Q3 2024 Orion Energy Systems Inc Earnings Call

Operator: Good morning, everyone, and welcome to the Orion Energy Systems Fiscal 2024 Third Quarter Conference. At this time, all participants are in a listen-only mode.

Okay.

Good morning, everyone and welcome to Orion Energy systems fiscal 2024 third quarter conference call. At this time, all participants are in a listen only mode.

Bill Jones: I would now like to turn the call over to Unknown Speaker, Bill Jones, Ambassador of Relations. Thank you, operator. Good morning, everyone, and thank you for joining today's call. Mike Jenkins, Orion CEO, and Per Brodin, Orion CFO, will review the company's third-quarter results, financial position, and outlook, and then we will open the call to investor questions. Today's conference call is being recorded, and a replay will be posted on the investor relations section of Orion's website, orionlighting.com.

Now I'd like to turn the call over to Mr. Bill Jones Investor Relations.

Thank you operator.

Good morning, everyone and thank you for joining today's call.

Mike Jenkins Orion's CEO impair protein Orion's CFO will review the company's third quarter results financial position and outlook and then we will open the call to Investor questions. Today's conference call is being recorded and a replay will be posted on the Investor Relations section of Orion's website.

Well, Ryan lighting Dot com.

Unknown Executive: Remarks that follow and answers to questions include statements that are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements generally include words such as anticipate, believe, expect, project, or similar words. Also, any statements that describe future objectives and goals, plans, or outlook are also forward-looking. Such forward-looking statements are subject to various risks that could cause actual results to differ materially from those currently expected. These risks include, among other things, just as described in its press release issued this morning, as well as in its filings with the Securities and Exchange Commission.

Remarks at Powell and answers to questions include statements that are forward looking within the meaning of the private Securities Litigation Reform Act of 1995 forward looking statements. Generally include words, such as anticipate believe expect project or similar words also any statements that describe future objectives.

Ingalls plans or outlook are also forward looking.

Such forward looking statements are subject to various risks that could cause actual results to differ materially from currently expected piece.

These risks include among other matters.

<unk> described in its press release issued this morning as well as in its filings with the Securities Exchange Commission.

Unknown Executive: Except as described therein, the company disclaims any obligation to update forward-looking statements, which are made as of today's date. Reconciliations of certain non-GAAP financial metrics to GAAP measures are also provided in today's press release. [inaudible] Thank you, Bill. Good morning.

Except as described therein the company disclaims any obligation to update forward looking statements, which are made as of today's date.

Reconciliation of certain non-GAAP financial metrics to GAAP measures are also provided in today's press release I will now turn the call over to Mr. Mike Jenkins.

Thank you Bill good morning, Thank you all for joining today's call.

Michael H. Jenkins: Thank you all for joining today's call. As previewed last month, Orion's third quarter revenue rose 28%, reflecting an anticipated acceleration in contract activity on large LED lighting projects in the government sector, projects secured through energy service company or ESCO partners, and projects with our largest customers. Q3 also saw growth in our electrical maintenance services business, which is benefiting from a new three-year agreement with Orion's largest customer. Our Voltrek EV charging solutions revenue was flat with the year-ago period and down on a sequential basis, principally due to the variability and timing of larger projects.

As previewed last month, Orion's third quarter revenue rose, 28%, reflecting an anticipated acceleration in contract activity and large Leds lighting projects in the government sector projects secured through energy service company or ESCO partners and projects with our largest customer Q3 also.

Growth in our electrical maintenance services business, which is benefiting from a new three year agreement with Orion's largest customer.

Our volt check EV charging solutions revenue was flat with year ago period, and down on a sequential basis, principally due to the variability and timing of larger projects. We are however, seeing very encouraging progress in the build out of our longer term EV charging project pipeline as we engage.

Michael H. Jenkins: We are, however, seeing very encouraging progress in the build out of our longer term EV charging project pipeline as we engage with new and existing customers to address their EV charging requirements. Our business development progress makes us optimistic about our growth prospects across the business in Quarter 4 and Fiscal 25. In LED lighting, we have several larger retrofit projects that are underway and should contribute to growth over the next few quarters. These include the remaining $6 million in revenue from our European retrofit project for the U.S. Department of Defense, several million in annual revenue for external lighting for the next several years to support our largest customer, as well as other potential projects with them, ongoing retrofits for a large global warehouse and logistics customer, which we expect to range from $8 to $9 million per annum, for the next few years, and a large multimillion-dollar project for a global technology customer, which we expect to begin in the first half of Fiscal 25.

With new and existing customers to address their EV charging requirements, our business development progress makes us optimistic about our growth prospects across the business in quarter, four and fiscal 'twenty five.

In the OLED lighting, we have several larger retrofit projects that are underway and should contribute to growth over the next few quarters. These include the remaining $6 million in revenue from our European retrofit project for the U S Department of defense.

Several million dollars in annual revenue for external lighting for the next several years to support our largest customer as well as other potential projects with them.

Retrofits for a large global warehouse and logistics customer, which we expect to range from $8 million to $9 million per annum.

For the next few years and a large multimillion dollar project for a global technology customer, which we expect to begin in the first half of fiscal 'twenty five.

Michael H. Jenkins: In our LED business, we see continued expansion through our ESCO channel partners, who continue to focus on our industry-leading high efficiency lighting products, as well as our new line of value-oriented fixtures, including our Triton Pro retrofit high bay lighting fixtures and our Harris exterior LED lighting products. These products strike a balance between our commitment to high quality components, design, and energy efficiency and the budget limitations of some end customers. These new products expand our total addressable market within the ESCO and distribution channel. As an example, we recently won and are implementing a project for a national specialty retailer through an ESCO partner using Triton Pro. Due to the customer's specifications, Triton Pro was the appropriate product to meet their needs.

In our led business, we see continued expansion through our ESCO channel partners, who continue to focus on our industry, leading high efficiency lighting products as well as our new line of value oriented fixtures, including our trading pro retrofit high Bay lighting fixtures and our Harris exterior led lighting products.

These products strike a balance between our commitment to high quality components design in energy efficiency and the budget limitations of some end customers.

These new products expand our total addressable market within the ESCO and distribution channels. As an example, we recently won and are implementing a project for a national specialty retailer through an ESCO partner using trade with pro due to the customer specification straightened pro was the appropriate product to meet their needs. This.

Michael H. Jenkins: This project should generate revenue of $3-4 million for Orion over the next 24 months. We continue to work on our electrical contractor channel to increase our value proposition by adding the right partners, products, and pricing to meet their needs. We have seen excellent quoting and pipeline build in this channel since we launched the Triton Pro in our exterior Harris line. Reflecting the strategic benefits of our U.S. manufacturing facility here in Manitowoc, Wisconsin, in the third quarter, Orion released a full line of new LED lighting fixtures compliant with the Build America, Buy America, or B-A-B-A Act. These include energy-efficient LED high bays, LED strips, and LED troughs. These fixtures exceed the requirements of both the earlier Buy America Act and the new BABA Act, which mandates at least 55% of material content come from U.S. sources. The BABA Act stipulates that states, municipalities, and schools use BABA-compliant products when possible in order to receive federal funding.

