkey project and program management capabilities on our most value differentiators in the marketplace, we have strong credentials and half the people systems and processes.
In place to be successful. In addition, there remains tremendous market opportunity.
Second we plan to build our new Orion maintenance services Division.
Already have strong credentials in place with our existing customers. We believe this new division provides us with the opportunity to generate significant recurring revenue streams with the possibility of multiyear contracts.
Third we intend to expand our controls and Iot capabilities, we are positioning Orion for a leadership role in the substantial long term growth opportunity that we anticipate from the increasing digitization of business through Iot enabled systems.
We believe that we are well situated to be a 1 source solution for our customers entire system, including system design engineering installation of lighting fixtures and controls commissioning controls integrating Iot technology leaking Whiting energy management and operational controls into management dashboard systems and <unk>.
Providing ongoing service.
In this role we intend to remain technology agnostic and qualified to work with many of the leading Iot solutions in the market. We believe the strategy is a competitive advantage as our customers can utilize different technologies in different locations, where they may have a specific solution preference or were they simply sneak an impartial.
On to new possible solutions.
We have the opportunity to all on the sealing technology landscape.
Fourth we intend to continue to develop higher margin products and services. We believe we have the ability to continue to develop healthy safe and sustainable products for our customers. In addition, since our business model is to be close to the end user of our products and services, we are able to listen and understand their future.
Needs and develop products and services to meet them.
The fifth and final initiative of our strategic plan is to actively pursue potential business acquisitions, which would add expanded and unique capabilities to our product and service offerings potentially transforming our business.
We believe the current business climate in our industry could create some attractive acquisition opportunities.
<unk> of our potential acquisitions include adding recurring revenue streams.
Celebrating the ramp up of our maintenance services business, adding new products and services and entering new markets, such as solar EV charging and energy storage.
We are aggressively pursuing opportunities that fit with our existing customer base and leveraged the strength of our turnkey capabilities to.
To date, we have extended a number of indications of interest and proposed letters of intent and term sheets to acquire certain companies that we believe fit our expansion on growth criteria.
We expect it to continue to do so although we don't plan to publicly announce any of these ongoing efforts unless and until we enter a definitive purchase agreement.
Unit initial modest step we've recently completed a $500000 strategic investment in industrial provider of Iot software and services to provide new levels of data analytics and business insights used to optimize industrial performance.
Software enables customers to better aggregate access analyze and act on data, we see synergies with what industrial is doing and the connected ceiling capabilities that our lighting systems provide to host sensors and controls.
We believe this investment will help Orion to extend our customer value proposition and enhance the potential return on investment of our led lighting systems and controls.
As a result of these factors and initiatives, we believe that Orion is well positioned for fiscal 'twenty 2 revenue growth of at least 28% to a range of $150 million to $150 million, excluding any recurrence of COVID-19 business impact or significant worsening of our supply chain or labor.
Shortage challenges.
This view is based on the strength of our new and existing product offerings, our turnkey design build install capabilities and our expanded portfolio of solutions and services. In addition, we're also progressing efforts to identify and pursue potential strategic acquisition acquisition and partnership opportunities that can accelerate our growth.
Underscoring our optimism is the enormous untapped market for led lighting and controls upgrade the facilities that have yet to be updated.
Based on a U S Department of energy study the domestic led the retrofit opportunity and Orion key markets is estimated to be in excess of 20 billion today and growing to over $80 billion by 2035 to.
To pursue this substantial market potential Orion Board and management team have update of the company's strategic plan to help guide on organic and inorganic growth initiatives with a long term target on building Orion into a company generating up to $500 million in annual revenue and approximately 5 years.
To achieve this long term target our plan envisions organic growth of at least 10% per year augmented by external growth initiatives, including the active pursuit of strategic acquisitions and business partnerships with.
We set these financial goals to provide our stakeholders with a vision of what we believe Orion can become.
Now, let me turn the call over to paired Roading Orion CFO for additional perspective on our financial results per.
Thanks, Mike.
Orion <unk> fourth quarter fiscal 'twenty, 1 revenue increased $9.6 million or 37% to $35.5 million from $25.9 million in Q4 fiscal 'twenty supported by strong national account activity as business has rebounded from pandemic related disruptions earlier in the year.
