Q4 2024 Orion Energy Systems Inc Earnings Call
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Operator: Good morning, everyone, and welcome to Orion Energy Systems' fiscal 2024 fourth quarter conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Bill Jones, investor relations, to begin.
Good morning, everyone and welcome to Orion Energy systems fiscal 2020 for fourth quarter Conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone you have been hearing.
Message advising you your hand, just raced to withdraw your question. Please press star one again. Please be advised today's conference is being recorded I would now like to turn the conference over to Bill Jones Investor Relations to begin.
Bill Jones: And good morning, everyone. And thank you for joining this call today. Mike Jenkins, Orion CEO, and Per Brodin, Orion CFO, will review the company's Q4 full year results, the company's financial position, and its fiscal 25 outlook. 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
Speaker Change: Thanks Michelle.
Bill Jones: And good morning, everyone and thank you for joining us.
Bill Jones: This call today.
Bill Jones: Mike Jenkins Orion CEO and pair protein Orion's CFO, who will review the company's Q4 and full year results.
Speaker Change: Company's financial position and its fiscal 'twenty five.
Speaker Change: <unk> outlook.
Speaker Change: Then we will open the call to investor questions.
Speaker Change: Today's conference call is being recorded and a replay will be posted on the Investor Relations section of Orion's website Orion lighting dotcom.
Bill Jones: As a reminder, the remarks that follow and answers to questions include statements that are forward-looking as per 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 targets, goals, or company plans or its outlook are also forward-looking. These forward-looking statements are subject to various risks that could cause actual results to differ materially from current expectations.
Speaker Change: As a reminder, remarks apparel and answers to questions include statements that are forward looking as per the private Securities Litigation Reform Act of 1995.
Speaker Change: Forward looking statements generally include words, such as anticipate believe expect project or similar words also any statements that describe future targets goals, where company plans or its outlook are also forward looking.
Bill Jones: Such risks include, among other matters, those that Orion has described in its press release issued this morning as well as in its filings with the SEC. Except as described therein, the company disclaims any obligation to update or revise these forward-looking statements, which are made as of today's date. Reconciliations of certain non-gap financial metrics to the closest gap measures are also provided in today's press release. Now I will turn the call over to Mike Jenkins.
Speaker Change: These forward looking statements are subject to various risks that could cause actual results to differ materially from current expectations such risks risks include among other matters.
Speaker Change: Matters that Orion has described in its press release issued this morning as well as in its filings with the SEC.
Speaker Change: Except as described there in the company disclaims any obligation to update or revise.
Speaker Change: These forward looking statements, which are made as of today's date.
Speaker Change: Reconciliations of certain non-GAAP financial metrics to the closest GAAP measures are also provided in todays press release now I will turn the call over to Mike Jenkins Mike.
Michael H. Jenkins: Thanks, Bill. Good morning, and thank you all for joining us on today's call. As anticipated, Orion's revenue momentum continued to build across the business in the fourth quarter, enabling us to achieve our strongest revenue quarter of the year and end within our full-year revenue guidance. We expect this positive revenue momentum to continue in fiscal 2025 and have guided 10 to 15% revenue growth over fiscal 24 for the full year. A few revenue highlights from our fiscal 24, quarter 4, and year end. Orion finished at $90.6 million, which is Overall, which is within our latest guidance, and it is approximately 17% above prior year. Quarter 4 was a strong 22% over prior years.
Speaker Change: Okay.
Michael H. Jenkins: Thanks, Bill good morning, and thank you all for joining today's call.
Michael H. Jenkins: As anticipated Orion's revenue momentum continued to build across the business in the fourth quarter, enabling us to achieve our strongest revenue quarter of the year.
Michael H. Jenkins: And within our full year revenue guidance. We expect this positive revenue momentum to continue in fiscal 2025 and have guided 10% to 15% revenue growth over fiscal 'twenty four for the full year.
A few revenue highlights from our fiscal 'twenty for quarter, four and year end.
Speaker Change: Well, Ryan finished at $96 million over which.
Yes.
Speaker Change: Overall, which is within our latest guidance and is approximately 17% above prior year quarter.
Speaker Change: Quarter, four was a strong 22% over prior year.
Michael H. Jenkins: Our lighting segment grew over 13% in Q4 and finished 8% above the prior year. Maintenance recorded over $5 million in revenue in quarter four while generating positive margin growth and finishing over 17% for the full year. Our EV business recorded a record quarter four of approximately $5 million, up 42% over the prior year, and over and finished over $12 million for the year, which was about a 96% increase. Let me now provide some commentary on our business.
Speaker Change: Our lighting segment grew over 13% in quarter, four and finished 8% above prior year.
Maintenance recorded over $5 million in revenue in quarter, four while generating positive margin growth and finished over 17% for the full year.
Speaker Change: Our EV business recorded a record quarter for of approximately $5 million up 42% over prior year and over and finished over $12 million for the year, which was about a 96% increase.
Speaker Change: Let me now provide some commentary on our businesses.
Michael H. Jenkins: Starting off with LED lighting solutions, we saw steady progress throughout Fiscal 24 in our ESCO and Turnkey customer group. Our number one customer grew significantly in the quarter and in fiscal 24, as we expanded our lighting projects and maintenance relations. On the lighting side, we began executing exterior lighting retrofits for their stores, as well as a number of their DCs, in addition to new stores, which drove meaningful growth. Both of these areas will be multi-year projects that enable them to upgrade their energy efficiency and lighting performance.
Speaker Change: Starting off with the led lighting solutions, we saw steady progress throughout fiscal 'twenty for <unk>.
Speaker Change: <unk> and turnkey customer groupings.
Speaker Change: Our number one customer grew significantly in the quarter and in fiscal 'twenty four as we expanded our lighting projects and maintenance relationships on the lighting side, we began executing exterior lighting retrofits for their stores as well as a number of their Dcs. In addition to new stores, which drove meaningful growth.