Projects should generate revenue of $3 million to $4 million for Orion over the next 24 months.

We continue to work on our electrical contractor channel to increase our value proposition by adding the right partners products and pricing to meet their needs. We have seen excellent quoting and pipeline building. This channel since we launched the <unk> pro and our exterior Harris lines.

Reflecting the strategic benefits of our U S manufacturing facility here in Manitowoc, Wisconsin in the third quarter Orion released a full line of new led lighting fixtures compliant with the build America buy America or be a be a act. These include energy efficient led high Bay led.

Strips and <unk>.

These fixtures exceed the requirements of both the earlier by America Act and the new <unk>.

Act, which mandates at least 55% of material content come from U S sources.

<unk> stipulates that states municipalities and schools used to.

Compliant products when possible in order to receive federal funding certainly it's important to us to be a leader in American manufacturing in the lighting industry, but it also unlocks federal funding opportunities for customers that can significantly increase their ROI and support their sustainability goals.

Michael H. Jenkins: Certainly, it's important for us to be a leader in American manufacturing in the lighting industry, but it also unlocks federal funding opportunities for customers that can significantly increase their ROI and support their sustainability goals. In November, we attended the Federal Small Business Conference in Texas to showcase our BABA-compliant product. We have received great interest from customers, and our quoted pipeline is already over a million dollars and growing. One additional area that should be noted is that there are now seven states which are banning fluorescent fixtures for commercial and industrial use over the next several years. Our understanding is that these states, including California, will prohibit new fluorescent fixtures from being sold as well as ban replacement fluorescent tubes.

In November we attended the federal small business conference in Texas to showcase our <unk>.

Compliant products, we have received great interest from customers in our quoted pipeline is already over $1 billion and growing.

One additional area that should be noted is that there are now seven states, which are banning fluorescent fixtures for commercial and industrial use over the next several years. Our understanding is that these states, including California will prohibit new fluorescent fixtures from being sold as well as prohibit replacement fluorescent tubes.

Michael H. Jenkins: We have heard from several customers that these requirements are motivating them to accelerate their timings on retrofit projects into the next 12 to 18 months. Now, turning to our EV charging solutions business. We have made good progress in building out the Voltrek team and its geographic reach to meet the needs of large national customers. We are now engaged with a broader base of customers and opportunities, which are contributing to growth in our project pipeline, which is now in excess of $50 million. Quarter 3 revenue of $2.8 million matched prior year quarter 3 but was down slightly from last quarter due to project timing.

We have heard from several customers that these requirements are motivating them to accelerate their timings and retrofit projects into the next 12 to 18 months.

Turning to our EV charging solutions business, we have made good progress in building out the volt trek team and its geographic reach to meet the needs of large national customers. We are now engaged with a broader base of customers and opportunities, which are contributing to growth in our project pipeline, which is now in excess of $50 million.

Quarter, three revenue of $2 8 million matched prior year quarter, three but it was down slightly from last quarter due to project timing, we do anticipate some variability in quarter over quarter performance of this segment due to the timing of what we expect will be larger regional and national projects.

Michael H. Jenkins: We do anticipate some variability in quarter-over-quarter performance of this segment due to the timing of what we expect will be larger regional and national projects. As you probably know, there has been some recent reporting on potential pushback in the EV space by auto dealers and rental car companies, as well as questions about the forecast of EV growth reaching 50% of the new vehicle fleet by 2030 or 80% by 2040. While some of the earlier projections might prove to be a bit bullish, it is clear that EV shipments are continuing at a significant rate, and our communities and enterprises are very much behind in building out the needed infrastructure to support the current and future needs of EVs. Voltrek, with its over 14 years of experience and impressive track record of EV charging station deployments, is extremely well positioned to serve customers in this area. Voltrek's experience and capabilities are even more compelling when compared to the many industry newcomers with little or no technical or EV charging deployment experience required to plan, deploy safe, successful, and reliable EV charging solutions.

As you probably know there has been some recent reporting potential pushback in the EV space by auto dealers and rental car companies as well as questions about the forecast of EV growth, reaching 50% of the new vehicle fleet by 2030 or 80% by 2040.

While some of the earlier projections might prove to be a bit bullish. It is clear that EV shipments are continuing at a significant rate and our communities and enterprises are very much behind in building out the needed infrastructure to support the current and future needs of Evs.

<unk> with its over 14 years of experience and impressive track record of EV charging station deployment is extremely well positioned to serve customers in this area.

<unk> experience and capabilities are even more compelling when compared to the many industry newcomers with little or no technical or EV charging deployment experience required to plan deploy safe successful and reliable EV charging solutions.

Michael H. Jenkins: Now turning to our maintenance services business, which achieved solid revenue growth year over year and sequential margin improvement in the third quarter. The improvement was attributable to the contribution of a new three-year agreement to provide preventative lighting maintenance services for our largest customers, approximately 2,000 retail locations nationwide. Our performance also reflects the benefit of our effort to secure price increases with key customers. Given the range of significant inflationary pressures over the past several quarters, many of these older contracts were no longer profitable.

Now turning to our maintenance services business, which achieved solid revenue growth year over year and sequential margin improvement in the third quarter.

The improvement was attributable to the contribution of our new three year agreement to provide preventative lighting maintenance services for our largest customers approximate 2000 retail locations nationwide.

Our performance also reflects the benefit of our effort to secure price increases with key customers.

Given a range of significant inflationary pressures over the past several quarters. Many of these older contracts or no longer profitable.

Michael H. Jenkins: In response to higher costs, we have raised our pricing to bring our profit margin more in line with our overall business. Over the past few quarters, we have worked to reprice legacy contracts, and we have successfully converted three of our four customers to our new pricing structure within the contracted period. Because we are committed to returning this business to a solid margin profile, we are prepared to exit relationships where we are unable to secure adequate pricing and margin. Many of our Stalight legacy customers have their three-year maintenance RFP processes in our current quarter four period. So we do expect some revenue headwinds as we move into fiscal 25 in our maintenance segment as we continue to focus on profitability. Overall, we believe that Maintenance Services offers Key Accounts additional value and provides Orion with recurring revenue. Overall, we believe that Maintenance Services offers Key Accounts additional value and provides Orion with recurring revenue.

In response to higher costs, we have raised our pricing to bring our profit margin more in line with our overall business over the past few quarters. We have worked to reprice legacy contracts and we have successfully converted three of our four customers.

To our new pricing structure within contracted periods.

Because of our committed because we are committed to returning this business to a solid margin profile. We are prepared to exit relationships, where we are unable to secure adequate pricing and margins.

Many of our stay light legacy customers have their three year maintenance RFP processes in our current quarter four period. So we do expect some revenue headwinds as we move into fiscal 'twenty five in our maintenance segment as we continue to focus on profitability.

Overall, we believe that maintenance services offers key accounts additional value and provides orion with recurring revenue.

