Q1 2023 Orion Energy Systems Inc Earnings Call
The conference will begin shortly.
Raise your hand during Q&A, you can dial star one one.
[music].
Okay.
Good morning, and welcome to <unk>.
Oregon Energy systems fiscal 2023 first quarter conference call at this time.
Parents are in a listen only mode. After some prepared remarks, we will conduct a question and answer session. Today's conference is being recorded.
I would now like to turn the call over to chip here.
<unk> Investor Relations, Sir you may begin.
Hi, This is bill challenge Investor Relations.
Thank you and good morning, Mike Akshay for Orion's, CEO and Board Chair will open today's call with an overview of Orion results and strategy.
Mike Jenkins, our I N C. O O will then provide more perspective on the business, including sales and operations.
Per protein Orion's CFO will review, the company's financial position and financial results. Mike. All cheerful will then conclude with an overview of Orion outlook for the year and the CEO transition plan announced today.
We will then open the call to your questions.
An archived replay of this call will be available after today in the Investor Relations section of Orion's Web site.
Remarks that follow it.
The answers to questions include statements that may be forward looking within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements generally include words, such as anticipate believe expect or similar works. Additionally, any statements that describe future plans objectives or goals are also forward looking.
These forward looking statements are subject to various risks that could cause actual results to be materially different.
Than currently expected.
Such risks include among others matters that the company has described in its press release issued this morning, and its filings with the SEC, except as described therein. The company disclaims any obligation to pay.
Forward looking statements that are made as of today's date reconciliations.
Reconciliations of certain non-GAAP financial metrics to their corresponding GAAP measures are also provided in today's press release, which is available at the Investor Relations section of the company's website Www Orion lighting dot com.
And now with that I'll turn the call over to Mike Akshay for Mike.
Thanks, Bill good morning, and thank you for joining today's call. This morning, we reported our first quarter results and updated our full year revenue outlook from a high level, our first quarter reflected a continuation of the trends that impacted the performance of our last two quarters, namely ongoing delays and the initiation of large OLED lighting projects as our <unk>.
Customers navigate a range of shifting economic supply chain and other external factors importantly, we continue to expect most of those projects will move forward in the next few quarters, providing a strong project pipeline in.
In addition, our new project quoting activity has been at near record levels across the business for the past quarter, providing further confidence in our market position and long term outlook.
We strongly believe that Orion has the right mission for today's macro environment, we help our customers achieve their sustainability energy savings and carbon footprint reduction goals through innovative technology and exceptional service.
Now I would like to turn the call over to Mike Jenkins to provide some commentary on our business today.
Thanks, Mike.
First I'd like to briefly discuss where we stand today with the overall business, while Orion's history is rooted in the manufacturer.
Energy efficient led lighting solutions with a focus on retrofit projects, both through our turnkey capabilities as well as through our valuable ESCO and distribution partners, we have been expanding our vision and capabilities to provide a broader set of solutions that brings even greater long term value to our customers.
With a growing emphasis on energy efficiency alternative power sources electric vehicles, and Internet of things solutions and other next generation technologies, our customers are faced with an expanding base of exciting options and growing complexity.
We believe helping customers navigate these opportunities with customized solutions and services and the highest levels of customer service service provides a very compelling and competitive offering they can support our continued growth and success.
We are now differentiating Orion through our customers for life mission, which envisions a growing range of value enhancing capabilities products and services to meet our customers' evolving needs, while Ryan wants to provide platforms and services for our customers throughout their journey towards sustainability energy.
<unk> safety environmental and other business goals are.
Our customers for life mission is visible in our product development efforts such as the introduction of our Pir motion Air movement and filtration products designed to create healthier indoor spaces, the launch of our lighting and electrical maintenance business and it will also be a key driver in our M&A strategy moving forward.
Our customers for life commitment starts with the highest quality smart design and most energy efficient led lighting solutions to deliver long term reliability and ROI to our customers.
Building on that fundamental commitment we have created a customized turnkey solutions capability for large national accounts.
Our turnkey solutions allow us to quickly and efficiently assess our customers' specific needs develop custom solutions for these needs and then manufacture and install solutions all with one point of contact and accountability. These integrated customized capabilities are unique in our industry.