Speaker Change: Both of these areas will be multi year projects enabled them to upgrade their energy efficiency and lighting performance.
Michael H. Jenkins: Our federal government business took a big step with the execution of our large Department of Defense base project in Germany. This project is done in conjunction with a Super ASCO who is acting as the prime contractor on the base and hired Orion to manage the lighting for them on a turnkey basis. The Super Esco is one with whom we frequently work and continually selects Orion as their lighting partner. This project contributed over $6 million in revenue for Fiscal 24 and will also provide an additional $2 million plus in Fiscal 25. This was a very complicated and challenging project to execute on a military base half the world away, and our team did a really excellent job showcasing our project management capabilities.
Speaker Change: Our federal government business took a big step with the execution of our large department of defense based project in Germany.
Speaker Change: This project is done in conjunction with the Super <unk>, who is acting as prime contractor on the base and hired O'brien to manage the lighting for them on a turnkey basis.
Speaker Change: <unk> is one where we frequently work with and continually select <unk> as their lighting partner. This project contributed over $6 million in revenue for fiscal 'twenty. Four it will also provide an additional $2 million plus in fiscal 'twenty five.
This was a very complicated and challenging project to execute on a military base. After all the way and our team did a really excellent job showcasing our project management capabilities.
Michael H. Jenkins: Looking forward in lighting, we expect our business to be supported by a range of projects from both new and long-term customers. We expect to see a rebound in activity for longstanding automotive customers after a lower fiscal 24, continued strength in our number one customer, strong opportunities in the public sector, growth with logistics and warehousing customers, as well as the initiation of several large projects in the technology, retail, and federal sectors that have been in the planning stages for more than a year.
Speaker Change: Looking forward in lighting, we expect our business to be supported by a range of projects from both new and long term customers.
Speaker Change: We expect to see a rebound in activity for long standing automotive customers after a lower fiscal 'twenty four.
Speaker Change: Continued strength in our number one customer strong opportunities in the public sector growth with logistics and warehousing customers as well as the initiation of several large projects in technology retail and federal sectors that have been in the planning stages for more than a year.
Michael H. Jenkins: We also expect continued growth in lighting product sales to energy service companies, or ESCOs, and our distribution contractor channel, which have responded very favorably to our expanded line of fixtures developed for the value and contractor segment of the energy-efficient fixture market. These new products were introduced last year under the names Triton Pro and Harris Exterior.
Speaker Change: We also expect continued growth in lighting product sales to energy service companies or <unk> and our distribution contractor channel, which have responded very favorably to our expanded line of fixtures developed for the value and contractor segment of the energy efficient fixture market.
Speaker Change: New products were introduced last year under the name <unk> Pro and the Arris exterior.
Michael H. Jenkins: These products balance our commitment to high-quality components, design, and energy efficiency with more modest price points that let us address a broader base of end-customer budgets. We believe these new products have allowed us to broaden our target market, as evidenced by quoting activities in building a pipeline that is now approaching $10 million, all without significant cannibalization of our higher end product sales. We expect to build on the success of these products in the coming year.
Speaker Change: These products balance our commitment to high quality components design and energy efficiency with more modest price points, but let us address a broader base of end customer budgets.
Speaker Change: We believe these new products have allowed us to broaden our target market as evidenced by quoting activities and building pipeline that is now approaching $10 million all without significant cannibalization of our higher end product sales.
Speaker Change: We expect to build on the success of these products in the coming year.
Michael H. Jenkins: Longer term, we also expect our LED lighting business to benefit from the implementation of state regulations banning the sale of fluorescent fixtures and replacement tubes over the next several years. Currently, seven states, including California, Hawaii, Oregon, Colorado, Vermont, Maine, and Rhode Island, have approved such regulations.
Speaker Change: Longer term, we also expect our led lighting business to benefit from the implementation of state regulations banning the sale of fluorescent fixtures and replacement tubes over the next several years.
Speaker Change: Currently seven states, including California, Hawaii, Oregon, Colorado, Vermont, Maine, and Rhode Island.
Michael H. Jenkins: Most of these go into effect in 2025, and we expect other states to follow with some similar regulations in the future. We have started to see signs of customers accelerating planned LED retrofits into our FISCO 25 as a result. Given Orion's strength in engineering and design, our industry-leading energy efficiency products, and our multiple go-to-market approaches, we believe these regulatory mandates should support growth in our lighting business. We are also encouraged by the potential benefits from federal funding that is really just starting to flow from the Build America, Buy America Act, or B-A-B-A, which was part of the $550 billion Infrastructure and Jobs Act. The BADA Act requires states, municipalities, and schools to use BADA-compliant products when available to receive federal funding.
Speaker Change: Such regulations, most of which go into effect in 2025, and we expect other states to follow with somewhat similar regulations in the future.
Speaker Change: We are starting to see signs of customers accelerating planned led retrofits into our fiscal 'twenty five as a result.
Speaker Change: Given our Orion strengthen engineering and design and our industry, leading energy efficiency products and our multiple go to market approaches. We believe these regulatory mandates should support growth in our lighting business.
Speaker Change: We are also encouraged by the potential benefits from federal funding that is really just starting to flow from the build America Buy America Act or <unk>.
Speaker Change: Which was part of the $550 billion infrastructure and jobs Act.
Speaker Change: The act requires states municipalities and schools to use <unk> compliant products when available to receive federal funding. In addition to these requirements.
Michael H. Jenkins: In addition to these requirements, we launched a full line, or I'm sorry, in anticipation of these requirements, we launched a full line of new BABA compliant LED lighting fixtures in the third quarter of last year that we produce in our manufacturing facility here in Wisconsin. We're still in the early days of BABA, but I believe there should be a growth driver for Orion in the years to come. Turning to our Voltrek EV charging segment, the business made solid progress in its first full year of operations within Orion, working to build out the Voltrek team, its capabilities, and geographic reach to meet the needs of larger national customers. Bull Check closed fiscal 2024 with record quarterly revenue of nearly $5 million, leading to an annual record revenue level of over $12 million.