We are active in our business development efforts and have new business in our pipeline that we believe could come to fruition in the first half of our fiscal 'twenty five.

Having touched on each of our product and service offerings I want to reiterate our Orion is focused on delivering the highest quality energy efficiency and value to our customers with the highest levels of customer service are complementary go to market approaches are working with ESCO and distribution partners along with our unique turnkey solutions.

Michael H. Jenkins: We are active in our business development efforts and have new business in our pipeline that we believe could come to fruition in the first half of fiscal 25. Having touched on each of our product and service offerings, I want to reiterate Orion's focus on delivering the highest quality, energy efficiency, and value to our customers with the highest levels of customer service. Our complementary go-to-market approaches of working with ESCOs and distribution partners, along with our unique turnkey solutions, allow us to participate in a broad segment of the overall market. Our turnkey approach starts with visits to each site and progresses to custom project and product designs, configuration, and project planning, including utility and government rebates.

Allow us to participate in a broad segment of the overall market.

Our turnkey approach starts with visits to each site progresses to custom project and product designs configuration and project planning, including utility and government rebates. We then can manufacture the led fixtures or procure the EV charging hardware from industry, leading partners and manage delivery.

Permitting installation and commissioning at hundreds or even thousands of sites all with just one point of contact and accountability.

Our initiatives to diversify the business over the past two years are starting to make meaningful contributions contributions to our growth from both new and existing customers. We continued to see significant cross selling opportunities, particularly with long standing large national account customers with potential needs across each of our three <unk>.

Per Brodin: We can then manufacture the LED fixtures or procure the EV charging hardware from industry-leading partners and manage delivery, permitting, installation, and commissioning at hundreds or even thousands of sites, all with just one point of contact and accountability. Our initiatives to diversify the business over the past two years are starting to make meaningful contributions to our growth from both new and existing customers. We continue to see significant cross-selling opportunities, particularly with long-standing large national account customers with potential needs across each of our three areas of operation. A priority in the coming quarters is to effectively market each of our capabilities across our combined customer base. As a result of these initiatives, we expect our expanded array of solutions to support meaningful long-term growth in Fiscal 25 in the years to come. Now I'll turn the call over to Per Brodin to discuss our financials and financial outlook in more detail. Thank you, Mike.

Areas of operation.

Priority in coming quarters is to effectively market each of our capabilities across our combined customer base as.

As a result of these initiatives, we expect our expanded array of solutions to support meaningful long term growth in fiscal 'twenty, five and the years to come.

Now I'll turn the call to <unk> to discuss our financials and financial outlook in more detail.

Thank you Mike.

As noted in today's press release, our Q3 24 revenue of $26 million grew 28% year over year and 26% sequentially from Q2 of this year driven by anticipated strength in led lighting and maintenance services and.

In prior calls we noted several larger projects that we expect it to ramp meaningfully in the second half.

<unk> began to benefit from that ramp in Q3.

One of those projects is the $9 6 million Department of Defense project in Europe, which we had expected to complete this fiscal year.

At this point, we have approximately $6 million remaining on this contract, we think approximately $1 million or more of that amount could rollover into early fiscal 'twenty five.

Per Brodin: As noted in today's press release, our Q3-24 revenue of $26 million grew 28% year over year and 26% sequentially from Q2 of this year, driven by anticipated strength in LED lighting and maintenance services. In prior calls, we noted several larger projects that we expected to ramp meaningfully in the second half, and we began to benefit from that ramp in Q3. One of those projects is the $9.6 million Department of Defense project in Europe, which we had expected to complete this fiscal year. At this point, we have approximately $6 million remaining on this contract and think approximately $1 million or more of that amount could roll over into early fiscal 25. Maintenance Services revenue rose to $4.6 million in Q3-24, which compared favorably to $3.3 million in Q3-23 and $3.6 million in Q2-24.

Maintenance services revenue rose to $4 6 million in Q3, 'twenty, four which compared favorably to $3 $3 million in Q3, 2003, and $3 6 million in Q2 24.

Significant portion of this growth came from our three year agreement for preventative lighting maintenance services for our largest customers roughly 2000 retail locations nationwide.

So those were the growth drivers in the quarter.

In terms of profitability, our gross profit percentage, our gross margin increased 95 basis points to 24, 5% in Q3 24 from 23, 6% in Q3 23 due to the achievement of a more favorable sales mix of products the impact of higher sales.

Home on fixed cost absorption and improved margin on services.

Gross margin on services rebounded sharply to 18, 5% in Q3 from slightly negative in Q2, 2004, and 17, 6% in Q3 23.

Per Brodin: A significant portion of this growth came from our three-year agreement for preventative lighting maintenance services for our largest customers, roughly 2,000 retail locations nationwide. So those were the growth drivers in the quarter. In terms of profitability, our gross profit percentage, or gross margin, increased 95 basis points to 24.5% in Q3'24 from 23.6% in Q3'23 due to the achievement of a more favorable sales mix of products, as well as the impact of higher sales volume on fixed cost absorption and improved margin on services. Gross margin on services rebounded sharply to 18.5% in Q3, from slightly negative in Q2-24 and 17.6% in Q3-23.

We expect further margin benefits driven by the continued impact of new pricing on renewing contracts in coming quarters.

Gross margin on Orion products improved approximately 220 basis points to 27, 7% in Q3 24 from 25, 4% a year ago.

The increase is attributable to new product sales as well as the benefit of higher volumes and fixed cost absorption.

Reflecting steps taken in the maintenance business and our expectations for the business overall, we expect our blended gross margins to remain strong in Q4.

Operating expenses declined to $8 4 million in Q3, 24 versus $9 4 million in Q3 dollars 23, and $8 7 million last quarter.

Per Brodin: We expect further margin benefits driven by the continued impact of new pricing on renewing contracts in coming quarters. Gross margin on Orion products improved approximately 220 basis points to 27.7% in Q3-24 from 25.4% a year ago. The increase is attributable to new product sales, as well as the benefit of higher volumes on fixed cost absorption. Given steps taken in the maintenance business and our expectations for the business overall, we expect our blended gross margins to remain strong in Q4. Operating expenses declined to $8.4 million in Q3-24 versus $9.4 million in Q3-23 and $8.7 million last year. The year-over-year variance is primarily due to a lower earn-out accrual in the current quarter and to acquisition expenses that occurred in the prior year period.

The year over year variance is primarily due to a lower earn out accrual in the current quarter and to acquisition expenses that occurred in the prior year period.

Looking at the bottom line, we reported a Q3 24 net loss of $2 3 million or <unk> <unk> per share as compared to a net loss of $24 1 million or <unk> 75 per share, which included a 56 per share noncash tax charge to record a valuation allowance.

<unk> and deferred tax assets in Q3 23.

On a comparable basis last year's net loss would have been approximately $6 3 million or <unk> 19 per share excluding the adjustment.

Cash generated from operations was approximately $1 million in Q3, 24, reflecting improved operating results and net positive working capital changes.

December 31, we had current assets of $45 7 million, which included inventory investments of $20 8 million accounts receivable of $15 7 million and cash of $5 million.