The launch of our maintenance services business builds on our customer for life mission by enabling Orion to provide ongoing service and support across our clients' electrical maintenance needs, while creating a growing base of recurring services revenue.
Maintenance services build on Orion strength and project management implementation and customer service. We expect it will also provide meaningful cross selling opportunities and other synergies throughout our business as we are able to better understand our customers' needs and leverage our product and service capabilities.
Looking at the sales and marketing efforts last month, we participated in light fair, our industry's largest annual global showcase held this year in Las Vegas. This was our first returned to light fair since 2019 prior to the Covid pandemic.
Although the show has scaled down Orion had a very good booth traffic and excellent conversations with many.
Existing and potential customers and channel partners that really bodes well for our future.
We're also rapidly building out the digital marketing capabilities of our organization.
We have raised nice awareness for our pure motion product in quarter, one through our social media campaigns, and we'll be launching a new website in fiscal Q3.
Stay tuned.
In terms of the lighting industry in general trends, despite the compelling cost savings of led retrofit projects the macro backdrop over the past few quarters has resulted in some customers delaying projects as they address other issues in their business. We are seeing a gradual movement back to more normal conditions and <unk>.
Or all the interest and quoting level remains at high watermarks for the last several years in our business.
With respect to supply chain the challenges have moderated somewhat but we continue to actively manage these areas in the past we have relied on one or two vendors for key components now, we're interacting with a dozen or more vendors to secure needed supplies, which of course takes substantially more time and resources.
To manage.
Secondly, we have made the strategic decision to invest more deeply in inventory to ensure access to key materials and components and we are fortunate to have the balance sheet flexibility to do this.
Due to proactive management within Orion, we have been able to meet most order demands within our normal stated lead times of around two weeks or less.
Our U S based manufacturing facility enables us to achieve such industry, leading timelines.
Most of the supply chain impacts we have felt have actually been on the customer side with projects moving more slowly to due to the lack of certain building supplies et cetera.
Our turnkey project and maintenance capabilities industry, leading responsiveness and high levels of customer service put us in a strong competitive position in this environment.
This has resulted in our winning some business from our competitors, who are unable to meet customer lead times given their offshore sourcing.
In terms of inflationary impacts on input costs, we've been able to mitigate the bulk of these factors through proactive sourcing efforts and offsetting price adjustments.
Over the past few months, we have successfully updated most of our products to comply with recently updated design light consortium or DLC standards.
DLC as the utility industry standards body that provides product qualifications required to earn utility industry rebates for the installation of energy efficient lighting solutions, while the standards are only relevant for securing utility rebates more and more customers view DLC compliance as an important.
Side of efficiency.
Finally in the first quarter Orion issued its first environmental social and governance or ESG report.
As our first formal effort Orion's history, and culture have long been deeply rooted in energy efficiency environmental stewardship community support and involvement and sound corporate governance policies and actions.
We are proud of the of the progress we have made in these areas and are committed to further improvements as we move forward in support of our all of our stakeholders.
I encourage you to review our ESG report, which is accessible from our homepage at Www Dot Orion lighting dot com.
I'd like to provide a few highlights.
Yeah.
In fiscal year 2022 by our internal calculations Orion helped its customers reduce carbon dioxide emissions by.
240000 tons or the equivalent of planting nearly 100000 acres of trees by implementing a more energy efficient led lighting solutions.
Alright.
Currently produces 10% of our energy needs through onsite renewables solar and wind turbine energy sources and in 2022, we recycled approximately 92% of the materials used in our manufacturing process that otherwise would have gone to landfill.
We are also very proud of our workforce, 44% of our employees are female which is significantly above the manufacturing average of approximately 30%.
Further 34% of our company management positions are held by women and diverse groups and following our shareholder meeting tomorrow two of our five directors will be female.
We have made significant strides in advancing our ESG goals and plan to make further progress in the years ahead.
With that overview I'll turn the call over to <unk> to provide an overview of our Q1 financial results.
Compare.
Thank you Mike.
Fiscal 'twenty three first quarter revenue was $17 9 million versus $35 1 million in Q1, 'twenty two reflecting the completion of a large project in Q4 'twenty two ongoing delays in the startup of several new larger led lighting projects and general slowness and.