Speaker Change: We launched a full line or I'm sorry, two in anticipation of these requirements, we launched a full line of new <unk>.
Compliance led lighting fixtures in the third quarter of last year that we produced in our manufacturing facility here in Wisconsin.
Speaker Change: We are still in the early days of <unk>.
But believe there should be a growth driver for Orion in the years to come.
Speaker Change: Turning to our volt Trek EV charging segment the business made solid progress in its first full year of operations within Orion working to build out <unk> team their capabilities and geographic reach to meet the needs of larger national customers.
Speaker Change: <unk> closed fiscal 2024 with record quarterly revenue of nearly $5 million, leading to an annual record revenue level of over $12 million.
Michael H. Jenkins: In Q1 of Fiscal 25, we announced over $11 million in contracts for one customer slated for completion this year, contributing to our strengthening platform for growth in Fiscal 25. In addition, Voltrek continues to develop a solid pipeline of larger opportunities, maintaining a $45 million plus pipeline. Overall, our confidence in Voltrex Outlook is supported by its positive momentum demonstrated in Fiscal 24. A strong pipeline of opportunities, including cross-selling with our lighting customers and significant federal funding to drive infrastructure catch-up needed in the build-out of EV charging access across the U.S.
Speaker Change: In Q1 of fiscal 'twenty, five we announced over a $11 million of contracts for one customer's slated for completion this year contributing to our strengthening platform for growth in fiscal 'twenty five in.
Speaker Change: In addition, <unk> continues to develop a solid pipeline of larger opportunities, maintaining maintaining a $45 million plus pipeline.
Speaker Change: Overall, our confidence in <unk> outlook is supported by its positive momentum demonstrated in fiscal 'twenty, four strong pipeline of opportunities, including cross selling with our lighting customers and significant federal funding to drive infrastructure catch up needed in the buildout of EV charging access.
Speaker Change: Across the U S.
Michael H. Jenkins: Opportunities include charging station infrastructure to support EV vehicle fleets across a range of customer segments, including government, commercial, industrial, and retail. Voltrek's decade-plus experience and long-term track record of successful EV charging installations puts Orion in a very favorable and competitive position to compete for EV infrastructure projects, particularly within our national base of lighting customers.
Speaker Change: Opportunities include charging station infrastructure to support EV vehicle fleets across a range of customer segments, including government commercial industrial and retail.
Speaker Change: <unk> decade, plus of experience and long term track record of successful EV charging installations puts orion in a very favorable and competitive position to compete for EV infrastructure projects, particularly within our national base of lighting customers.
Michael H. Jenkins: Lastly, we were able to make significant strides in enhancing the performance of our electrical maintenance services business during fiscal 24. We were successful in driving revenue growth in the business, primarily due to the contribution of a new three-year Lighting Preventative Maintenance Service Agreement for a major customer's approximately 2,000 retail stores nationwide. This new contract, secured with our largest LED lighting customer, continues to confirm the cross-selling synergies between our LED lighting and maintenance services business. Also, during fiscal 24, we made tough decisions regarding unprofitable contracts from our stalight acquisition. Many of these multi-year fixed price contracts have become unprofitable due to a variety of inflationary impacts over the past few years.
Speaker Change: Lastly, we were able to make significant strides in enhancing the performance of our electrical maintenance services business during fiscal 'twenty. Four we were successful in driving revenue growth in the business, primarily due to the contribution of a new three year lighting preventative maintenance service agreement for a major customers approximately.
Speaker Change: 2000 retail stores nationwide. This new contract secured with our largest led lighting customer continues to confirm the cross selling synergies between our led lighting and maintenance services businesses.
Speaker Change: Also during fiscal 'twenty, four we made tough decisions regarding unprofitable contracts from our <unk> acquisition.
Speaker Change: Any of these multiyear fixed price contracts that would become unprofitable due to a variety of inflationary impacts over the past few years, we recognized that we either had to reprice. The contracts terms that would allow them to be profitable, while we had to allow the contracts youre expire take the resulting reduction in revenue.
Michael H. Jenkins: We recognize that we either had to reprice the contracts in terms that would allow them to be profitable, or we had to allow the contracts to expire to take the resulting reduction in revenue. Our discipline enabled us to return this segment to a meaningful gross profit percentage in quarter four. And our goal in fiscal 25 is to bring this business to a margin profile more in line with our overall business. As a result of our profitability focus, we did shed approximately $6.8 million in annualized revenue of unprofitable contracts in our quarter four, fiscal 24, and quarter one fiscal 25 periods.
Speaker Change: Our disciplined.
Speaker Change: Our discipline enabled us to return this segment to meaningful gross profit percentage in quarter, four and our goal in fiscal 'twenty five is to bring this business to a margin profile more in line with our overall business.
Speaker Change: As a result of our profitability focus we did shed approximately $6 $8 million in annualized revenue of unprofitable contracts in our quarter four.
Speaker Change: Fiscal 'twenty, four and quarter, one fiscal 'twenty five period.
Michael H. Jenkins: We expect this to be partially offset by growth from other accounts and new business in the maintenance segment. Overall, this loss will be a net positive for the profitability of our maintenance business and for Orion. We view maintenance as a means to provide greater value to some of our key accounts while also providing a base of recurring revenue. Over the past two years, Orion has leveraged its industry-leading experience in LED lighting and project management capabilities to expand and diversify its overall business.
Speaker Change: We expect this to be partially offset in growth from other accounts and new business in the maintenance segment.
Speaker Change: Overall this loss will be a net positive for profitability of our maintenance business and for Orion.
Speaker Change: We view maintenance as a means to provide greater value to some of our key accounts, while also providing a base of recurring revenue.