Per Brodin: Looking at the bottom line, we reported a Q3 24 net loss of 2.3 million, or seven cents per share, as compared to a net loss of 24.1 million, or 75 cents per share, which included a 56 percent share non cash tax charge to record evaluation allowance and deferred tax assets in Q3. On a comparable basis, last year's net loss would have been approximately $6.3 million, or $0.19 per share, excluding the

Net working capital was $15 million and our financial liquidity defined as cash and revolver availability was $17 5 million.

As such we believe we are in a good position to fund our operations and growth goals moving forward.

As a reminder, last month, we updated our revenue expectations for fiscal 2024 to a range of $90 million to $95 million representing growth in the range of 16% to 23%.

Per Brodin: Cash generated from operations was approximately $1 million in Q3-24, reflecting improved operating results and net positive working capital changes. On December 31st, we had current assets of $45.7 million, which included inventory investments of $20.8 million, accounts receivable of $15.7 million, and cash of $5 million. Networking capital was $15 million, and our financial liquidity, defined as cash and revolver availability, was $17.5 million. As such, we believe we are in a good position to fund our operations and growth goals moving forward. As a reminder, last month, we updated our revenue expectations for fiscal 2024 to a range of 90 to 95 million, representing growth in the range of 16 to 23%. On a preliminary basis, we are targeting growth of 10 to 15% for fiscal 25, and we will update this outlook when we report our full-year results in June. And with that, I'll ask the operator to begin the Q&A session. (Inaudible) As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

On a preliminary basis, we are targeting growth of 10% to 15% for fiscal 'twenty five and we will update this outlook. When we report our full year results in June.

And with that I will ask operator to begin the Q&A session.

And thank you.

As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star. One again, please standby will compile the Q&A roster and we do ask that you limit yourself to three questions and then queue back up if you have any more thank you.

And one moment.

First question.

Okay.

And our first question comes from Amit Dayal from H C. Wainwright. Your line is now open.

Thank you good morning, everyone.

Morning.

Hey, guys on the EV side, but a little bit of a.

Dropped sequentially was it seasonality or are there any other factors.

Driving some of the.

Quarterly variance from that segment.

Yes. Good question. It was just really how the projects laid out in the quarter.

Project timing overall, we continue to see as I referenced in the comments our project pipeline continues to build.

Now north of $50 million and the overall pipeline and we really haven't seen any substantial push outs or anything out or anything along those lines due to concerns about the broader EV market. So.

Operator: Please stand by while we compile the Q&A roster. And we do ask that you limit yourself to three questions and then queue back up if you have any more. Thanks. For our first question, the line is now open. Thank you. Good morning, everyone.

Okay, the $50 million pipeline you mentioned.

Is this all northeast or is it spread across the U S.

So it's spread across the U S.

Out of the northeast. So we're beginning we've begun our cross selling work with our existing lighting customers and we're gaining traction in multiple states around the country.

Okay.

And then your comments around you know focusing on higher margin customers and higher margin.

Amit Dayal: Hey, guys, on the easy side, you know, the little bit of a drop sequentially, was it seasonality? Or are there any other factors? driving, you know, some of the [inaudible] Yeah, good question. It was just really how the projects laid out in the quarterly project timing overall. We continue to see, as I referenced in the comments, our project pipeline continues to build now north of $50 million in the overall pipeline. And we really haven't seen any substantial pushouts or anything out or anything along those lines due to concerns about the broader EV market. So, the 50 million pipeline you mentioned. You know, is this all in the northeast, or is it spread across the U.S.? No, it's spread across the US. It's out of the Northeast.

Revenues.

How much of the sort of lower margin revenues.

Could be impacted by this shift in strategy.

Is it a small amount that is not very meaningful.

The larger number that would be.

Sort of.

And it can make an impact on the model projections.

Specifically, we're referring to the maintenance business the legacy maintenance business, which was acquired with stay light and so right now we're working through that.

Is the focus.

We're working through those rfps in this quarter, so we really don't.

Have any specifics in terms of what that could look like but it's isolated really to the to the business that we acquired with satellite and the maintenance side.

Okay understood. Thank you for that and maybe just last one for me you know for fiscal 'twenty five.

Michael H. Jenkins: So we're beginning, we've begun our cross-selling work with our existing lighting customers, and we're gaining traction in multiple states around the country. Okay, and then your comments around focusing on higher-margin customers and higher-margin revenues. You know, how much of the sort of lower-margin revenues could be impacted by this shift in strategy? Is it, you know, a small amount that is not very meaningful, or is it a..., a larger number that we should sort of, um, you know, can make an impact on the model or projection?

What kind of revenue mix between.

In maintenance and <unk> should be.

B looking forward.

Okay.

We projected 10% to 15%.

Guided in terms of growth for the year, we are expecting continued growth in lighting and stronger performance in EV and the maintenance business will be we will see how things play out with these couple of customers through the RFP process.

Certainly the growth in lighting and strong growth in EV.

Okay.

I'll take my other questions offline guys. Thank you so much.

Thank you.

Thank you.

Okay.

And one moment our next question.

Amit Dayal: Specifically, we're referring to the maintenance business, the legacy maintenance business, which was acquired with Staylite. And so right now, we're working on it. Yeah, that's the focus. We're working through those RFPs this quarter. So we really don't, you know, have any specifics in terms of what that could look like.

And our next question comes from Eric Stine from Craig Hallum. Your line is now open.

Hi, Mike Thanks for taking the questions.

So curious I know with your large customer we all know who it is but your large customer you would clearly expanded.

Michael H. Jenkins: But it's isolated really, to the business that we acquired with Staylite on the maintenance side. Okay, understood. Thank you. Maybe just last one for me, you know, for fiscal 25.

The retrofit of the footprint.

The maintenance now I know that they are very interested on the EBIT side just curious.

I think youre seeing that dynamic with other national accounts.

Amit Dayal: You know, what kind of revenue make, between lighting, maintenance, and EV, should we be looking for? Well, we're, you know, projected 10 to 15% in terms of growth for the year; we're expecting continued growth in lighting and stronger performance in EV and the maintenance business. We'll see how things kind of play out with these couple of customers through the RFP process, but certainly growth in lighting and strong growth in EV. Okay, so I'll take my other questions offline.

Whether you are starting to.

See that expansion beyond just your.

Since your legacy business of the core led.

Led retrofits.

Yes, Great question, Eric Yes, we are I mean, I think that there is there is interest on certainly the EV front with a broad swath of our customers and all of particularly our large public comp customers a lot of those are considering their <unk>.

Suffocation strategy moving forward to support their guests they're cut their employees and in some cases electrifying their fleet. So we are having conversations with a broad group of them some of them the maintenance services might apply to particularly retail customers, who don't have maintenance staffs and their locations.

Operator: Thank you. In one moment for our next question. And our next question comes from Eric Stine on Craig Hallam. Online.