Ear.
Q4, 'twenty 1 benefited from several large national retrofit projects, including projects for a large national retailer and a specialty retail customer with minimal COVID-19 impacts.
We achieved full year fiscal 'twenty, 1 revenue of $116.8 million. Despite the significant challenges presented by COVID-19 work stoppages and project delays that began last March and continued through mid August.
Ryan's gross profit improved to $9.2 million in fourth quarter fiscal 'twenty, 1 from $5.8 million in fourth quarter of fiscal 'twenty and our gross profit percentage improved to 26% from 22, 3%.
For the full year gross profit was $30.1 million in fiscal 'twenty, 1 versus $37.1 million in fiscal 'twenty, primarily related to lower revenue.
Our gross profit percentage increased 120 basis points to 25, 8% in fiscal 'twenty, 1 from 24, 6% in fiscal 'twenty due to improved product margin as well as supply chain and input cost management.
Fourth quarter fiscal 'twenty, 1 operating expenses were $6.7 million versus $6.1 million in the prior year period, improving to 18, 8% of sales versus 23, 7% in the respective periods because of the impact of significantly higher business.
Volume.
Total operating expenses declined to $23.3 million in fiscal 'twenty, 1 versus 'twenty 4 million in fiscal 'twenty.
Orion generated EBITDA of $2.9 million in the fourth quarter fiscal 'twenty, 1 compared to zero in fourth quarter fiscal 'twenty, reflecting higher revenue and gross margin.
Fiscal year 'twenty, 1 EBITDA was $8.4 million versus $14.7 million in fiscal year, 'twenty, reflecting lower year over year business volume.
The fourth quarter and fiscal year 'twenty..1 included a noncash tax benefit of $20.9 million or <unk> 67, and 66 cents per share with.
Respectively for the release of valuation allowances or reserves previously recorded against our deferred tax assets.
Including this benefit Orion reported fiscal fourth quarter 21, net income of $22.1 million or <unk> 71 cents per share compared to a net loss of half a million dollars or <unk> <unk> per share in the year ago period.
Orion full year net income was $26.1 million or <unk> 83 per share compared to prior year net income of $12.5 million or <unk> 40 per share.
These results will make future direct comparisons difficult without adjustment.
I'll repeat this tax benefit is a noncash item the upshot of recording this item is that our future tax provisions will likely be more reflective of actual statutory rates in place at the time.
Those provisions will not indicate that we are generating a cash tax liability under current tax laws, rather we plan to utilize our approximately $70 million of tax NOL carryforwards to offset future tax liabilities.
Our press release includes a reconciliation of net income and EPS to net income and EPS, excluding the tax benefit for your reference.
Fourth quarter 21, net income excluding the tax benefit improved to 1.2 million or 4 cents per share versus a net loss of half a million or 2 cents per share in the fourth quarter fiscal 'twenty.
Also excluding the tax benefit fiscal year 'twenty..1 net income was $5.2 million or <unk> 17 per share compared to $12.5 million or <unk> 40 per share in fiscal 'twenty.
Orion's balance sheet as of March 31, 2021 remained strong with net working capital of $26.2 million, including $19.4 million of cash and cash equivalents and no balance outstanding on our new expanded $25 million revolving credit facility.
This compares to net working capital of $27.8 million at March 31, 2020, which included 10 million drawn on the company's revolving line of credit.
As a precautionary measure at the outset of the COVID-19 pandemic.
And with that I'll turn the call back over to the operator for the Q&A session.
Thank you.
As a reminder to ask a question you will need to press star 1 on your telephone.
And to address your question press the pound key.
Please limit yourself to 3 questions placed on vinyl we compile the Q&A roster.
Our first question on income from the line of Amit Day, a day, Alex from H C. Wainwright may begin.
Thank you good afternoon, everyone.
Mike with respect to the services business could you give us some color on Luna. How this is tracking to you in terms of maybe less.
Customers that you have signed up for this or you know what portion of revenues. This was.
Well good.
Sure.
Good afternoon.