Speaker Change: Over the past two years Orion has leveraged our industry, leading experience in led lighting and project management capabilities to expand and diversify our overall business. The benefits of this transformation are clearly reflected in our quarter four and full year revenue and bottom line improvements as well as in our outlook for FIS.
Michael H. Jenkins: The benefits of this transformation are clearly reflected in our quarter 4 and full year revenue and bottom line improvements, as well as in our outlook for fiscal 25. Orion's transformation is also providing new opportunities to build on existing customer relationships by offering new products and services to meet their needs. Turning to our outlook for the business, Orion continues to target fiscal 25 revenue growth of 10 to 15% on a consolidated basis, which includes the reduction in the maintenance revenue referenced earlier.
Speaker Change: 25 <unk>.
Speaker Change: Ryan transformation is also providing new opportunities to build on existing customer relationships by offering new products and services to meet their needs.
Speaker Change: Turning to our outlook for the business Orion continues to target fiscal 'twenty five revenue growth of 10% to 15% on a consolidated basis, which includes the reduction in the maintenance revenue referenced earlier. This outlook is based on expected revenue from large national led lighting projects for <unk>.
Michael H. Jenkins: This outlook is based on expected revenue from large national LED lighting projects for automotive, retail, technology, logistics and distribution, banking, and public sector. Additionally, we expect continued growth in our ESCO and agent channels due to the strong response to the quality, energy efficiency, and value of Orion's new and existing products. We expect our EV charging solutions business to be driven by current contracts, as well as our growing pipeline of opportunities, and we expect it to achieve 50% plus growth this year.
Speaker Change: The motive retail technology logistics and distribution banking and public sector customers.
Additionally, we expect continued growth in our ESCO and agent channels due to the strong response to the quality energy efficiency and value of orion's, new and existing products.
Speaker Change: We expect our EV charging solutions business to be driven by current contracts as well as our growing pipeline of opportunities and achieved 50% plus growth this year.
Per Brodin: Maintenance services revenue is expected to contract by approximately $5 million in fiscal 25, and so we expect a much better bottom line performance. The revenue decrease is primarily due to the loss of three legacy customers that were profitable. The revenue impact from the losses is partially offset by growth in other accounts and is expected to net $5 million. With regard to quarterly performance, we expect Fiscal 25 to look similar to Fiscal 24, with revenue weighted to the second half of the year. However, we do expect growth for all quarters on a year-over-year basis. With that said, let me now pass the call to our CFO, Per Brodin, to discuss our financials and outlook in more detail.
Speaker Change: Maintenance services revenue is expected to contract by approximately $5 million in fiscal 'twenty five so we expect a much better bottom line performance the.
Speaker Change: The revenue decrease is primarily due to the loss of three legacy customers that were unprofitable.
Speaker Change: The revenue impact from the losses is partially offset by growth in other accounts and expected to net to $5 million.
Speaker Change: With regard to quarterly performance, we expect fiscal 'twenty five to look similar to fiscal 'twenty four with revenue weighted to the second half of the year, we do expect growth for all quarters on a year over year basis.
Speaker Change: With that said, let me now pass the call to our CFO <unk> to discuss our financials and outlook in more detail.
Per Brodin: Thank you, Mike. Hello, everyone.
Speaker Change: Okay.
Speaker Change: Thank you, Mike and Hello, everyone.
Per Brodin: I'll briefly review some highlights before we move to Q&A. Our Q4'24 revenue rose 22.1% to $26.4 million, which compares to $21.6 million in Q4'23, an improvement of approximately $5 million across all three business sectors. Full fiscal year 24 revenue increased 17.1% to $90.6 million, a $13.2 million increase over fiscal 23. Fiscal 24 included 96% growth in our EV business, 18% in maintenance services growth, and 8% growth in LED lighting. Both the quarter and the full year reflect the ramp of some larger LED lighting projects, most notably the Department of Defense contract Mike referred to, and the start of a three-year preventative lighting maintenance service contract for our largest Customers 2000 retail location.
Speaker Change: I'll briefly review some highlights before we move to Q&A.
Speaker Change: Our Q4 'twenty four revenue Rose 22, 1% to $26 4 million, which compares to 21 6 million in Q4 'twenty three.
CFO <unk>: An improvement of approximately $5 million across all three business segments.
CFO <unk>: Full fiscal year 'twenty four revenue increased 17, 1% to $96 million of $13 2 million increase over fiscal 'twenty three.
CFO <unk>: Fiscal 'twenty four included 96% growth in our EV business, 18% in maintenance services growth.
CFO <unk>: 8% growth in led lighting.
Speaker Change: Both the quarter and the full year reflect the ramp of some larger led lighting projects, most notably the department of defense contract Mike referred to.
Speaker Change: And the start of a three year preventative lightning maintenance service contract for our largest customers 2000 retail locations.
Per Brodin: Looking at margins, our gross profit percentage improved 390 basis points, 25.8% in Q4'24 versus 21.9% in Q4'23. For the full fiscal year, our gross profit percentage increased 50 basis points to 23.1% in 2024 from 22.6% in fiscal 23. Both 2024 periods benefited from the impact of higher volume on fixed cost absorption. SalesMix, and improved pricing on certain maintenance. Product close margin improved approximately 370 basis points to 21 29.8% in fiscal 24 from 24.9% a year ago. The increase is attributable to new product sales as well as the benefit of higher volumes and fixed cost absorption.
Speaker Change: Looking at margins, our gross profit percentage improved 390 basis points to 25, 8% in Q4 24 versus 21, 9% from Q4 'twenty three.
Speaker Change: For the full fiscal year, our gross profit percentage increased 50 basis points to 23, 1% in 2024 from 22, 6% in fiscal 'twenty three.
Speaker Change: Both 2024 periods benefited from the impact of higher volume and fixed cost absorption sales.
Speaker Change: Sales mix and improved pricing on certain maintenance contracts.