Approval of projects by new and existing customers due to the current economic environment.
The prior year quarter benefited from strong business activity, including from several large national projects enabled by the easing of work and travel restrictions after the onset of the pandemic.
Our gross profit percentage was 19, 8% in Q1, 'twenty three as compared to 29, 1% in Q1, 22, and 23, 8% last quarter Q4 'twenty two.
The biggest driver here is the impact of less fixed cost absorption because of lower revenue in general we are able to flex direct production labor up and down as business volume fluctuates. However, we are not able to flex fixed plant and indirect production labor cost when volumes are lower.
Resulting in lower margins.
There's a similar dynamic in our service operations. There are some costs that flex up and down with the business volumes, but there is a component that is fixed.
Given that we do expect our gross profit percentage to improve due to operating leverage as volumes increase in subsequent quarters during the year.
If you remove the absorption impact from gross profit percentage and just look at the other input costs are components and raw materials, our product margin was essentially flat compared to the prior year.
First quarter fiscal 'twenty, three operating expenses were $7 2 million versus $6 8 million in Q1, 'twenty two with the increase attributable to higher general and administrative expenses, partially offset by lower sales and marketing costs. The.
The addition of Stellite costs. Following the January 2022 acquisition accounted for most of the increase in overall G&A costs.
We reported a net loss of $2 8 million or minus <unk> nine per share in Q1, 'twenty three as compared to net income of $2 5 million or <unk> <unk> per share in Q1 'twenty two.
At quarter end, our net working capital improved to $29 5 million from $29 4 million in Q1 'twenty two.
Our working capital includes $18 $8 million of inventory investment, which positions us well to execute on our expected increases in volume.
Orion remains in strong financial position with approximately $25 million of liquidity, including cash and cash equivalents of $9 4 million and $15 $8 million of availability on our credit facility and no bank debt outstanding.
As we manage the business in the current environment, we intend to be vigilant in managing our cash position and overall liquidity. Our aim at a minimum is to be free cash flow neutral for the full fiscal year.
Therefore, we believe we have the financial flexibility to continue to consider strategic tuck in acquisitions on an opportunistic basis in the current environment.
And with that I'll turn the call back over to Mike <unk> to comment on our outlook and CFO CEO transition plan.
Thanks, Pierre despite near term customer delays and economic impacts we continue to feel very good about our long term market position and our three primary paths to market. We recently added five new agents to our electrical contractor distribution channel as we continue to strengthen our national footprint and market position.
We also continue to add sales resources dedicated to the ESCO market, which is a particular strength for Orion given its focus on delivering tangible energy efficiency benefits.
The ESCO market was our fastest growing business segment in fiscal 'twenty, two and we expect it will continue to provide significant growth again in fiscal 'twenty, three and going forward.
As for our National accounts business, we continued to expand and diversify our base of active customers as well as the products services customization and turnkey capabilities we offer.
Ryan is recognized for our unique ability to execute very large customized national led retrofit programs on a turnkey basis.
We believe this provides a very exciting long term growth opportunity for our company. We are seeing signs that large national account project activity will rebound over the next few quarters, providing an outlook for improving results as we progress through fiscal 'twenty three.
I do think it is important to put some context around our revenue growth in fiscal 'twenty. Two we grew revenues by six 5% to $124 4 million.
Excluding our largest customer we actually grew our fiscal 'twenty two revenues by nearly 25% over the prior year.
Our Q1 'twenty three revenue was impacted by the expected reduction in revenue from our largest customer.
In addition, our large global online retail customer has made public announcements that had unexpectedly needed to greatly reduce its planned addition of warehouse and fulfillment centers, which impacted both Q1, 'twenty three and our fiscal 'twenty three outlook.
Our Q1 'twenty two included significant revenue from this customer.
Excluding our largest customer and our global online retail customer our Q1 'twenty three revenue grew 18% over Q1 'twenty two revenue. This gives us confidence in our sales and marketing activities that we continue to use.
While fiscal 'twenty three is off to a slower start than expected we have a steadily expanding pipeline of projects with existing clients in automotive the public sector logistics and retail several of these projects have the potential to generate 10 plus million dollars in revenue and are expected to start later this year.