Eric Andrew Stine: Hi Mike, thanks for taking the questions. Hey, so curious. I know when you're a large customer, and we all know who it is, but you're a large customer, you've clearly expanded beyond the retrofit of the footprint to the maintenance now. I know that they are very interested on the EV side. I'm just curious if you're seeing that dynamic with other national accounts, you know, where you are starting to see that expansion beyond just your, I mean, I guess it's your legacy business of the core LED retrofit. Yeah, great question, Eric.

That's really where our value proposition probably is strongest and so there are conversations happening there as well. So we see all three of these pillars continuing to work moving forward from a cross selling standpoint.

<unk>.

Yes.

Got it and then just coming back to the initial outlook here for fiscal 'twenty five.

Thank you Sir.

Your implied fourth quarter.

The mid point and Youre annualizing that but if you dig down into that.

Michael H. Jenkins: Yes, we are. I think that there is certainly interest in the EV front with a broad swath of our customers. And all of you know, particularly our large public customers. A lot of those are considering their electrification strategy moving forward to support their guests, their, their employees, and, in some cases, their fleet.

I mean, you expect to be done largely done with the Dod project and is it fair to say that you are not assuming.

The the renewal at better pricing would that force customer on the maintenance side.

Michael H. Jenkins: So we are having conversations with a broad group of them; some of them, the maintenance services might apply to particular retail customers who don't have maintenance staff in their locations. That's really where our value proposition probably is strongest. And so there are conversations happening there as well. So we see all three of these pillars continuing to work moving forward from a cross-selling standpoint.

Yes.

Certainly I agree that our projections are that we will be substantially complete with the Dod project on the maintenance side, we feel like we've taken reasonable.

Incineration sins of the forecast.

Okay, and then as we think about that project.

I mean, correct me, if I'm wrong, but you are kind of qualified.

I know that you would still have to go through the <unk>.

Eric Andrew Stine: And then just coming back to the initial outlook here for fiscal 25. So I mean, basically, it's your implied fourth quarter, you know, the midpoint in your annualizing that, but if you dig down into that, I mean, you expect to be done, largely done with the DOD project. And is it fair to say that you are not assuming the renewal at better prices with that fourth customer on the maintenance? Yeah, we certainly agree that our projections are that we'll be substantially complete with the DOD project. On the maintenance side, we feel like we've taken reasonable considerations into the forecast. Okay, and then as we think about that DOD project, I mean, correct me if I'm wrong, but you are kind of qualified.

RFP process, but maybe talk about.

That pipeline as well.

Whether it's something that there are things out there that could replace the project completed.

As you get into 'twenty, five or just more about the long term outlook.

Sure absolutely yeah. The federal space is one that's of keen interest to US we do have a significant pipeline.

Been built over the years and continues to be accelerating Lee built right now both on the lighting side as well as on the EV front and that's both you know working with with partners like we are in the D. O D situation and in some cases on a direct basis.

Eric Andrew Stine: I know that you still have to go through the RFP process, but maybe talk about that pipeline as well. You know, whether it's something that there are things out there that could replace the project you've completed as you get into 25, or just more about the long-term outlook. Sure, absolutely. Yeah, the federal space is one that's of keen interest to us.

<unk>.

Got it I mean is there a way to think about what's the most typical form.

Yeah.

Partners. We're typically we're working through it yes, typically we're working through and ESCO partner, who would would do kind of the entire project, including HVAC and other elements and we are the lighting specialists, who basically manage that and we often manage that in a turnkey fashion.

Michael H. Jenkins: We do have a significant pipeline that has been built over the years and continues to be acceleratingly built right now, both on the lighting side as well as on the EV front. And that's both, you know, working with partners, like we are in the DoD situation, and in some cases on a direct basis. Got it. I mean, is there a way to think about what's the most typical form?

Okay, and does that do anything to your kind of visibility into what's out there at this backwards.

It's something where youre working with certain partners and you kind of.

I would think would have a view.

Michael H. Jenkins: Typically, we're working through it. Yeah, typically, we're working through an ESCO partner who would do kind of the entire project, including HVAC and other elements. And we are the lighting specialists who basically manage that. And we often manage that in a turnkey fashion. Okay, does that do anything to your kind of visibility into what's out there?

What the potential is.

Yeah, well. These are long term projects that we have a significant pipeline that's built up with core partners.

Okay. Thanks, a lot.

Thanks, Eric.

And thank you.

And one moment our next question.

And our next question comes from Vijay Cook from singular Research. Your line is now open.

Michael H. Jenkins: I suspect that it's something where you're working with certain partners and you kind of, I would think, would have a view of what the potential is out there. Yeah, these are long-term projects, and we have a significant pipeline that's built up with core partners. Okay, thanks a lot.

Hey, guys. Thanks for taking my call.

Just a couple of things I wanted to touch on.

EV segment produced exact.

You mentioned in here in the short term that the timing of some of your larger projects do you expect.

All or some of those projects just.

Operator: Thanks, Eric, and thanks. And one moment for our next question. Singular Research, your line is now open. Hey guys, thanks for taking my call. Unknown Speaker Sure, for just a sec.

Simply move to the next quarter.

Yes.

It's the next quarter and maybe the quarter after that but near term.

These some of these things have been moved out a little bit again, I want to stress that we're not seeing any kind of <unk>.

Broad reaction in the marketplace to any of the headlines that we've seen about the rental car companies or anything like that this is just normal kind of project push outs. That's the way I would describe them at this point a couple of things P. J that can impact timing as some of these customers are waiting for.

Unknown Attendee: Thank you. You mentioned here in the short term the timing of some of their larger projects. Did you expect all or some of those projects just kind of simply to move to the next quarter?

Michael H. Jenkins: Yeah, I think it's the next quarter and maybe the quarter after that, you know, about near term. Some of these things have been moved out a little bit. Again, I want to stress that we're not seeing any kind of broad reaction in the marketplace to any of the headlines that we've seen about, you know, the rental car companies or anything like that. This is just the normal kind of project pushouts. That's the way I would describe them.

For permitting and sometimes they are waiting for.

Final grant approvals and they can't move forward without that so theres couple of things that just are gatekeepers to certain projects and then.

Just if you can push things up.

Part of a month, but it will crossover quarter. So those are the kind of dynamics, we're dealing with.

Michael H. Jenkins: Yeah, a couple things that can impact timing are some of these customers are waiting for permits, and sometimes they're waiting for final grant approvals, and they can't move forward without that. So there are a couple things that are kind of gatekeepers to certain projects. Just, it can push things up for part of a month, but it will cross over a quarter.

Okay.

Got it thanks I appreciate that.

Yes, I guess you have talked about.

$50 million plus.

Pipeline in <unk>.

Pretty impressive.

I guess I'm kind of wondering if.

Some of that comes from infrastructure Bill.

Maybe that's further down the road.

Michael H. Jenkins: So those are the kind of dynamics we're dealing with. Got it. Thanks. Appreciate that. [inaudible] Unknown Speaker, $50 million plus. Pipeline, pretty impressive.

There might be a benefit in addition to what you guys are doing internally.