Speaker Change: Product gross margin improved approximately 370 basis points to 21 29, 8% in fiscal 'twenty four from 24, 9% a year ago.
Speaker Change: The increase is attributable to new product sales as well as the benefit of higher volumes and fixed cost absorption.
Per Brodin: Reflecting steps taken in the maintenance business and our expectation for the business overall, we expect our blended gross margin to remain strong in fiscal 25 as we continue to grow sales. However, there will be some negative effects in Q1 as we work through the remaining work orders for the maintenance contracts that have left. Operating expenses declined to $5 million in Q4-24 from $9.6 million in Q4-23, mainly due to the impact of a net earn-out reversal of $3 million of previously-recognized Bull Trek earn-out expense in the current year period, compared to a $2.5 million earn-out expense accrual in Q4-23.
Speaker Change: Reflecting steps taken in the maintenance business and our expectation for the business overall, we expect our blended gross margin to remain strong in fiscal 'twenty five as we continue to grow sales. However, there will be some negative effect in Q1 as we work through the remaining work orders.
Speaker Change: For the maintenance contracts that have lapsed.
Speaker Change: Operating expenses declined to $5 million in Q4, 'twenty four from $9 6 million in Q4 2003, mainly due to the impact of a net earn out reversal of $3 million of pre.
Speaker Change: Previously recognized full track earn out expense in the current year period.
Speaker Change: Compared to a $2 $5 million earn out expense accrual in Q4 'twenty three.
Per Brodin: For the full year, operating expenses also declined due to the earn out adjustment that would have increased 6.4% excluding the earn out due primarily to the inclusion of a full year of Voltrec expenses in the current year and higher commission expense based on higher sales levels, partially offset by lower product testing, to highlight a couple of other unusual items that occurred during Q4 this year. We recorded a non-cash impairment charge of $456,000 for intangible assets acquired as part of the SteeLite acquisition.
Speaker Change: For the full year operating expenses also declined.
Speaker Change: Due to the earn out adjustment would have increased six 4% excluding the earn out due primarily to the inclusion of a full year of both track expenses in the current year and higher Commission expense based on higher sales levels, partially offset by lower product testing costs.
Speaker Change: To highlight a couple of other unusual items that occurred during Q4 this year.
Speaker Change: We recorded a noncash impairment charge of 456000 for intangible assets acquired as part of the Stellite acquisition.
Per Brodin: In addition, we incurred $138,000 of restructuring costs as part of a maintenance segment realignment and expect to record another $400,000 to $500,000 of charges in fiscal 2025, some of which are non-cash charges, such as inventory and equipment disposals, as we finalize the wind down of the three maintenance contracts that have left. Considering higher revenue and an improved gross profit percentage and lower operating expenses, Orion's Q4'24 net income improved to $1.6 million in Q4'24 versus a loss of $5.1 million in Q4'23.
Speaker Change: In addition, we incurred 138000 of restructuring costs as part of the maintenance segment realignment and expect to record. Another 400 to 500000 of charges in fiscal 'twenty five.
Speaker Change: Some of which are noncash charges, such as inventory and equipment disposals as we finalize the wind down of the three maintenance contracts that have lapsed.
Speaker Change: Considering higher revenue and improved gross profit percentage and lower operating expenses Orion's Q4, 'twenty forward net income improved to $1 6 million in Q4 24 versus a loss of $5 1 million in Q4 23.
Per Brodin: Likewise, for the year, Orion's net loss was cut to $11.7 million or $0.36 per share in fiscal 24 from $34.3 million or $1.08 per share in the prior year, which included a $17.8 million valuation allowance recorded on the company's deferred tax assets.
Speaker Change: Likewise for the year Orion net loss was cut to 11 7 million or <unk> 36 per share in fiscal 'twenty four from $34 3 million or $1 80 per share in the prior year, which included a 17 8 million valuation allowance recorded.
Speaker Change: The companys deferred tax assets.
Per Brodin: Cash generated was approximately $175,000 in Q4 24, primarily reflecting improved operating results, partially offset by working capital changes. On March 31st, we had current assets of $44.8 million, including inventory of $18.2 million, accounts receivable of $14 million, and cash of $5.2 million. Networking capital was $16.8 million, and our liquidity, defined as cash plus revolver availability, was $15.3 million. After year end, we further enhanced our liquidity position by approximately $5 million to over $20 million via an amendment to Orion's bank credit facility, which now exceeds $17.5 million of liquidity that Orion had available at December 31, 2023, our prior quarter end.
Speaker Change: Cash generated was approximately $175000 in Q4, 24, primarily reflecting improved operating results, partially offset by working capital changes.
Speaker Change: At March 31, we had current assets of $44 $8 million, including inventory of $18 2 million accounts receivable of $14 million and cash of $5 2 million net.
Speaker Change: Net working capital was $16 8 million and our liquidity defined as cash plus revolver availability was $15 $3 million.
Speaker Change: After year end, we further enhanced our liquidity position by approximately $5 million to over $20 million via an amendment to Arion Bank credit facility, which now exceeds $17 5 million of liquidity that Orion had available at December 31 2023.
Speaker Change: Our prior quarter end.
Per Brodin: The amendment provided a $3.5 million mortgage on our Manitowoc Corporate Headquarters, plus an additional $1.6 million of borrowing-based enhancements due to a broadening of the defined eligible receivables allowed to be included in the company's borrowing-based calculation. As such, we believe we are in a good position to fund each of our business segments and their growth objectives for fiscal 25. As a reminder, we are reiterating our outlook for 10 to 15% revenue growth in fiscal 25, and we'll update this outlook at least quarterly. With that, I'll now ask the operator to start the Q&A. Thank you. As a reminder, to ask a question, please press.
Speaker Change: The amendment provided a $3 $5 million mortgage on our Manitowoc corporate headquarters plus an additional $1 6 million of borrowing base enhancements due to a broadening of the defined eligible receivables.
