Q4 2022 Orion Energy Systems Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the Orion Energy systems fiscal 2022 conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time as a reminder, today's call.
Is being recorded I would now like to turn the call over to Bill Jones, Sir you may begin.
Thank you and good morning.
Mike I'll check for Orion's, CEO and Board Chair will open today's call to review the company's 2022 performance and business outlook.
Orion C O O Mike Jenkins will then review business operations.
Finally per protein Orion's CFO will review additional financial items, and then we will open the call to your questions and archived replay of the call will be available. After today in the Investor Relations section of Orion's website. This call is taking place Tuesday June seven 2022.
Remarks for fall and answers to questions include statements that the company believes to be forward looking within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements Gen.
Generally include words, such as anticipate believe expect or similar words. Additionally statements that describe future plans objectives or goals are also forward looking.
Such forward looking statements are subject to various risks that could cause actual results to be materially different than expected. These risks include among other matters.
That the company has described in its press release issued this morning and in its filings with the SEC, except as described in these filings the company disclaims any obligation to update forward looking statements, which are made as of today's date reckon.
Reconciliations of certain non-GAAP financial metrics to the corresponding GAAP measures are provided in today's press release as well.
And this is available at Www Orion lighting Dot Com now I will turn the call over to Mike All cheerful Mike.
Okay.
Thanks, Bill good morning, and thank you for joining today's call.
A few weeks ago, we announced our expected fiscal 'twenty two results and today, we reported our actual results for the fourth quarter and fiscal year ended March 31 2022.
Despite a variety of external business and economic challenges Orion was able to grow fiscal 'twenty two revenue by 6.5% over last year to $124 4 million.
We performed well from a profitability and a cash flow standpoint, particularly in terms of gross margin and adjusted EBITDA compared to last year, and our cash and financial liquidity position remains strong.
Orion was successful in growing our business space outside of our largest customer by nearly 25% in fiscal 'twenty two versus last year.
Growth was driven by a mix of new and existing customer projects.
Progress in our ESCO partner and electrical contractor distribution channels and our acquisition of stay like lighting.
Our efforts to diversify our customer base and revenue sources are progressing well, even amidst a challenging business environment in which some of our customers are having to focus resources responding to challenges posted by supply chain and other economic and global issues.
I will now turn it over to Mike Jenkins, our C O O to provide some additional commentary on our operations and then I'll return to comment on our business outlook and other matters Mike.
Thanks, Mike during fiscal 'twenty, two we expanded our major national account base by adding or reactivating customers, particularly in the technology and specialty retail verticals. Our go to market strategy is to highlight <unk> unique ability to deliver high quality products innovative design customer.
Engineering industry, leading energy efficiency domestic manufacturing and our turnkey design build install capabilities all of which we work to deliver with the highest levels of customer service.
We target customers, who can best benefit from our unique focus and capabilities and we have the benefit of a growing base of reference accounts to validate our performance.
We are particularly encouraged by our traction in the energy service company or ESCO partner channel, where in fiscal 'twenty. Two we grew revenue by 71% to $19 6 million.
We believe this channel offers a significant growth opportunity for us going forward because our ESCO partners are focused on delivering energy efficiency improvements to their customers.
Compensation is generally tied to the cost reductions they delivered through energy efficiency upgrades to their customers.
Because the Orion utilizes the highest quality design components and manufacturing methods. We continued to lead our industry in the energy efficiency performance measured as lumens per watt as well as quality and reliability.
Orion fixtures provide savings to end customers through lower energy usage dependable performance and limited maintenance a value proposition that ask us appreciate about our products.
Also as a U S manufacturer, we can produce and deliver products in just a few weeks, which is typically a fraction of the delivery turnaround of competitors sourcing fixtures from overseas.
Orion strengths put our ESCO partners in a strong position to win business and to deliver excellent ROI to their customers.