The revenue so far for our maintenance services Division has been rather modest we've got reported actual numbers for it. It is a growing business that we invested during fiscal 'twenty, 1 and as I mentioned during my comments, we expect it to grow into a significant business for us in the future.
Not quite prepared to talk about actual customers at this time, but if we would enter in any substantial contracts that required disclosure, we would do that but I will tell you that we're having.
Fruitful conversations with some of our existing larger national accounts of how to work into some of their service opportunities and also talking with new customers about opportunities. So we're optimistic about it we think we're in the right space, We think there's opportunity and we expect to be able to talk more about it in the future.
Right, that's understandable and then when we think about the services opportunity should we.
Think about it in terms of.
This tracking against new deployments or do you have an opportunity to offer this to our customers on prior deployments as 1.
Sure we absolutely have the opportunity to offer this to pass deployments also so we see it as an opportunity to.
Bring it to the table when we are talking with a new customer about their installation needs of having this ongoing maintenance capabilities for them, but we certainly are also going to be going back to our existing customers, where we've got installations in place to talk with them on what our ability to provide lighting electrical as well as some other maintenance services too.
So it's really is wide open for us on both new and prior installations. It also is open to us for customers, we had not done installations for in the past. So there really are several different areas that provide opportunity for us for the services business.
Okay. Thank you Mike and then.
With respect to the outlook for fiscal 'twenty 2 from the $1.50 to $1.55, and revenues is majority of that already in backlog or contracted how should we think low too.
Each of that sort.
And I'm.
Sure, we'd probably kind of talk about a little more from a pipeline standpoint as to where we stay on so no I'm not going to.
Today at this early stage day that all of that is in absolute in backlog of contracted what's normal for our businesses that we have a fair amount of business that comes to us during a fiscal year that we both sell and perform but we are really encouraged we feel comfortable sending out debt on.
We'll have revenue for next year based on the customer conversations we've had we built up our plan based on specific discussions with customers our larger national accounts, the feel from what we might be with distribution as well as with our ESCO and contractor business and we feel confident about where we stand on it right now so we.
Do have contracts in place that we've announced previously to continue with some of our larger national accounts and the conversations and the public sector and some other areas of automotive.
Healthcare continued to be very promising so.
On it.
Alright.
Mike. Thank you so much.
Thank you.
Our next question comes from the line of Alex <unk>.
On the Jill from B Riley you may begin.
Yeah.
Alex Your line is open.
Thank you sorry about that gentlemen, good evening any chance you could quantify the headwinds.
It relates to sort of your revenue guidance.
Well I think maybe the way I would suggest we think about that as debt we have laid out.
This revenue range of 150 million to $155 million, knowing that there are certain headwinds out there for us and we just felt it was important given what we assume many investors understand what's going on not only in our industry, but just generally.
On the manufacturing businesses that there are there are some challenges with supply chain for a variety of reasons that I mentioned on the call today.
And so we think that if there is not.
Hey.
Significant worsening of what we're facing right now we feel very comfortable with that but we just felt it was important to at least say that either recurrence of significant COVID-19, pandemic impacts, which we at this point do not see or some of these supply chain challenges or labor shortages would get.
Much worse it could have an impact so I'm really not prepared to kind of give a specific dollar multi percentage to it and right. Now we continue to feel that we laid out a number that we are comfortable with the size of 150 to 155 sales.
Yes.
And then read 1 day care M&A.
Alex I, just thought I'd add something to it if you look at our balance sheet I think you'll see that we've made some strategic investments when inventory standpoint. So.
We are doing what we can to mitigate those headwinds and we will continue to do that as part of our managing of this risk as much as possible.
Okay, great points, we actually if I can just 1 more thing accounts are interrupted we actually see some of these things are going to happen, they're part of the business, we actually see them as an opportunity to outperform our competitors. Because we think we are the ability to make decisions to be nimble as Pere mentioned, we've got the financial strength to take more.
Physical.
Full of inventory order further out and so we take these things in stride and feel very good about our ability to still perform given some of those channels. Thanks.
And then with regards to your pipeline of projects for larger customers. Obviously it appears to be very strong can you talk about how these may roll in or roll out over the next few quarters.