Yes. Good question, we're seeing that product build that pipeline build rather is coming from the organic <unk> business. It is coming from cross selling opportunities with our lighting customer. It's also coming from strategic partners like equipment providers that we work with.

Unknown Attendee: I guess I'm kind of wondering if some of that comes from the structure bill or, you know, maybe that's further down the road, might be a benefit in addition to what you guys are doing internally. Yeah, good, good question. We're seeing that product build or that pipeline build is coming from the organic Voltrek business. It's coming from cross-selling opportunities with our lighting customer. It's also coming from strategic partners like equipment providers that we work with, in a true kind of partnership format, and share opportunities there. So we've rapidly built that pipeline from approximately 30 million a few quarters ago. So we've seen a nice build on that.

In a true kind of partnership format and share opportunities. There. So we have rapidly built that pipeline from <unk>.

Several quarters back it was approximately $30 million. So we've seen nice build on that and again. The team is very focused on driving those through to converting those to wins and execution.

Fantastic. Thanks.

One more quick one.

Yes sure.

Chatted about.

Michael H. Jenkins: And again, the team is very focused on driving those through to converting those into wins and execution. Fantastic. Thanks. There's one more quick one.

Running off and renegotiating some of the legacy unprofitable maintenance business.

I appreciate that can you at least give us a glimpse of what segment segment margins might look like on a normalized basis.

Unknown Attendee: Chairman of the Board, running off and renegotiating some of the legacy unprofitable maintenance business. I appreciate that. Can you at least give us a glimpse of what Segment Mark... margins might look like on a normalized basis?

Yes, I think thats.

Hard to say to it.

It depends on.

Sales volumes, but we expect.

Over time that things will be at a fairly normalized rate.

Michael H. Jenkins: Yeah, I think that's awfully hard to say. A lot of it depends on sales volumes, but you know, we expect it will be at a fairly normalized rate. Great, thanks. I appreciate it, guys.

Sure.

Great. Thanks, I appreciate it guys.

Thank you.

And thank you.

And one moment our next question.

And our next question comes from Bill.

Dizzy Liam.

Unknown Attendee: Thank you, and thank you. And one moment for our next question. And our next question, and Teton Capital Management. Your line is now.

From Teton Capital Management. Your line is now open.

Thank you.

Back in January in the middle of the month I believe that the government awarded something like 150 million to repair.

Operator: Thank you. Back in January, in the middle of the month, I believe that the government awarded something like $150 million to repair existing EV charging stations. How was Voltrek involved in that process? If not, why not?

Existing EV charging stations.

It was full truck involved.

In that.

Our process and and.

And if.

If not why.

Bill Jones: Hi Bill. It's nice to hear from you. No, we have not seen that money flow through. At this point in time, a lot of the funding from the federal government does take quite some time to work its way through. The NEVI funds, as an example, were approved probably about 18 months ago, 18 to 24, and that funding is going to the states and is now just kind of beginning to hit the street. So we have not benefited from that funding at this point in time. My impression, Mike, was that these were actual awards that had taken place.

Hi, Bill nice to hear from you know we have not seen that money flowed through at this point in time, a lot of the funding from the federal government does take quite some time to work its way through the nervy funds. As an example, we're approved probably about 18 months ago 18 to 24 as.

That funding is going to the states and now just beginning to hit the street. So.

We have not benefited from that funding at this point in time.

My impression like with these were actual awards that had taken place.

Michael H. Jenkins: Did I misread the announcement? Bill, I don't know the specifics of the announcement. I would have to go back and check on that. Okay, thank you. Let me continue down the EV path. The 50 million pipeline that you referenced, how does that compare to one year ago? Yeah, we were probably, I would say, around 30 a year ago.

Did I did I misread the announcement.

Well I don't know.

The specifics of the announcement I would have to go back and check on that.

Okay. Thank you.

Let me continue down that path the $50 million of pipeline that you referenced how does that compare to one year ago.

Yes, we were probably I would say around 30, a year ago.

Michael H. Jenkins: Maybe maybe a little less. Actually, less. Yeah. So it's built substantially. Congratulations.

Maybe maybe a little less actually less.

So its built substantially.

Congratulations and great and then you had referenced in the release and in your opening remarks that 10% to 15% growth anticipated next year.

Bill Jones: And then you referenced in the release and in your opening remarks that 10 to 15% growth anticipated next year. What do you currently see as the trajectory of how the year looks and, really, the thinking rate of, Are you anticipating that each quarter is going to be roughly up 10 to 15 percent? Is it front-end weighted, back-end weighted?

What do you currently see is as the trajectory.

How the year.

The year looks and really not as much thinking rate of change are you anticipating that each quarter is going to be roughly up 10% to 15% is it front end weighted backend weighted.

Michael H. Jenkins: What's your general early read on that? Yeah, good question, Bill. Typically, I, you know, this year and the years prior, we tend to be more back-end loaded. As a company, it's the way the timings of some of the projects and the capital cycle tends to work out. So I think that the growth rate would be applied, let's say at this point in time, and we haven't really given any specifics on this, but I wouldn't see quarter over quarter growth throughout the year. But we're probably going to still have the way the quarters will lay out be a bit back end loaded. Mike, just to make sure I understand what you're saying there is that the rate of change of 10 to 15% is probably similar for each of the quarters. However, in an absolute dollar sense, the year will be back loaded just like it was this year.

Your general early read on that.

Yes, good question Bill.

Typically.

This year and the years prior we tend to be more backend loaded as a company, it's the way kind of the timings.

Some of the projects and the capital cycle tends to work out so I think that the growth rate would be applied let's say at this point in time and we haven't really.

Given any specifics on.

On this but I would see quarter over quarter growth throughout the year, but we're probably going to still the way the quarters lay out be a bit back end loaded.

And Mike just to make sure I understand what you're what you're saying there is that that is the rate of change that 10% to 15% probably similar for each of the quarters. However in an absolute dollar sense the year will be backend loaded just like it was this year.

Bill Jones: That's how we get the math to be up 10 to 15% each of the quarters. Yep, good summary, Bill. Absolutely. Thank you.

And that's how we get the math to be up 10% to 15% each of the quarters.

Yep. Good summary, bill absolutely. Thank you and then one additional question. Please <unk>.

Michael H. Jenkins: You've referenced the large accounts and their interest in all three business segments. Talk a little bit more about that, if you would, please, and include to what degree this is new customers that are wanting to do a bundle of all three versus existing customers primarily, and any additional insights you can share would be appreciated.

<unk> referenced the large accounts and their interest in all three business segments.

Talk a little bit more about that if you would please and including including to what degree. This is new customers that are wanting to.

Do a bundle of all three versus existing customers primarily.

And any additional insights you can share would be appreciated.

Michael H. Jenkins: I can use two examples of customers right now. One is a customer that we did a very large EV installation for. Our team, as they've worked with this customer, has made them aware of our new exterior lighting products, which are available, the new Harris ones that we launched this past year. And so we were in the process; we quoted three-quarters of a million-dollar project lighting project for them. So that's an example of cross-selling, working from an EV standpoint to lighting. On the other hand, we have a longstanding manufacturing customer of ours. Public Company, multiple sites throughout the U.S.