As an example, we had a good success this year supporting <unk> supply led fixtures for several large east Coast School districts. We are working to build upon this success in other regions and believe that federal program funding may create additional opportunities to upgrade educational facilities.
Our distributor and contracted channel also achieved growth in fiscal 'twenty, two with revenue of $22 2 million up from 21, one year prior.
This channel, which focuses on broad line electrical distributors continues to be an important path to the market for us.
We have developed led lighting products, specifically designed for this channel, which tends to supply newbuild agricultural and smaller projects.
We continue to build on our base of electrical contractor relationships and we expect this channel to contribute growth in fiscal 'twenty, three and future periods.
Despite the many challenges created by supply chain and pandemic related issues. The Orion team has been quite successful in mitigating any impact within our own operations <unk>.
Proactive measures and smart inventory bets have enabled us to meet our customer requirements with very minimal business impact we are still delivering manufactured product in two weeks or less and this ability to meet short lead times combined with our complete turnkey project and maintenance service solutions puts us in a strong.
Position.
I will now pass it back over to Mike.
Thanks, Mike.
Turn now to an exciting new area of long term growth potential, which is Orion maintenance services, we've made significant strides formulating and building out the team and systems for our Greenfield maintenance services business over the past two years after launching the service with our major national retail customer in a national specialty retail customer lie.
Lighting and electrical maintenance services provides an ideal complement to our existing business as it allows us to extend our expertise and customer value proposition to address the entire lighting product lifecycle, while building a growing base of recurring services revenue.
Maintenance services provide us with more regular ongoing customer contact points that should provide additional L.
Led lighting solutions sales opportunities. Similarly, led lighting system sales, particularly our turnkey solutions should provide opportunities to demonstrate our service excellence and open channels to introduce our maintenance service offerings.
To expand our geographic reach in January we purchased stay light lighting, a national provider of lighting and electrical maintenance services heavily focused on the retail industry. One of our Ryan's strong market sectors stay light has a national reach with particular strength in the Midwest and mid Atlantic regions, including there too long.
<unk> national retail accounts that are new customers for Orion.
We also see good opportunities between our service capabilities and building our relationships with many of our ESCO and electrical contractor distribution partners as we are able to partner with them and some contractors to execute Orion installation of maintenance services for certain customers in regions of the country.
Growth in lighting and electrical maintenance services should provide a growing base of steady recurring revenue that complements and balances our led lighting solutions and turnkey project business.
This maintenance business is on track to generate meaningful growth in fiscal 'twenty three with at least $20 million of revenue up from $5 8 million in fiscal 'twenty, two and we expect this business can deliver a gross profit percentage roughly in line with our existing business.
Overall, there are a number of positive growth dynamics and trends that give us great optimism for continued growth and expansion over the long term.
However, current supply chain and other economic challenges continue to create near term visibility challenges in customer decision, making regarding projects and their timing.
Some customer delays impacted our fiscal 'twenty two second half results and continued to create near term visibility challenges on certain larger projects.
Looking ahead, we have a realistic path to matching or exceeding our fiscal 'twenty two revenue.
Formats in fiscal 'twenty, three so uncertainties principally around project timing make it difficult to provide specific revenue guidance at this time.
We expect revenue from our largest customer to decline to approximately $25 million in fiscal 'twenty three following the completion of the turnkey led lighting and control retrofit of the bulk.
They're U S store footprint, we are optimistic regarding the potential for strong growth in our business outside of this customer to offset this revenue decline.
Our path to matching or exceeding fiscal 'twenty. Two revenue would result in organic revenue growth of approximately 50% outside of our largest customer we reviewed key factors expected to influence Orion's fiscal 'twenty three performance in today's press release.
<unk> management and board remain committed to our long term strategic plan to grow the business via organic and external growth to a $500 million annual revenue business over approximately five years.
We envision the achievement of this goal with a combination of double digit organic growth plus growth through acquisitions partnerships and other initiatives.