And should we be at all concerned about sort of the timeline of rollout and any potential delays.
Yes.
Well at this point, we are not seeing any.
Possibilities of delays.
Either from the several things that I've mentioned that could impact our business.
And from what we are seeing our customers continue to be performing well.
We've often said that we would encourage shareholders to think about the full year and the fact that we do have.
Project a project based business in addition to our services business.
And we have recurring revenues.
In some respects, but repeat customers on number of projects, sometimes things can bump around between orders for a little bit for a variety of reasons. It may often be because the customer is not quite ready for us on a facility that needs to push it out for a few weeks and those could have some impacts from quarter to quarter basis. So we really would encourage people to be <unk>.
Thinking about what we're providing is our sales.
Our goal on guidance for the full fiscal year as to how we are going to perform from this current year.
But we are very encouraged by the last half of fiscal 'twenty..1 I came in right, where we had.
Given an indication on back in both November and February. So we do think we have a history of being able to see pretty well out and give a good range of where we think we might be.
Very helpful. Thank you.
Thank you Alex.
Our next question on comes from the line of Eric Stine from Craig Hallum, You may begin.
Hi, Mike Hi per.
Okay.
Hello, Eric Eric.
Hello, So maybe just sticking with your outlook.
'twenty 2 I know.
And then in the past you had you had thought that fiscal 'twenty 2 would exceed fiscal 'twenty.
And that EBITDA and EPS would be better.
Physical plan, maybe just sticking to EBITDA.
I mean it is.
That left out just as that kind of a nod to the uncertainty related to some of the costs in some of the supply chain issues or is that something that we should still think.
But if you could comment at that revenue range, you likely would exceed fiscal 'twenty from an EBIT perspective.
Yeah, I think that we come in at a $1.50, we should be right around that same EBITDA range as 2020.
EPS is obviously going to be different because of the fact right. We're now going to book tax provision so.
Yeah.
Got it. Okay. So you are basically just assuming I guess, both revenues and EBIT its strength.
Stay out is you feel good about that level.
Hum.
Got it maybe just on the acquisitions the pipeline there.
As you think about that.
I mean do you envision those more as bolt on acquisitions or are you actually looking at some large acquisitions.
And then I'm also curious is this a result of some feedback that you've gotten from customers to add this to your turnkey offering.
And some of these applications any thoughts there would be great.
Absolutely.
We actually previously have looked at both.
<unk>.
Some smaller mid sized bolt on acquisitions and we've looked at some situations that 1 could say that would be a little bit more transformative or larger size, Eric and we feel we have the financial strength and the ability to raise money if we need to.
The debt markets, perhaps equity to look at something larger if it really makes sense for our company on for our shareholders. So we are not limiting ourselves in any direction on large versus small but want to be open to all opportunities.
Certainly from a management team and board standpoint, we understand that as opportunities get larger debt needs to be more clear and the opportunity needs to be something that we think really can be good for our company and good for all of our stakeholders.
So.
Secondly.
We do have some conversations with customers win.
Would you say are you getting into these areas can you help us on some of these areas. So some of this things that I've mentioned have been driven by customers asking about our ability to help them in different areas.
Maintenance services is certainly 1 of those we've talked about which is 1 of the goals we could perhaps.
Ramp up with an acquisition.
We also think that there could be some interesting opportunities when we think of things like solar maybe EV charging stations and we've got a very large retail big box customer base over the years and we expect some of those maybe looking down continue to look at some of those options. Some probably have sold already some might have.
And EV charging stations might be more prevalent in some of these areas in the future. So.
Part of it we look at it is we have excellent.
Project management capabilities, and if we can find something that fits with our customer base fits with those core skills that we have is an ROI on the electrical energy saving energy storage area.
Things that we want to look at so wanted to make it clear that we are more active than we had been in the past that's partly because we've been successful and we feel we have a strong balance sheet and a good vision of where we want to go as a company.
Got it and then the maintenance services I mean, I would assume that that would fit.
That would fit pretty well was expanding on these other areas solar EV charging storage wherever it may be.
It really would you know and part of it for us as debt, we are a company that physically.