Given recent delays in the pace of order activity, we updated our revenue outlook for fiscal 'twenty, three and today's release.
We expect second quarter revenue will be a modest sequential improvement over the first quarter and now anticipate full year fiscal 'twenty three revenue of between 90 and $110 million.
This range principally reflects the potential variability in the timing of several large customer projects as well as other factors we outlined in today's release.
Assuming we achieve the midpoint of this range, we would grow our revenue more than 25% over last year exclusive of our largest customer.
We feel we are in a strong position financially to support our growth initiatives, including potential accretive acquisition opportunities such as the stay light acquisition, which closed in January .
In terms of further M&A, we have a strong pipeline of opportunities. We are reviewing we will remain extremely prudent in this environment focusing on businesses that offer significant value growth potential and synergies with our existing businesses and customer base.
I will now review today's CEO transition announcement, which is the product in more than a year planning by Orion Board and management team.
We believe our transition plan along with the separation of the CEO and board chair roles, which will go into effect in conjunction with our annual shareholder meeting being held tomorrow provides a clear and smooth leadership transition for Orion and further aligns our corporate governance with best practices.
Our planning now enables me to act in my personal decision to step down from day to day management responsibilities at Orion and move into retirement. After we report our second quarter results on about November 10 this year.
<unk> been building, our Ryan's board leadership team and structure of the past few years to prepare the business for future growth and the inevitable shift and our leadership I am proud of the team and management structure. We have built an extremely confident in its ability to lead orion into the future.
As we announced this morning, our Chief operating Officer, Mike Jenkins will take over as <unk> next CEO and join our board of directors. Following my retirement in November .
Mike joined Orion in his current role as executive Vice President and Chief Operating Officer last November and has quickly become a valued and trusted leader in our organization as we had hoped Mike's performance leadership and talents confirmed that he is well suited to lead our rides long term growth initiatives.
Our board is confident Mike has the right skill set to lead Orion going forward not only in operations and general management, but a significant sales and marketing skills in prior P&L responsibility for <unk>.
Several hundred million dollar business.
Additionally, Mike has significant experience in the M&A process, having evaluated acquired and successfully integrated a number of businesses during his career.
And with that let's turn the call back to the operator for our Q&A session operator.
As a reminder to ask a question you will need to press star one on your telephone.
<unk> limit to three questions. If you do have additional questions. Please go back into the queue. Please.
Please standby, while we compile the Q&A roster.
Our first question comes from Eric Stine with Craig Hallum. Your line is now open.
Morning, everyone.
Good morning, everybody.
So maybe just starting.
Obviously talking about a strong pipeline and then starting to see things potentially normalize when you think about the future of the business.
Maybe talk about how you feel it plays out.
Balancing on one side diversification, but whether there are any large.
Home depot like contracts out there that you potentially see.
Sure. Thanks, Eric.
First of all we.
I think that it was important to highlight today when we look back at where our growth has been that there was the reality that we needed to work through our largest customers eventual wind down of that very large project and as we've talked back in January and February .
Prior to that we had a handful of projects that we're fairly confident we're going to fill that gap just as that large customer rolled off and the reality is some of those projects have been delayed and so we'd want to again reiterate that the growth in the non large customer business has been there over the last year and in this quarter of the.
So we still are looking at that had been pushed back we mentioned in the release today and in my comments that some of those are $10 million plus opportunities and I would say within those Eric there are some possibility at some could be quite large not really ready to say they are going to be the size of that largest customer where we had.
Previously set about $250 million of business over the last two and a half to three years.
But there are some.
Projects of significant size out there that we are in discussions with.
Okay.
Helpful. And then on the maintenance side I know a lot of the business has been with that large customer.
Just curious what type of diversification youre seeing in that business.
We are continuing to see diversification in that business because with the acquisition of stay light lighting back in January that brought with it obviously a book of business that has continued to perform well for us in total our maintenance business was roughly $4 million in this Q1 of 'twenty three.
And that business is split between our existing customer base with the stellite acquisition as well as with our largest customer we are providing certain maintenance services. So there is diversification that number and we would see that continuing as we add customers for.
Service and operating maintenance going forward.
Got it.