Our confidence in achieving our growth goals rooted in the strength of orion's expanding product and service portfolio, our growing base of customers and distribution partners are unique turnkey service capabilities and our team's commitment to delivering customers the highest quality solutions and services with a compelling return on investment and environmental benefits to our planet.
We are also confident in our ability to accelerate our growth through strategic transactions our partnerships such as our recent stay light acquisition.
Our ongoing research and analysis have created a growing pipeline of potential opportunities. We believe we have the financial strength to execute on the right opportunities manner that is accretive to our financial performance and shareholder value.
I wanted to highlight a few of our Ryan's recent industry recognition.
We were one of four winners in the concept category. The American made challenge L price competition sponsored by the U S Department of energy and our yell and Pacific Northwest National Laboratory Orion was recognized for a sustainable and connected led troffer retrofit fixture. This highly efficient networked led luminaire with advanced controls <unk>.
Wi Fi technology can retrofit an existing fluorescent luminaire in less than two minutes.
Orion was also a finalist for the Wisconsin manufacturer of the year Awards, we are very proud to be in the company of such high quality businesses in our state.
And earlier this year, our ice on pure motion UBC and ice on Pir motion light products. Each one for 2021 spaces for learning New product Awards space.
Spaces for learning as a leading publication for education institutions service providers and others interested in creating high quality educational facilities.
Our Pir motion product line sanitize, their and eliminates the airborne viruses, including COVID-19, and shared spaces, such as schools medical facilities offices and other public spaces.
And finally Orion as American made ice on led high Bay Light fixture was ranked number one for energy efficiency in our Harris High base Star line was ranked number two in the ultra high lumen category by inside lighting and online industry resource for.
Fighting professionals.
I want to talk about ESG for a minute with our history rooted in delivering improved workplace environments safety and reduced energy consumption. We have long been committed to fundamental ESG concepts. This year in response to the growing interest in enhanced ESG reporting we will be providing stakeholders with our initial sustainability report, which.
It will be updated annually core values that drive our ESG thinking include a one team mentality, meaning Orion is nothing but the sum of our employees as a collective team.
We also embrace technology and innovation.
And also see the benefits of new technology to meet our customers' changing needs with enhanced efficiency safety and a lower environmental impact and finally, we embraced a customers for life philosophy in which we view our customer and partner relationships is ongoing in perpetual as a <unk>.
Core value.
We are committed to meeting the evolving needs of these key relationships to deliver improved operating performance sustainability energy savings and carbon footprint reduction.
Hope he spent some time with our sustainability report and we welcome and encourage your feedbacks that we may continue to evolve in a productive stakeholder friendly manner.
Now I'd like to turn the call over to <unk> to discuss financial highlights and additional insights there.
Thank you Mike.
I'll quickly review some highlights and then we can open the call for Q&A.
As Mike mentioned Orion grew fiscal 'twenty, two revenue six 5% to $124 4 million driven by outside growth outside of our largest customer relationship <unk>.
<unk>, our ESCO channel, which increased by $8 1 million.
And a $5 7 million increase in maintenance services.
Fourth quarter fiscal 'twenty, two revenue decreased to $22 1 million from $35 5 million in Q4, 'twenty, one which had benefited from strong national account project activity enabled by the easing of work and travel restrictions following the onset of the COVID-19 pandemic.
Our gross profit grew 12, 6% to $33 9 million in fiscal 'twenty two as our gross profit percentage improved to 27, 3% from 25, 8% in fiscal.
'twenty one.
The recent year benefited from higher revenue pricing increases and ongoing supply chain product and cost management.
Gross profit percentage declined to 23, 8% in Q4 versus.
Q4, 'twenty, one due primarily to lower fixed cost absorption on reduced revenue.
Fourth quarter fiscal 'twenty, two operating expenses were $6 6 million slightly below the Q4, 'twenty one level of $6 7 million fiscal.