Speaker Change: <unk> to be included in the company's borrowing base calculation.
As such we believe we are in a good position to fund each of our business segments and their growth objectives for fiscal 'twenty five.
Speaker Change: As a reminder, we are reiterating our outlook for 10% to 15% revenue growth in fiscal 'twenty, five and we will update this outlook at least quarterly.
I'll now ask the operator to start the Q&A session.
Operator: Thank you. 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. We ask that you please limit yourself to three questions before returning to the queue. One moment while we compile our Q&A roster, and our first question is going to come from the line of Eric Stine with Craig Hallam Capital Group. Your line is open. Please go ahead.
Speaker Change: 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, we ask that you. Please limit yourself to three questions before returning to the Q1 moment, while we compile our Q&A roster.
Speaker Change: And our first question is going to come from the line of Eric Stine with Craig Hallum Capital Group. Your line is open. Please go ahead.
Unknown Attendee: Hi, Mike Haefner.
Unknown Attendee: Eric.
Eric Stine: It sounds like the 10 to 15% growth outlook for 2025 is really LED lighting, right? If we think about maintenance, the loss of those contracts is offset by charging. You know, do you agree with that?
Eric Stine: Hey, so.
Speaker Change: It sounds like.
The 10% to 15% growth outlook for 'twenty five is really led lighting right. If we think about maintenance.
Speaker Change: The loss of those contracts offset by charging.
Michael H. Jenkins: And then just curious, you know, what type of visibility do you see? You mentioned 2 million from the DoD project. I know you've got a number of other projects in hand set to start, but just curious, you know, as you look at fiscal 25, kind of what you have in hand today. And I know it's always timing-dependent.
Speaker Change: Do you agree with that and then just.
Speaker Change: Curious.
Speaker Change: What type of visibility do you see you mentioned $2 million from the <unk> project I know you've got a number of other projects.
Speaker Change: In hand central start, but just curious.
Speaker Change: As you look at fiscal 'twenty, five kind of what you have in hand today and I know, it's always timing dependent.
Michael H. Jenkins: Yeah, as you outlined, we see both LED lighting and electric vehicles as being strong growth drivers for us. As you said, the EV business and the growth in that kind of helps offset some of the decline in maintenance, but they're both working together for growth. We do have a significant pipeline going into this year for both EV and LED lighting. We have some very large projects that support both our new and long-term customers.
Speaker Change: Yes.
Speaker Change: You outlined I mean, we see both led lighting and EV as being strong growth drivers for us as you said the EV busy.
Speaker Change: Business and the growth in that kind of helps offset some of the decline in maintenance, but theyre. Both working together for growth. We do have a significant pipeline going into this year on bolt EV and led lighting, we have some very large projects for.
Speaker Change: That support both our new and long term customers.
Michael H. Jenkins: We did reference in the remarks about the automotive customers coming back this year. We did see a softer year in the automotive industry just based on the timing of projects this past fiscal year. That will give us a nice boost. I did also mention that one of those automotive customers is really beginning to respond to some of the fluorescent bands that we've seen. There's evidence that they want to accelerate some of the timing of retrofits as a result of some of the fluorescent bands coming. So that's why we feel very good about the year in general and feel good about the lighting business.
Speaker Change: We did reference in the remarks about the automotive customers coming back this year.
Speaker Change: Did see a softer year in automotive just based on timing of projects. This past fiscal year that will give us a nice boost.
Speaker Change: I'd reference also one of those automotive customers is really beginning to respond to some of the fluorescent bands that we've seen there.
Speaker Change: As evidenced that they want to accelerate some timing of retrofits as a result of some of the fluorescent bands coming so so.
Speaker Change: So that's why we feel very good about the year in general and feel good about the lighting business.
Michael H. Jenkins: All right, that's great. And then maybe just turning to Voltrek. I mean, it sounds like you'd characterize the growth here, to this point, being really skewed towards fleet opportunities. You know, just curious about the synergies with your lighting customers. Maybe, what do you think that contribution is in fiscal 25? And maybe how much of your I think your reference to the $45 million plus pipeline?
Alright Thats great.
Speaker Change: And then maybe just turning to volt track.
Speaker Change: It sounds like you would characterize the growth here.
Speaker Change: To this point being really skewed towards lead opportunities.
Speaker Change: Just curious.
Speaker Change: You mentioned synergies with your lighting customers maybe.
Speaker Change: Maybe what do you think that contribution is in fiscal 'twenty five and maybe how much of your I think you referenced some $45 million plus pipeline.
Michael H. Jenkins: Yeah, there's, I would say right now our business is definitely a mix, as it continues to be from a historical perspective. In terms of fleets and non-fleet sales, we do see a huge opportunity moving forward with fleet and DC fast charge, you know, the NEVI funds and kind of connecting the interstate highway system, all of that, we see that as an opportunity unfolding over the next several years. The first phases of grants are kind of hitting the streets right now at the state level.
Speaker Change: Yes, there is.
Speaker Change: I would say right now our business is definitely a mix.
Speaker Change: Is it can continue.
Speaker Change: Continues to be from historical perspective in terms of fleets and non fleet sales, we do see a huge opportunity moving forward with fleet and DC fast charge.
Speaker Change: The Navy funds and kind of connecting the Interstate highway system all of that we see that as an opportunity unfolding over the next several years. The first phases of grants are kind of hitting the street right now at the state level.
Michael H. Jenkins: So we do see more and more opportunities for fleet as we move forward, and we are engaging with customers about that, as well as government sectors. But the pipeline of over $45 million does not include all of the cross-selling synergies back and forth between lighting and EV. We actually have a cross-selling pipeline right now that exceeds $30 million between our lighting and our EV business. And so we are really pleased with how that's coming together and strengthened.
Speaker Change: So we do see more and more opportunities for fleet as we move forward and we are engaging with customers about that.