Maybe last one for me just you were talking about some potential M&A.
Are there are there areas you can speak to that Youre youre hearing from your customers that they would like you to be involved in and are you is it too early to say that given market conditions.
That started to be reflected in valuations out there.
Hi, Great question the way I would describe it is that we are allowing.
What we are hearing.
For needs from our customers and desires for expanded products or services from our customers to be a strong guiding factor in our M&A activity. So as we execute on our M&A activity one could expect that it's going to be in an area that we think we can very quickly bring to our existing <unk>.
Customer base, because we are hearing from them that they need assistance in those areas versus something completely foreign in a different sort of vertical.
And Eric it it would be consistent with the comments we've highlighted in the past of our key priorities for M&A.
Okay. Thank you.
Thank you Eric.
Please standby for our next question.
Okay.
Our next question comes from and Dr. Yao with H C. Wainwright. Your line is now open.
Thank you good morning, everyone.
From an <unk> perspective, just from an M&A perspective.
Is there potential financing needs to execute on.
Any decent size M&A opportunities you may be pursuing.
Well.
We first looked at it in terms of the fact that we continue to have a significant significant amount of cash on our balance sheet.
And secondly, we would look to acquisitions that are of a size that we think fit the risk that we think is prudent to take at this time from a capital structure standpoint.
And part of what I mean by that Amit is that.
We are not real excited about using our stock as currency right now because we have such confidence in our future and the growth that we're going to see in the future that we would like to wait and so we would see it most likely coming from a combination of cash.
Perhaps some seller financing and also the fact that we have an unused line of credit with our bank and no term debt outstanding from a financing standpoint.
Understood. Thank you for that.
<unk>.
In terms of product launches et cetera, I know you guys have been relatively active on that front in the last few years.
Sort of the delays and push outs.
This economic environment and how is that.
Playing out for you are you pushing out on any new product launch efforts etcetera, you are trying to save costs on that side any color on that would be helpful.
Yes.
Matt This is Mike Jenkins I can address that so obviously, we talked a little bit about the launch of our Pir motion product, which was last year that product is gaining traction currently we do have a nice pipeline of opportunities for that and we've invested significantly in marketing and demand creation Act.
<unk>, which is helping boost that we have spent a lot of resources as indicated in the.
Commentary earlier on our DLC compliance.
Which really was unnecessary activity to make sure that we could maximize the value for our customers with utility rebates and so that was a big body of work that has taken place over the last six months and as we pivot now and shift to the second half of the year and beyond we do have a number of new.
<unk> industry, leading products, which we plan to release.
Okay.
No. That's all I have I'll take my other questions offline. Thank you.
Thank you Amy.
Please standby for our next question.
Our next question comes from Alex Rygiel with B Riley Securities. Your line is now open thank.
Thank you good morning, gentlemen.
Good morning, good morning still.
We're still trying to get my hands around understanding the full year guidance, which obviously suggests.
Pretty strong pick up over the next couple of quarters. So.
Are you seeing that evidenced in your backlog.
<unk>.
That is suggesting that real strong kind of fiscal third quarter and fourth quarter pickup.
What is the risk to additional project delays in that.
And then I have a follow up.
Sure.
I mean, yes, when you look at our comments about.
Our outlook for the year and let's just.
First our comment was that we expect our second quarter to be a modest sequential improvement and so when you then look at that and look at our range. It certainly suggests a strong second half of the year, which we believe is going to be the case. The reason we come to that conclusion is that one our backlog remains fair.
Strong, it's a little bit over $8 million going into this.
Next quarter, and usually that backlog will work its way off used.
Usually during a quarter number two we have some projects that are confirmed that we expect to start over the next couple of quarters and then as we've been talking about and I realize it's been a few quarters of talking about it but back in January and February some of the significant projects have been delayed or.
Still very much in the forefront and we now think are getting much closer to being signed up and kicking off this year and so with all of those things we do have confidence in the second half of the year.
And.
Youre risks to that would be could customer slowdown in some of these but some are getting near to being signed contracts and somewhat quite definitive in and we're not overly concerned about things being pushed back.
Yeah, maybe this is Mike Jenkins just to add to those comments. In addition to the known projects, which we're working on.