Fiscal 'twenty two operating expenses increased to $25 5 million from $23 3 million the prior year.
The increase principally reflects higher sales and marketing expense as well as a point $5 million in acquisition expense fiscal 'twenty. One expenses. We're also suppressed based on reductions associated with the COVID-19.
<unk> pandemic.
Orion reported a fourth quarter fiscal 'twenty to net loss of $1 2 million versus net income of $22 1 million in Q4 fiscal 'twenty, one which included a $20 9 million noncash tax benefit from the release of the valuation allowance against the Rins deferred tax assets.
Fiscal 'twenty two net income was $6 1 million or <unk> 19 cents per diluted share versus $26 1 million or <unk> 83 per diluted share in fiscal year 'twenty, one, which also included the $20 9 million tax benefit.
<unk> effective tax rate was 26, 2% in fiscal 'twenty two.
Although we do not expect to pay meaningful cash taxes for several years because of net operating loss carryforwards of more than $60 million for federal tax purposes as of March 2022.
Orion generated adjusted EBITDA of $9 7 million in fiscal 'twenty, two including negative $4 million in Q4, which compares to 9.1 million for fiscal 'twenty, one, including $3 1 million in Q4 'twenty one.
Looking beyond fiscal 'twenty two.
We remain very confident in the company's long term strategic growth plan and potential despite near term customer supply chain and economic uncertainties.
Uncertainties.
Supporting our outlook Ryan remains in a strong financial position, we ended fiscal 'twenty two with over 35 million in liquidity, including $14 5 million of cash and $21 million available on our credit facility with no material debt outstanding.
Net working capital improved to $32 9 million.
At March 31.
May 22, compared to $26 2 million on March 31, 2021.
Given our financial strength, we are well positioned to pursue other potential accretive acquisition opportunities in this environment.
And we will remain prudently opportunistic.
And with that we'll turn the call back over to the operator for the Q&A session.
Certainly as a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound key please limit yourself to two questions and rejoin the queue for any follow up.
And our first question comes from Eric Stine, Craig Hallum. Your line is open.
Hi, everyone. Thanks for taking the questions.
Yes, good morning, Eric.
Good morning so.
Maybe just starting with home depot do appreciate the detail you are giving for the contribution in fiscal 'twenty. Three just curious what kind of visibility you have into additional work here, whether it's fiscal 'twenty three and going forward should we think about that $25 million is kind of a sustainable run rate or.
Should we expect a direction one way or the other longer term.
Yes, we felt since we were now substantially through the retrofit of the U S retail locations, yet continuing with the other business with them, which we've mentioned in the past which consists of.
New construction.
Locations of special projects in the store locations of maintenance services that we wanted to give a little more visibility going forward. So we do expect the $25 million to be somewhat of a base.
Slide with this customer and we expect that to continue for a number of years going forward. So we feel that we've managed through the concentration reality that we had with home depot.
For fiscal 'twenty, two and the $61 million was 49% of revenues at $25 million and assuming we stay flat in revenues and 23, we'd be at 20% concentration, which we think is a much healthier situation.
Overall, Eric Yes, we do expect that level of revenue combination of the items I mentioned, plus the service revenues to be around that $25 million range.
Okay, that's great I appreciate that.
And maybe for my second one just just on maintenance services, obviously, you've got high hopes there.
But as you think about that longer term.
What what part of your five year targets do you think maintenance services is and is that an area, where you think you will add to it.
Through inorganic sources is it something that you think is organic maybe just some details there.
Absolutely so starting with the Stellite acquisition in January that company.
It is giving us a run rate going into fiscal 'twenty three of around $10 million of revenue.
And we're expecting roughly $10 million of revenue from a couple of our other retail customers at this point in time. So as we've mentioned we think we will exceed 20 million in revenue. So it's becoming a certainly greater proportion of our total revenues and we expect that to grow.