Speaker Change: As well as.
Speaker Change: Government sectors.
Speaker Change: Yes.
Speaker Change: So the pipeline of over.
Speaker Change: <unk> $45 million does not include all of the cross selling synergies back and forth between lighting in EV, we actually have across our cross selling pipeline right now that exceeds $30 million.
Speaker Change: Our lighting and our EV business and so we really are pleased and how that's coming together and strengthening.
Michael H. Jenkins: Got it. And maybe last one for me, just sticking with charging, you know, there's been a bit of a shakeout in the EV charging space, a number of EV charging companies, you know, just curious, is that something that helps you hurts you doesn't matter? Just some thoughts there would be helpful. Yeah, I think over all.
Speaker Change: Got it.
Speaker Change: And maybe last one for me just sticking with charging you know theres been a bit of a shakeout in the EV charging space a number of the EV charging companies.
Speaker Change: Just curious is that something that <unk>.
Speaker Change: Helps you hurts you doesn't matter just some thoughts there would be helpful.
Michael H. Jenkins: Yeah, I think overall that volatility, you know, helps us. I mean, we're a well-established company in this space with over a decade of experience. We're partnered with very well-known premier equipment providers like ChargePoint, who's our largest partner. And so we feel really good about our position, stable partners, trusted name in the industry, and a growing pipeline. So we've seen some new entrants come and go, but overall, we feel continually optimistic about this space and our ability to compete and win.
Speaker Change: Yes, I think overall that volatility.
Speaker Change: US I mean, we're a well established company in this space with over a decade of experience with.
Speaker Change: Partnered with very well known premier equipment providers like charge point.
Speaker Change: Who's our largest partner.
Speaker Change: So we feel really good about our position stable partners.
Speaker Change: Trusted name in the industry.
Speaker Change: Our growing pipeline. So we've seen some new entrants come and go but overall, we feel continually optimistic about this space and our ability to compete and win.
Speaker Change: Alright, Thanks, Mike.
Operator: Thank you. And one moment as we move on to our next question. And our next question comes from the line of Amit Dayal with HC Ringwright. Your line is open. Please go ahead. Thank you.
Eric Stine: Thanks, Eric.
Speaker Change: Thank you and one woman has now move onto our next question.
Speaker Change: And our next question comes from the line of Amit Dayal with H C. Wainwright. Your line is open. Please go ahead.
Amit Dayal: Thank you. Good morning, everyone. [Inaudible] So, you know, good to see the diversification, you know, starting to show up in the revenue mix. With respect to this, you know, $11 million EV customer, is this an enterprise customer or a government customer that, you know, you expect to deploy this year?
Amit Dayal: Thank you and good morning, everyone.
Speaker Change: Good morning, Amit.
Speaker Change: So.
Speaker Change: Good to see the diversification.
Starting to now show up.
Speaker Change: And the revenue mix.
Speaker Change: With respect to this $11 million EV customer is this an enterprise customer or a government customer that you expect to deploy this year.
Michael H. Jenkins: We did announce it previously; it's Eversource, which is a utility in Massachusetts. And so we're contracted with them to do what they call make ready work, which essentially is getting essentially all the infrastructure in place. And then on top of that, and in addition to that, there's equipment.
Speaker Change: Yes.
ever source: We did announce that previously it's ever source, which is a utility in Massachusetts.
ever source: And so we're contracted with them what they call make ready work, which essentially is getting.
ever source: Essentially all the infrastructure in place and then on top of that and in addition to there is equipment.
Michael H. Jenkins: Maybe just to clarify, Amit. The end user is not the utility. There are customers of Eversource that are the customers purchasing these products and services, but Eversource helps fund those purchases for the customer.
Speaker Change: And maybe just to clarify Amit.
Speaker Change: End user is not the utility there are customers of ever source that RV customers purchasing this these products and services.
Speaker Change: Ever source is helps fund those.
Speaker Change: Purchases for the customer.
Amit Dayal: Okay. How many units does this translate into just to get a sense of, you know, what the market is looking like? If you can, share that.
Understood.
How many units does this translate into just to get a sense of you know what.
Speaker Change: The market is looking like.
Speaker Change: If you can share that.
Operator: I'm sorry, it got a little broken up there. Could you please repeat the question?
Speaker Change: I'm sorry, Amit.
Speaker Change: Got a little broken up there could you please repeat the question.
Amit Dayal: Yeah, I was wondering how many units this $11 million translates into. I don't know if you can share that information.
Amit Dayal: Yes, I was wondering how many units and $1 million translates into I don't know if you can share that information.
Michael H. Jenkins: Yeah, I can't really give you units. I can tell you that I believe the total subset of projects underneath that is approximately somewhere around, let's say, 20 to 25.
Speaker Change: Yes.
Amit Dayal: I can't really give units I can tell you that I believe the total subset of projects underneath that are approximately somewhere around let's say, 20% to 25 projects.
Amit Dayal: Okay, thank you. Um, okay, maybe I'll just clarify one more thing. And that is, when we say make ready, that work is a lot of the infrastructure required for the installation of a charging unit. So that $11 million may not always include a charging unit itself if the customer decides to only have us do the make ready work or the groundwork below. Yeah.
Speaker Change: Okay. Thank you understood.
Speaker Change: Okay, and maybe just to clarify one marketing.
Speaker Change: And that Amit when we say make ready that work because a lot of the infrastructure required for the installation of charging unit. So that $11 million may not always include charging unit itself. If the customer decides to only have us do the make ready work or that.
Michael H. Jenkins: Yeah, part of our turnkey solution is to provide that construction work often to put the infrastructure in place to then put the charger, and connect the charger.
Speaker Change: Grounded below work because yes it helps.
Speaker Change: As part of our turnkey solution is to provide that construction work often.
Speaker Change: To bring the infrastructure in place to to then put the charterer connected charter too.