Sure I could use two examples of customers right now one is a customer that we did a very large EV installation for.

Our team.

They've worked with this customer has made them aware of our new exterior lighting products, which are available the new Harris ones that we launched this past year and so we were were in the process. We quoted three quarters of a million dollar project lighting project for them. So that's an example of cross selling work.

From an <unk> standpoint to lighting on the other side, we have a long standing.

Manufacturing customer of ours.

Public company multiple sites throughout the U S. They are now getting through their strategy on electrification, which will include fleet.

Michael H. Jenkins: They're now going through their strategy on electrification, which will include a fleet for them, and we're engaging, actively engaging with them in terms of helping them design their layouts and requirements as they move forward, and then, obviously, we hope to move that to execution. So those are two examples of some of the cross-selling. And relative to new customers versus existing, what you described is primarily existing. Do you have any new customers that are coming to you or that you're finding that are right out of the gates wanting to talk about doing all three? All three aspects of your business, lighting, maintenance, and I think the reality is that new customers typically come to us about a pressing need in one of the three areas. And that once the customer comes into the ecosystem, let's say, we cross sell from there. That's typically the way it works. That's helpful. Thank you for your time.

For them and we're engaging actively engaging with them in terms of helping them design their layouts and requirements as they move forward and then obviously hope to move that to execution.

Those are two examples of some of the cross selling.

And relative to the.

Is it new customers versus existing what you described is primarily existing do you have any new customers that are coming to you or that you are finding that are right out of the gate wanting to talk about.

Doing all three.

All three aspects of your business lighting maintenance Andy.

I think the reality is that new customers typically come to us about a pressing need in one of the three areas and that once the customer comes into the ecosystem lets say, we cross sell from there that's typically the way it works.

That's helpful. Thank you for the time.

Bill Jones: You bet. Thanks, Bill, and thank you. And one moment for our next question. And our next question comes from Andrew Shapiro. Hi, thank you.

You bet. Thanks Bill.

And thank you.

And one moment our next question.

And our next question comes from Andrew Shapiro from Lawndale Capital Management. Your line is now open.

Alright. Thank you you mentioned in your script three of four I guess legacy customers and the maintenance.

Operator: You mentioned in your script that three of four, I guess, legacy customers on the maintenance side have been converted to have their service contracts up at market prices rather than the money-losing, lower price level. This last customer's contract runs off when is it during the current fourth quarter or sometime thereafter? The end of April.

Side had been converted.

To have their service contracts up at market prices, rather than the money losing.

Lower price level.

This last customers contract it runs off.

When was it during the current fourth quarter or sometime thereafter.

Okay.

At the end of April.

Andrew Evan Shapiro: Okay, at the end of April and, Are there margins at a loss in this, or have you recognized like a, you know, a fixed price defense contract? You know, remaining estimated loss and the revenues generated from this contract going forward are just at zero margin, or there is some embedded loss.

Okay at the end of April and.

Are there.

Are there margins at a loss in this or have you recognized like.

Fixed price defense contract.

Remaining estimated loss in the revenues generated from this contract going forward or just at zero margin or there is some embedded loss here.

There is an embedded lost and we do not have a reserve for future losses on that contract based on the nature of that contract. So as we worked through.

Per Brodin: We do not have a reserve for future losses on that contract based on the nature of that contract. So as we work through, The contract. Completion of, Current Contract. We would anticipate there's additional losses, you know, as netting against the other results within maintenance. Right, right. Yeah, no, no, they've already seen the improvement. And someone had asked you the question, maybe you were just hesitant to provide the numerical range of

Okay.

The contract at.

At least the completion of.

The current contract.

Would anticipate there's additional losses.

Netting against the other results within maintenance.

Right right, Yeah, no no and we've already seen.

Improvement and somebody had asked you. The question, maybe we're just hesitant to provide.

Numerical range absorbed someone asked you the question on what the normalized margins would be.

Andrew Evan Shapiro: Someone asked you the question of what the normalized margins would be from this segment once the money-losing contract burns off, and I didn't know if you were comfortable or able to provide a range, or that was just something that, you know, you'd rather not, for whatever competitive reason, provide. Full transparency, I didn't quite hear the full question before, so we anticipate that business operating in the 20% margin range. Okay, excellent. Thank you.

From this segment once the money losing contract.

Burns off.

And.

I didn't know are you comfortable or are you able to provide a range or that was just something that.

Rather not for whatever competitive reason that provide.

Full transparency I didn't quite hear the full question before so we anticipate that business operating in the 20% margin range.

Okay excellent. Thank you.

Michael H. Jenkins: And then, are there any other smaller customers that you have in that segment that are also with these kind of fixed rate terms that have to burn off with smaller amounts of money loss, or is this it? Unknown Speaker, Yeah, we've addressed all the situations we have and are addressing all the situations, big or small, that need to be addressed from a margin standpoint. Okay, excellent. Thank you, guys. Thank you, and thank you.

And then are there any other.

Smaller customers that you have in that segment that are also.

With these kind of fixed.

Rate terms that have to burn off with smaller amounts of money loss or this is it.

Yes, we've addressed all of the situate, we have and are addressing all of the situations bigger small that need to be addressed from a margin standpoint.

Okay excellent. Thank you guys.

Thank you.

Thank you.

Operator: And one moment for our next question. Unknown Speaker, Unknown, Hi, I want to just focus on your last statement that you've addressed. You are addressing all the margin issues. And I appreciate the prior callers or questioners clarification on the fourth customer and the three of the four customers that have not been that have been converted to the new pricing model with our better margins. What I want to understand is, are their contracts now fully negative margin contracts fully done, just like you said in April. 4th customers' lost contract will be done. Is it that there are those other three customers; there are no more contracts with them that have these negative margins? Or is it simply that they're accepting prospectively on new contracts, better margins, but there's still contracts with them that have yet to work off with the negative margin? Yeah, good question and good ask for clarification.

And one moment our next question.

And our next question comes from Steve Rudd from Blackwell. Your line is now open.

Hi.

I wanted to just focus on your last statement that you've addressed you are addressing all the margin.

Issues.

And I appreciate the prior callers are questioners.

Verification on the fourth customer on the three of the four customers that have not been.

Does that have been converted to the new pricing.

Model with our better margins.

I want to understand is are there contracts now.

Fully the negative margin contracts fully done just like you said in April the.

Fourth customers.

Lost contract will be done is it that there's those other three customers. There are no more contract with them that have.

These negative margins or is it simply that they are accepting prospectively on new contracts bedroom.

Better margins, but there is still contracts with them that have yet to work off with the negative margins.

Yes, good question and good asked for clarification. So we have to be clear we have gone to these customers with in contract periods and we have successfully repriced three out of the four as also indicated.

Unknown Attendee: So we have, to be clear, we have gone to these customers within their contract periods, and we have successfully repriced three out of the four. As also indicated in my comments earlier, this is the RFP season, let's say, for the majority of these accounts. So the majority of the RFPs are taking place now in our fourth quarter, and so, as we suggested, some of these RFPs may not renew because of the profitability concerns that we have. That's interesting. Is that another way?