How we do that going forward is likely to be a combination of organic and inorganic. We now have a really strong presence, particularly in the Midwest and mid Atlantic States, but we have the ability to provide those services on a nationwide basis and so we may expand that through additional acquisitions, we may do it by adding people and <unk>.
Taken full advantage of rolling that out to our existing customer base, which we expect to provide growth also so we think it's a great opportunity for recurring revenues and we see opportunities both in the lighting industry for that as well as some other sectors that we may get into in the future.
And our next question comes from Alex Rygiel of B Riley Your line is open.
Good morning, Alex.
Around flattish I guess year over year can you talk a bit about EBITDA margins and Directionally, how should we think about them expanding are compressing. There's obviously various shifts in business. So away from a large customer towards the ESCO as a maintenance. So if you could just sort of give us some thought.
Sure, let me start and I may have pair asked a little bit on just longer term. So first even with obviously our second half of fiscal 'twenty two not as strong as we had originally anticipated we were pleased to end up.
Any chance you could quantify the value of projects that were delayed in fiscal 'twenty two.
Well I will give some high level comments to that and it goes back to the last couple of.
Combination of calls we've had in press releases we've had.
And first of all what we attempted to do back in January was to provide some information as to why as we entered into fiscal 'twenty. Two we did feel that.
The revenue guidance, we'd given at that time was.
Based on.
Our existing customer base expectations of future sales and particularly some significant projects that we had and we walked through a couple of times now some of those projects being delayed.
So I think it's fair to say that a lot of that revenue shortfall from what we originally expected the year to be going back a year.
Year ago to today is due to projects being pushed back we do not feel that we've lost a significant amount of business through either the supply chain aspects of us internally or from our customers things have just been pushed back and delayed and that has continued through the fourth quarter of fiscal 2022.
So with all of that kind of said.
You probably would put a box around that of somewhere between 20 and $25 million of business that we had expected that has been was pushed back due to largely customer situations and decisions and sometimes their own supply chain challenges in somewhat of a COVID-19 mix sense.
Situations in terms of access.
And of that $20 million to $25 million.
<unk>.
How much of that is in your kind of baseline assumption here a flattish revenue is as a portion of that in that baseline assumption or is none of that and therefore, if it were to all come back.
Could there be $20 million to $25 million of upside to your commentary of flattish revenues in 2023.
I would say that today Alex.
Most of that.
Business that we expected in 2022 that we hope and may occur in 2023.
Is part of what we are talking when we say, we see visibility to being flat in 2023. So I think it would not be I would not say that if all of that happens you would suddenly be a big upside potential there is always upside potential in some of our customers doing more than what we had expected going into this fiscal year.
And certainly we're always looking for new projects that will happen during fiscal 'twenty, three and we may make other acquisitions. So I certainly feel optimistic there could be some upside, but I think it would not be correct to simply assume if all that happens that suddenly twenty-three wood.
Be significantly higher.
Very helpful. Thank you very much.
Thank you Alex.
And our next question comes from Amit Dayal of H C. Wainwright Your line is open.
Thank you and good morning, everyone.
Good morning, gentlemen.
Hi, Mike.
Just you know.
With respect to sort of the macro environment I know you.
For sort of flattish to maybe some improvements year over year, but what's the risk of any of these projects.
<unk> began to them and we saw targets resolve or announcements today.
Journeys <unk>.
Has sort of fallen or these companies fall as part of your customer base.
How should we think about you know.
Any projects continuing to get pushed out et cetera have you seen any of that happen already or.
Any color on that side would be helpful. Thank you.
Absolutely I think that.
The reason, we felt it necessary in some of our prepared remarks today to say that there are things that we are watching is it starts probably at the macro level just in terms of what's going on globally right now with some uncertainties and so we do think that if the economy would change significant.
Lee, it's possible that customers might decide to slow things down in terms of what they're planning to do and yet on the other hand, we have seen situations, where when the economy slows down companies are looking for cost savings.