We also have deployed a number of growth activities in both the ESCO and distribution market segments. Mike indicated earlier that we've added five new distributor agents. So far this year, we plan to continue to add and broaden our coverage in that market segment and on the ESCO side, where we are.
Had great momentum through last year and already this year into Q1 with some growth we have new programs, which are launching and plan to again add significantly.
To that market segment in terms of the number of <unk> that we parks.
So those are the things that are leading us to the guidance in the second half.
That is helpful.
Then I.
I think you mentioned that backlog was $8 million it looks like Thats down from about 10 million three months ago, and maybe down from a peak of 16 million two quarters ago have you seen any cancellations in backlog or are you only seen delays in backlog.
For us in backlog, we feel we are consistent and I would say conservative of what we put into backlog. So usually nothing goes in the backlog Alex unless it's signed contract appeal Thats been received and it's known business and even in.
Situations, we've explained in the past and let's use our largest customer as an example.
May have had a contract with them to do a lot of business over a period of time, but until they actually issue their purchase orders for specific locations that does not go into backlog. So there are times when that backlog can be more or less indicative of what's coming in the future.
I can tell you is the mix in that backlog.
Has changed such that the backlog related to our.
Our non <unk>.
<unk> customer is staying nice and steady and so we think it's a good indication and just the near term, but we take internally we look much more at our pipeline in terms of contracts that we're negotiating projects that we're quoting on Mike and I, both mentioned that our quoting activity, which we track both.
In quantity of quotes as well as dollars of quotes are near record levels and so we look at all of those things as a mix when we think through what the rest of the year might look like for us.
That's very helpful. Thank you.
Thank you Alex.
As a reminder to ask a question. Please press star one one on your telephone.
One moment for our next question.
The next question comes from Bill <unk> with Titan Capital. Your line is now open.
Thank you I'd like to start by following up Mike or something you said in response to an M&A question.
Which was that your you are following kind of what your customers are expressing that they would like you to.
To add in terms of products and our services.
The question is.
Are you hearing a wide range of new capabilities that your customers are wanting or is it is it much more narrow.
And focused.
Are you seeing there.
Yes, Bill I think what I would expand it a little bit there and we have said this on several occasions in either releases or in our calls that the types of things, we're hearing from customers or things in the area of EV charging station capabilities, both product as well as service and maintenance related to that.
We've had customers asking us about our capabilities to look and help them on solar projects, perhaps on rooftops and we have a customer base existing customer base that has lots of rooftops. We have thought about control technology as it continues to evolve for our customers and then there are certain products that.
It might be helpful to fulfill our hour.
<unk>.
Breadth of our product portfolio. So I think in the past we have I know in the past. We've said our priority is probably kind of head down that line and then the other one I failed to mentioned in that list is horticultural lighting has been of interest to US also somewhat from a customer standpoint, but also just looking at the macro environment over the <unk>.
Few years in vertical farming and other aspects so.
Part of cultural lighting solar.
Product expansion and controls technology would probably would be the five things that we are looking at the most in terms of expanding.
And some of those are being driven by our customer base.
Great. Thank you and then.
Relative to your comments that you.
Youre seeing customers affected by economic uncertainty.
History would you say that you are seeing your customers are most impacted by that.
Economic uncertainty and secondarily the opposite those that are seem to be at least at least impacted.
Okay.
Okay.
The starting point Albi is just to double back on my comments earlier that we have talked over the last year and a half approximately that we had a very nice global online retail customer there was a new construction for US is they added warehouses fulfillment centers and it was a very substantial amount of business for us in fiscal 2022.
And also had business with them in fiscal 2021 and.
In a rather abrupt change.
They have publicly announced that they feel they have somewhat excess capacity and warehousing and fulfillment centers and they put a quick hold on some projects that were expected to come through so it would be one example, but a very specific example, maybe a little bit more general of areas that we are seeing some changes in that.
<unk>.
I'll, let Mike comment on that also I don't know that we can really pin it down to a specific industry.
Really been more of a customer by customer.
Situation, where they've given us feedback and obviously some of that has to do with the rest of the dynamics going on in their business. So I'm not sure. We can provide anything from an industry standpoint, it's just been an individual by individual situation.