Catch things installed and so whether it's installing light fixtures or installing whiting controls or start installing sensors.
1 somebody has to do the installation for some of these things and again that goes back to your program management capabilities and project management capabilities and number 2.
All of those things, we've talked about do require ongoing maintenance services and so.
It's it's.
Great.
Full complement of things, we can bring to the table for potential customers to not only help them upfront with empty with them in the future with those systems to keep them well maintained.
Yeah.
Okay. Thanks.
Thank you thank you Sir.
I mean Q on.
Our next question on comes from the line of Cliff.
<unk> is a private investor you may begin.
Hello, and thanks for letting me ask a question yes.
Yes cyclists.
So.
You know it's difficult to fix as non tier of your company because obviously last year was very.
No unusual and your revenue.
You know have grown.
So would you say that you know of.
In the coming year.
There'll be some kind of it will be weighted towards the beginning towards the end it will be.
Be linear or you know you've come out from audio.
How would you kind of planning to have supply chain difficulties this quarter on that make up for it in the later quarters or anything like that.
Sure.
Well I think that I would go back a little bit to what I commented in 1 of the earlier questions that we would encourage people to think about an annual basis for us when we are laying out our revenue guidance for the year, we had last fiscal year provided some quarterly.
Information just because it was such an unusual year with Covid and things got delayed and then it came back pretty strong we thought it was helpful to tell people that the second half of our year is going to be very strong.
So it.
To say that it is going to be straight linear we don't think we can say that we continue to feel confident about the revenue range, we're laying out for fiscal 'twenty 2 of $1.50 to $1.55.
We we don't see some of the challenges we've talked about having a significant initial impact to us.
And we'll see how things progress, we've kind of baked in some of those challenges right now into what we've laid out for our revenue goal for this year clip and we'll see how things kind of develop as we go along so I think again just ask shareholders to keep in mind that we are project based and.
<unk>.
Debt at 2 of customers that sometimes we can be a little bit lumpy from quarter to quarter as things kind of move around but often if not because things were canceled they simply are delayed and they might flow into the next quarter for us.
Okay, that's understandable.
Also on both gross margin it seems like this past quarter, you're already well ahead of the fiscal year 'twenty gross margin and are you on.
I mean, you are predicting EBITDA, let's start on the fiscal year 'twenty level so true.
Are you, saying that gross margin will kind of go.
Gold zone into next year.
But you know if total debt because of the semiconductor shortages.
Or is it just.
Is that just you being safe.
This is per I think but the way we look at it is we've been working on expanding margins, particularly gross margin over time that.
That will still be an objective for us if we're able to do that we certainly would outperform fiscal 'twenty at the.
Gross margin line I think 1 thing you need to keep in mind, probably from a fiscal 'twenty standpoint is that that was a year of significant growth and so the company probably hadn't made all of the infrastructure investments that were necessary to support on $150 million business and so is it.
Yes.
Ramped up from a business volume standpoint, it was also necessary to add some more resources internally.
Go up now in the operating expenses section.
To accommodate that that level of revenue.
And once again, ladies and gentlemen that started on for questions.
Our next question on offline of David already.
At Investor Day, maybe.
I might guide you guys hear me.
Yes, Hi, David Okay, I got it.
You have a medical background for years. So my my 3 questions I have are gonna be laser focus too.
Pure motion product.
And what you guys are doing there I think it was a little early to ask your guidance when you announced it and you've had time to get out on the field.
And get some feedback.
So first on my first question is.
Tell me about competition when you were looking at this technology. This ray your technology.
And you chose that.
What other competitors come close to their product is there any out there that's question 1.
Charleston too.
Addressable market.
Schools.
Food processing plants airports.
All of these type of fields.
Ah can use this type of UV C product to kill the Covid.
What has been your feedback.
You've talked to any of them.
A large company.
And give me a scale of 1 day patent hadn't been excited when they see the product the Pir motion.
They excited do.
Do they look like they would be interested on the UBC product to share the COVID-19 or at least reduce the COVID-19 spread in their facilities.
And then my last question is.
If and when you've got a big order from UBC product for the Pir motion.
Could you guys do you have the production capacity to supply the product to the consumer.