And migrating to LCD lighting, usually provides a 50% or greater antigen reduction so at times those capital projects can move forward. So there could be some pros and cons in terms of economic changes or economy changes and the impacts on our business.
I think the supply chain side of things I would say have gotten modestly better than they were three months ago, and certainly six months ago and some of the logistics have been better but there continues to be some uncertainties in that area, but I probably would put the overall concern we would have right now or caution I would say just on the economy.
Self and what they might do to some of our customer decisions, but again, Fortunately we have seen in the past.
And even back when Covid first hit in certain projects had to stop it companies that the led lighting side of things projects, sometimes prevailed because of the great energy savings and improvement in safety and environment for their people. So those are the things that we are watching right now and I'd say.
Going into the first quarter, we're seeing continued caution by our customers are saying how fast they want to move on projects and where some of their supply chain challenges might be.
I appreciate that thank you just one last one I guess how much was.
In fiscal 2022 for you guys in terms of percentage of rooms.
I'm, sorry, I didn't hear the full question yeah could you.
Start over the first part cut out on Osama please.
ESCO channel I was just wondering how much.
What percentage of revenues was at school in <unk>.
For the full year was 18%.
Okay. Okay. Thank you that's all that I'm, sorry, I'm sorry.
Ah yes it was.
Flat year over year, 18%.
18% global growth.
Okay.
Good question.
Our next question comes from Jeffrey Campbell of Alliance Global Partners Your line.
Okay.
Good morning, and thanks for all the color at this point.
Yeah, Scott I'm wondering.
I wanted to ask regarding the maintenance services.
Your work exclusively on your own installations or and you perform work on installations from the others. What I'm really wondering is if over time.
And the service businesses.
Relationships that lead to installations as well as the installations, obviously late into the services work.
Great question, we absolutely believe that to be the case.
So there is no significant connection between us being able to provide lighting and miscellaneous electrical services are based on whose product is in the facilities and that happens currently in our the business that we acquired back in January to stay light, where we are doing maintenance services on a variety of product often the the.
A manufacturer of the fixtures is quite different from who provides the maintenance services and then secondly to your point, we do think that ability to cross sell both the maintenance services to our existing LCD turnkey project solution customers as well as the other direction as possible.
Also on the services side, so we're not limited by our own installed base.
Okay, great. Thank you.
And.
I'm wondering if you could just provide a little bit further color on the ESCO channel I mean, I understand the ESCO emphasis on performance.
I just wanted about relationships there their importance, we see some <unk> is more important than others just strategically how are you.
But how do you go about approaching.
Because in Q1.
Sure we have a really long history of working with <unk> and we've been selling to <unk> energy service companies that manage a number of energy projects for their customers going back to when we first started in business 26 years ago and strategically we've talked in the past that.
About five years ago, we kind of made some strategic shifts in our sales, adding distribution and we lost a little focus on the US goes and we've been very heavily going back and focusing on them. The last few years and we are starting to see really good results from having a heavier focus on the ESCO market. So we see a lot of potential there with them.
M. S goes we believe in many cases like to buy and want to buy directly from the manufacturer, which we can do because they typically may not need the services of the distribution market channel.
And in addition, we're able to provide.
Roddick today that sometimes some of our competitors can't because we do have a U S based manufacturing and we think we've got our inventory of components in a good position for us. So we actually see a really bright future for us with S. Goes in there are we believe a number of them that we've not touched in the past and so we have some very active marketing and <unk>.
Those activities are focused heavily on the ESCO channel.
And if I could just follow that up since you just said a few minutes ago.
<unk> sales were.
Flat.
Year over year.
Do you attribute that to the same sort of forces that you discussed.
Other projects that have been pushed out.
Sure.
And I on for 2023 or do you think it's been more of this businesses.
They may have gotten away from really pushing those sales and now that youre, making.