Comments earlier this is the RFP season, let's say for the majority of these accounts. So the majority of the Rfps are taking place now in our quarter four and so therefore, we are as we suggested some of these rfps may not renew because.

The profitability.

Concerns that we have.

It's interesting that another way.

Michael H. Jenkins: Yeah, go ahead. I was just going to. Another way to think about it is that while the three of the four open the contract, mid-contract. We did not extend those contracts, so they went back to the regular RFP. Okay, and what I want to clarify here is, it's interesting, and I'm glad you guys reached out to these three of the four customers. What's it, or to the four of four, but you had success with these three of the four.

Yes go ahead.

I was just going to.

Another way to think about it.

Three of the four open the contract.

Mid contract.

We did not extend those contracts.

Went back to the regular RFP cycle.

Okay.

I wanted to clarify here, it's interesting and I'm glad you guys reached out to these three of the four customers what.

The four four but you had success with the three of the four what's interesting to me was their willingness to reprice the.

Per Brodin: What's interesting to me was their willingness to reprice the existing contracts. And I think the implication there is that those contracts are no longer unprofitable. Is that, first of all, the correct implication that these existing contracts with them are no longer unprofitable? Correct. The ones that have been repriced are profitable.

Existing contracts and I think the implication there is that those contracts are no longer unprofitable is that first of all the correct implication that these existing contracts with them are no longer unprofitable.

Correct the ones that have been re priced are profitable.

Michael H. Jenkins: And then the second half of that is the customer's willingness to reprice those existing contracts. What I hear in your answer is an implication that we probably won't be doing much more with a number of them. That's kind of a strange outcome, where yes, we understand, you know, that we need to reprice, but no, we really don't see, you know, we don't see a model going forward. And I just don't, I don't know how they're lined up, but... do you see what I mean?

And then the second half of that is with the customer's willingness to reprice those existing.

Contract.

What I hear in your answer is the implication that the.

We probably won't be doing much more with that with a number of them.

Kind of a strange.

The outcome, where yes, we understand.

You know that we need to reprice, but no we really don't see.

We don't see a model going forward and I just don't.

I don't know how that lines up.

Unknown Attendee: We need we need to reprice our contract. But going forward, we really don't see ourselves doing much more business. Yeah, I don't know how those two line up.

You see what I mean, we need we need to reprice, our contract, but going forward, we really don't see ourselves doing much more business.

Yes, I don't know how those two lineup you follow the conflict them trying to resolve.

Michael H. Jenkins: Do you understand the conflict I'm trying to resolve? Sure, sure, I understand. I would say that they understood the inflationary environment, and therefore, we negotiated our way to pricing within contract periods. Anytime you get into an RFP situation, it's a competitive situation, and so there's a lot of unknowns. What we do know is that we're not going to take on business that is not profitable, and if we end up shedding some of the revenue because of its unprofitable nature, and especially in one of these situations, that will benefit us in the long term. And I, and that's obviously the way to go. I do want to ask you one thing, though. Have you or do you have any ability in the marketplace to go forward on a cost plus model?

Sure sure I understand I would say that they understood the.

The inflationary environment, and therefore, we negotiated our way to pricing within contract periods anytime you get into an RFP situation. It's a competitive situation and so therefore, there is a lot of unknowable. What we do know is that we're not going to take on business, which is now profitable and if we end up shedding some of the <unk>.

Avenue because of its unprofitable nature, and especially for one of these situations.

That will benefit us in the long term okay alright.

And that's obviously the way to go I do want to ask you one thing though have you.

Or do you have any ability in the marketplace too.

Go forward on a cost plus model because it seems to me that.

Michael H. Jenkins: Because it seems to me that, you know, we got squeezed on our margins, like everybody did during the pandemic and the bottlenecks, etc. But your particular business, I think, might lend itself to a cost plus model, so that we reduce the risk that either we get our pricing wrong or that other exogenous events, which are floating around in massive possibility, whack us yet again. So is there no possibility to do cost plus?

We got squeezed on.

Sure.

Like everybody did on margins during the pandemic can be bottleneck et cetera, but your particular business I think might lend itself to a cost plus model. So that we reduce the risk that either we get our pricing wrong or that other exogenous events, which are floating around and massive.

Possibility.

Whack us yet again so no.

Cost plus.

Unknown Attendee: Unfortunately, that's not the way the industry works. And so it's basically a fixed price for three years, and the customers are all, you know, use the same methodology. So we have to subscribe to that if we're going to end up doing business with them. So again, we feel like we've had some wins, we've had some contracts, which have been, you know, one and some RFPs, which we've gotten pricing through, which we feel good about. And we do have some that we're in the midst of right now, which are unknowable except for the fact that we're not going to take on unprofitable businesses.

Unfortunately, that's not the way the industry works and so it's basically a fixed price three year and the customers are all use the same methodology. So we have to subscribe to that if we're going to end up doing business with them. So again, we feel like we've had some wins we've had some contracts which have been.

One in tomorrow.

Which we've gotten pricing through which we feel good about and but we do have some that were in the midst of right now which are unknowable.

Except for the fact that we're not going to take an unprofitable business. So that's what we've committed to okay.

Michael H. Jenkins: So that's what we've committed to. Okay. Yeah, and this is pretty deep in the weeds.

Okay, Let me.

Yes pretty deep into the weeds. If you want to have a detailed conversation sometime maybe you could reach out to the or.

Michael H. Jenkins: If you want to have a detailed conversation sometime, maybe you could reach out to the IR group, and we could schedule a separate call for that. Okay, we can do that. I appreciate it. Thanks, guys.

IR group and we could schedule a separate call for them.

Okay, we can do that I appreciate it thanks guys.

Operator: Thank you. That concludes the Q&A session. I'll now turn the conference back to Mr. Jenkins.

Thank you.

Okay.

Okay.

And.

That concludes the Q&A session I will now turn the conference back to Mr. Jenkins for concluding remarks.

Michael H. Jenkins: Thank you all for joining our call today. We look forward to updating you when we report our full year results and as we progress through fiscal 25. We also hope to speak with you at upcoming investor events, including Singular's Research Emerging Growth and Value Leaders webinar on February 22nd or to meet with you in person at the LD Micro Invitational in New York City on April 8th and 9th. Please contact our investor relations team with any questions or to schedule a management call or meeting. The IR team's contact information is in today's press release. Thank you again. Thank you. This concludes today's call.

Thank you all for joining our call today, we look forward to updating you when we report our full year results and as we progress through fiscal 'twenty five.

We also hope to speak with you at upcoming Investor events, including singular research emerging growth in value leaders webinar on February 22nd or to meet with you in person at the LD Micro Invitational in New York City April eight and nine please contact our Investor relations team with any question.

Or to schedule management call or meeting the IR team's contact information is in today's press release.

Thank you again.

Thank you this concludes today's call.

Okay.

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Okay.

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