Yes.
And that's it.
Alright.
Thanks, David Great Great questions. So let me do my best to answer those and I might kind of back and forth between the 3 of them.
Okay.
So first of all.
From a competitive standpoint.
As you probably know.
Perhaps others on the call UBC has been used for.
From a long time too.
Impact there if you will or treat are through.
Air systems and also through water systems.
So there is competition out there.
We did look at other technology and others to your payout certain units debt provide both air movement as well as UBC and we decided to partner with an existing business partner with their air movement technology, because we thought it was a good balance between being does.
<unk> very well.
Adding intellectual property that protected the motion side of things and the initial work they had done in the.
In the.
Market gave us some confidence that we thought this could be a very good product and so we work with them to incorporate this into a product that we could launch for ourselves.
It's pure motion product.
Things that we looked at when compared to competitors, we try to understand where things went from a design standpoint.
From a serviceability standpoint, 1 of the things that people need to think about down. The road is how do you service something like this a safety standpoint, UBC cannot be directly impacting.
People and so we helped design with UBC chamber in this fixture that has gone through UL testing and in past and when we sell it does not need to be.
Pacific Li noted as being something dangerous because the life is completely encapsulated inside the fixture chamber.
So those were some of the things we thought about from a competitive standpoint.
We felt very confident this was 1 that we thought could work very well for us from fit into this space and we're looking at from a feedback standpoint so.
So far it's been quite positive and you've talked about opportunities, we have talked with people in the public sector.
Which could include as you mentioned.
School systems.
Could the other kind of government agencies hospitals, and we just see a lot of different opportunity you can think about fitness centers locker rooms.
Professional teams having this.
As you said mid packing et cetera, so there's a lot of different areas, where 1 could see it being we with lower partners has been conversations in airports, we see it as a very intriguing idea in certain areas debt.
You could be impacted by the UBC part of the other pure emotion.
Scale of 1 to 10 I would say people are I'm not going to be probably can violent exactly but its been towards the higher end of the scale of people being very interested in this product and I think people are obviously thinking about say buildings, providing more comfort to their employees as they come back to the work.
Rates and this could be a product that can help them.
In doing that and I also would just quickly digress and say we've had a product for a number of years debt.
In the 4 or 5 nanometers spectrum of Lightwave, which has an impact.
On.
On virus is also it has the ability on the surface side to kill virus news kills bacteria and mold and so we actually have a dual solution, where this pure motion could help in the air movement and the.
The 405 nanometer product, which incorporates some technology from 1 of our partners could handle the surface side of things. So we really have 2 products at this point that we could bring to the marketplace. So our initial feedback has been good like any new product it tends to be a little bit longer sales cycle and so we're starting that and we'll keep people informed.
And as we made some progress, but we feel really good about the feedback so far and then to your last question. If we got a big order.
We feel very good debt, we could ramp up to manufacture and assemble the product that would be needed. If we receive some larger orders, we as we mentioned earlier.
I'll put certain inventory in place to manage against supply chain issues.
So we feel comfortable we could manage a certain level of manufacturing things got huge there could be some future delays of just supplying particularly the.
The UBC boards that are needed for this.
And we have incorporated our product around the sole viruses.
Product because we felt it was more on the best proven in the industry right. Now. So we're very optimistic about this and look forward to being able to talk about it more.
<unk> made some headway with their products. So thank you very much for your questions David.
Thank you and I'm not sure.
Oh for the questions in the queue I'd like to turn the call back over to Mike Shaffer for any closing remarks.
Alright, Thank you Victor and thanks, again to everyone, who joined us today for.
Our call and we appreciate your interest in Orion, we will be participating in the Craig Hallum Virtual Investor Conference Tomorrow June 2nd and we will also be participating in the LD micro Invitational on June 8 which is also virtual and during the period of social distancing. We have participated in several other virtual conference.
Which are recorded and available on our website and as always you can contact our IR team with any questions or to schedule a call with management and their contact information is included in today's press release book.
Again, we look forward to updating all of you on our fiscal 'twenty to Q1 call have a good rest of the evening.
This concludes today's conference call. Thank you for participating you may now disconnect.
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