A more concerted effort in the area that you might see some growth there.
Respective as anything else.
Jeff It's Perry, let me correct that I misquoted the.
Penetration on that.
For the current for fiscal 'twenty two.
U S markets was actually at about 16% penetration.
And 10% in the prior year, so sorry for this.
No.
Yes, so we did see significant growth both dollars and penetration.
From them.
<unk>.
Then you can scratch and my last question.
Yes, and actually if I could maybe I'll add one more to it because I apologize for earlier, we got that a little bit mixed up so.
When we issue our K later this week, we do break out the <unk> business is one of our segments and RK, it's called the U S markets.
And so for on a year over year basis, we actually grew the ESCO business by over 70% in fiscal 2023, I'm, sorry, 2022, so I apologize for not making that clearer earlier, but if we saw extremely good growth in the ESCO.
<unk> market in 2022, and we see it as potential growth in the future. So thanks, a lot for your questions Jeffrey.
Oh, great. Thanks for the clarity.
Thanks.
And as a reminder to ask a question you will need to press Star then one on your telephone to withdraw your question press the pound key again, please limit yourself with your question rejoin the queue. Our next question will come from Bill.
Titan capital your line is open.
Thank you let me start with supply chain, you had mentioned that yours is likely a little bit better.
And it was three months ago, but do you have a sense.
The impact on your competitors supply chain.
Typically from the Lockdowns.
And what that either has or could could impact them in in future months.
Yeah.
Yeah, My comments would be need to be somewhat high level, because I certainly don't have specific knowledge of our competitors supply chain situations bill, but when we think about the fact that.
Our view is that we import.
Substantially less amount of complete fixtures.
From Asia, and particularly China that we believe our competitors do and the fact that we have our component.
Situation in good shape that we're continuing to deliver product as we mentioned earlier on the call often in two weeks or less we feel we're in a better position and we.
Can tell anecdotally through the sales channel that we have been given opportunities over the last few months where.
Competitor has not been able to deliver product on a timely basis.
To the site, either whether it's new construction or retrofit.
So we think the early efforts that we took of building up some inventory bolt certain finished goods that come from Asia, as well as components and working really hard with our suppliers and finding alternatives.
And substitute.
<unk> said that we have fared fairly well and and so we think we are in a better position than most of our larger competitors from a supply chain standpoint.
Right and so the essence of the question was do you think that that advantage may widen in.
In coming months.
I suppose I should have asked it that way is that.
What's your sense there.
I think it's hard to tell at this point in time.
At.
I'm not sure we've seen the full extent yet of the Lockdowns because it takes some time kind of both situations.
It hasnt gotten significantly better at this point in time, so I.
I would have to say.
Schools, so a little bit out on that one but there could still be some advantages. We think over the next few months from a supply chain standpoint, too to us versus our competitors.
Great. Thank you and then my second question.
It has to do with pricing.
How much if at all does your pricing need to catch up.
With with costs that have come about as a result of inflation.
We feel that we've taken the right moves from our price increases in the marketplace and it's always a balance between wanting to remain competitive and making sure that we protect gross margin and our philosophy as a management team has been that when you go through an inflationary period you need to focus.
Leon on on protecting your gross margin and the fact that we grew our gross margins on a year over year basis.
As a reflection that we have been able to do that.
We have had three general price increases over the last 18 months and we feel that we as we did those we watched with the information that we could obtain of what our competitors were doing and we felt that we were either in line or below what we saw some of our competitors doing and we also have worked very hard with our suppliers to manage.
Some of the inflationary pressures that we're seeing so our fuel so far is that we've managed with it and <unk>.
We remain in a competitive position right now and and.
Certainly protected our gross margins for this period of inflation Bill.
Great. Thank you for the time.
Yes, Thanks Bill.
And our last question will come from Toni <unk> of key equities investment.
Your line is open.
Good morning, everyone. Thank you for taking my question.
Sure.