I'll also add build the interesting counter to that is the automotive area, which was really impacted during COVID-19 due to access issues and challenges in that industry. We are seeing that industry vertical for us coming back very very nicely and so we're having some great conversations with our largest customers that we've talked about it.
Pass and expect some very nice business from them during the remainder of fiscal 2023. So several one size fits all and as Mike has said, it's very customer specific sometimes of.
And their decision basis.
That's quite helpful and then lastly.
Have your price increase has been fully reflected.
The first quarter results or is there still more to go in and if there is more to go kind of when do you expect it to be fully felt I suppose then.
All tied to that is do you anticipate the need for an additional price increase.
As we went through some of the inflationary times I've made the past comment that one of our goals was to protect our gross margin profit percentage as we went through that with.
Prudent and well thought out price increases and at the same time watching the market and watching our competitors.
I'm going to come back to comment that Pierre made earlier today to make sure everybody can hear it perhaps one more time.
We certainly have been impacted by the.
Cut lower couple of quarters of volume going through our manufacturing facility. We continue to think having U S. Based manufacturing facility is a great advantage, but at the same time when you go through some lower volumes your fixed costs.
<unk> impacted for a while if we peel away that impact our gross margins have stayed stayed rather steady. So we feel fairly confident that our price increases have been able to cover the inflationary pressures that we've seen on labor and component costs and logistics over the last period of time, we don't have any.
Near term plans for price increases because we think were on top of the situation right now, but we'll keep watching it and we would feel that most of those price increases have probably been reflected up through this period of time.
And there's still maybe some more to be implemented but for the most part I would say most of our price increases have probably taken effect through this quarter.
Alright, Thank you for the thorough answers.
Thanks Bill.
Please standby for the next question.
Our next question comes from Steve Rudd with Blackwell Millennium.
Hi.
This is a question for Mike Jenkins.
As Youre looking forward to the back half of the year.
The hope for increase in revenues have you begun to give thought to how to adjust your internal cost structure to return the company to profitability should those revenues not come.
Come about and we face future disappointment as a conflict here between talking about economic uncertainty.
Growth.
And yet diminished revenues, there's a disconnect and I wonder if your thinking.
Into the CEO position says, okay, here's what I can do too.
Cut our internal cost structure and I'm not talking about your.
Sourcing, but rather your.
Personnel.
Sure Steve Thank you for the question.
Absolutely and managing businesses, we have to always be vigilant on our costs and recognize.
The contingency plans that need to be in place. So we will continue as we look to the future for growth to also be prudent and cautious and make sure that we have plans in place should those.
Should those strategies not realize the kind of growth that we're anticipating will be in a position to safeguard the company and maintain profitability.
Okay, and then just to follow up briefly.
At what point, we've headquarter last few quarters have been one after another of disappointment and promise of <unk>.
Yes.
It's temporary.
At what point in your own head as the new CEO do you say now it's time for them to act and I'm going to act decisively.
Third quarter fourth quarter.
Should that continue what's your own thinking of how quickly you will act.
Okay.
Well I think we again as we've indicated I think that the plans and strategies that we have in place today, the customers for life, which we highlighted today.
<unk>.
Transition to broadening our view of the services and platforms that we can offer customers a part of that may be through acquisitions as well and so I think the company is already moving down that path. We're already taking actions today that should bear fruit in the future. So those to me.
Our under.
Well down the path.
And obviously as always in strategy and business will make modifications should we find that those things are necessary.
Okay.
Yes.
That concludes the Q&A session I will now turn the call over to Mike.
Our chief Pauls for closing remarks.
Thank you Michelle and thanks, again to everyone, who joined US today for your interest in Orion, we expect to present at the H C. Wainwright Global investment conference in mid September if you have any questions or would like to schedule a call with management. Please contact our IR team and their contact information is included in today's press release, we always welcome your interest.
Thank you we recognize it's been a bit of a tough quarter and we are very committed to continue to improve this company and we look forward to talking with our investors as we go forward and we will talk with you if not before during our second quarter call in November thanks, everyone.
Today's conference has now concluded. Thank you you may now disconnect.
The conference will begin shortly.
As Johan during Q&A, you can dial star one one.
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Okay.
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