I'm, a new investor and Im looking at the revenue trend, obviously from quarter to quarter, and it's obviously been declining and in the fourth quarter looks.
Especially lull relative to what you've been doing over the last several quarters can you break down the components of what drove I know, we've talked about supply chain and customer delays et cetera, but what are the components of the delays or the shortfall in revenue for the fourth quarter and how do you.
<unk> has to be resolved over the next several quarters.
Sure I think.
Thank you for being a shareholder I appreciate your question Tony.
I think that.
As we discussed.
<unk> discussed in our February call.
And somewhat today that.
Certainly the second half of fiscal 2022.
It was not up to what our original expectations were and we are.
We attempted in.
As much detail as we could back in February .
To describe some of the things that caused that to happen and so the impacts of those in Q3 and Q4 were a combination of.
Our global online retailer, where we were doing new construction.
Fixtures for their fulfillment centers, where they needed to take a slowdown in pause on their expected business in the.
Look I'll call it the first calendar quarter of 2022.
And continuing due to their supply chain issues of their new construction materials, such as steel for their for their fulfillment centers.
We had situations, where we had customers.
Customers that were.
We're planning projects, but they had some other supply chain issues with their facilities and therefore had to pull back somewhat we had some government federal government business that was expected to go more quickly. So those handful of things that we saw had been delayed those delays for the most part continued.
The fourth quarter.
And which.
That's why as you said the fourth quarter was.
Somewhat.
Softer than what we had expected back in the January February timeframe.
I think today, we feel very optimistic again, we feel that most of that business has not been lost.
Although I will say that the FERC.
First quarter.
He has continued to be somewhat sluggish in terms of companies fully turning back onto the projects that they have been planning on in the past and so when we think about our fiscal 'twenty three it's likely to be somewhat back end loaded from our revenue expectations, but again, we feel good about the customer base that we have in the projects that are in place.
And at this point, where we're not seeing a lot of things canceled. It's just been a slowdown for the reasons that we've mentioned so it's probably as specific as I can get at this time Tony.
That's very helpful.
My second question is how would you consider your competitive position as these revenues have dropped have you do you feel you've maintained your market share or you've raised it as additive but lowered.
Well, a couple of things and first I'll tie it a little bit back to your earlier question and one thing I should have mentioned also is that one impacts we had in the fourth quarter of fiscal 2022 as we did.
Get to largely the end of the rollout of the U S retail locations for our largest customers that was unknown situation that was coming and you finally get there where you get through most of those locations. So that was part of the falloff.
That happened in that fourth quarter.
I think that.
I think going forward.
We still feel very optimistic about where things stand today and and.
I think from a competitive standpoint, I've never been one to really talk a lot about market share because it's a massive industry and when we have talked.
In the past about the fact that commercial and industrial lighting, we think is somewhere around 30% implemented in the U S.
Through the department of Energy studies and that the market is.
Going to be massively growing over the next five years, we just have to be better than our competitors.
Centers and take more business away from them and get more than our share. So I think at our size and the sizes industry to meet our market share is not important it's just taking business that we win through better product better service and better execution than our competitors.
Understood. Thank you very much and the best of luck.
Thank you very much.
Much Tony.
That concludes the Q&A session I would now like to turn the call back over to Mike Akshay for closing remark.
Thank you Latonia and thanks again to everyone, who joined US today for your interest in Orion today, we are participating in person at the LD Micro conference in California, which is a hybrid conference and for any investors, who may want to see our presentation. Please contact LD micro.
We participated in several virtual conferences over the past year, many of which were recorded and are available on the IR section of our website. So if you have any questions or if you'd like to schedule a call with management. Please contact our IR team. Their contact information is included in today's press release, and we really welcome your interest. So thanks again for joining us on today's call and we look for.
To talking to you after the next quarter have a great day, thanks a lot.
Today's conference call is now concluded. Thank you you may now disconnect.
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