Amit Dayal: Understandable. And then along those lines, you know, you feel like you touched on it a little bit. Are you seeing any sort of acceleration in federal funding that could support, you know, stronger deployments in the next one or two years? It's been a little bit slower than what folks might have expected to play out. But is that changing? You know, and that helps sort of your Future Outlook.
Speaker Change: Understood and then along those lines.
Speaker Change: You touched on it a little bit.
Michael H. Jenkins: Yeah, it does. I mean, in the EV charging space, there was the $5 billion of NEVI funds that were appropriated. Like a lot of federal programs, they work ultimately through the states, and so it takes time for that funding vehicle to go to the states and then for them to comply and begin to grant the money. So we're just starting to see some of that NEVI funding hit the streets. And I think it will really accelerate over the next 24 months, but it's starting to be applied now. And that's really for DC fast charge infrastructure, so which is good.
Speaker Change: Are you seeing any sort of acceleration in federal funding that could support.
Simo: Stronger deployment Simo in the next one or two years.
Simo: It's been a little bit slower than what folks might have expected to.
Simo: To play out but is that changing.
Simo: And that helps sort of your.
Simo: Future outlook.
Yes, it does.
Amit Dayal: Amit I mean in the EV charging space there was the $5 billion.
Speaker Change: Nervy funds.
Speaker Change: Were appropriated like a lot of federal programs. They work ultimately through the states and so things take time for that funding vehicle to go to the states then for them to comply and begin the grant money. So we're just starting to see some of that nervy funding hit the street and I think it will really accelerate.
Speaker Change: Over the next 24 months, but it's starting to be applied now so and that's really for DC fast charge infrastructure.
Speaker Change: Which is good.
Amit Dayal: Okay, understood. Just one last one for me, you know, with sort of the maintenance margins now expected to, you know, improve from here, overall margins, is there, you know, room for further improvement, or should we sort of model for these levels, you know, 25, mid 20% margins for the, for at least fiscal 25?
Speaker Change: Okay understood.
Speaker Change: One last one for me.
Speaker Change: With sort of the maintenance margins and I expect it to.
Speaker Change: Improve from here.
Speaker Change: Overall margins is there room for further improvement or should we sort of model for these levels or anything of that sort of mid 40% margins for the put at least fiscal year <unk>.
Per Brodin: I think for fiscal 25, we expect to see some positive potential improvement, as I mentioned in my remarks. I won't necessarily go through it in Q1 because of some of the headwinds still that we're facing related to these three contracts that are lapsing, but then it should continue to improve in Q2, 3, and 4.
Speaker Change: I think for fiscal 'twenty five.
We.
Speaker Change: We expect to see.
Speaker Change: Potential improvement.
Speaker Change: As I mentioned in my remarks.
Speaker Change: Secondly flow through in Q1, because of some of the headwinds still.
That we are facing related to these three contracts that are lapsing.
Speaker Change: And it should continue to improve in Q2, three and four.
Amit Dayal: That's all I have, guys; I will take my other questions.
Speaker Change: Okay.
Speaker Change: That's all I guess I would take my other questions offline. Thank you.
Operator: Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of B.J. Cook with Singular Research. Your line is open. Please go ahead.
Speaker Change: Thanks.
Speaker Change: Thank you and one moment as we move on to our next question.
Speaker Change: And our next question is going to come from the line of BJ Cook with singular research. Your line is open. Please go ahead.
BJ Cook: Hey, guys. Thanks for taking my call.
Speaker Change: Just wanted to clarify Vijay.
Speaker Change: Hey, guys.
Speaker Change: The $45 million.
B.J. Cook: I just wondered if that because, if I remember right, it was 50 last quarter or so, and that's on a net basis. I'm just wondering if that includes, you know, some new contracts that moved from the pipeline to South New Orders. We're kind of looking at a net basis. I just wanted to figure, you know, see some growth in the pipeline, pick up for the new contract that turned into firm orders.
Speaker Change: Pipeline.
Speaker Change: I just wondered if that.
Speaker Change: Because if I remember it was shift either last quarter or so.
Speaker Change: That's a net basis I'm just wondering if that includes some new contracts.
Speaker Change: That moved from the pipeline.
Speaker Change: New orders were kind of looking at a net basis I'm just wondering if here.
Speaker Change: Seeing some growth in the pipeline hick.
Oxford, the new contracts that turned into firm orders.
Michael H. Jenkins: Yeah, great, great question, BJ. Yeah, absolutely. The opportunities return to our pipeline, you know, once they're closed and landed, then they come out of the pipeline once we begin to activate them as projects. So there's that's a constant moving group of opportunities in there. And so a fair amount of those have been realized and are being realized. And so we're constantly replenishing. So I would say our pipeline overall is stable to growing. As I mentioned, there are additional opportunities, which we are counting as cross selling back and forth between EV and lighting that are, let's say, EV related, which are not included in that currently.
Speaker Change: Okay.
Speaker Change: Yes, great Great question, Vijay, Yes, absolutely say opportunities return our pipeline once they're closed and landed then they come out of the pipeline. Once we begin to activate them as projects. So there is that's a constantly moving.
Group of opportunities in there and so a fair amount of those that have been realized and are being realized and so we're constantly refresh at replenishing. So I would say our pipeline overall is stable to growing as I mentioned, there are additional opportunities, which we are counting as cross selling back and forth between EV and lighting.
Speaker Change: That debt.
Speaker Change #100: Let's say EV related which are not included in that currently.
B.J. Cook: Yes, we appreciate that. And one other thing for me, you mentioned the $4 to $5 million contraction in the maintenance business. I was just wondering if that's just the contraction, or is that the number for your consolidated revenue outlook?
Speaker Change #101: Got it I appreciate that.
Speaker Change #102: And one other thing for me just.
Speaker Change #103: You mentioned that you mentioned before.
Speaker Change #104: $4 million to $5 million contraction in the maintenance business I was just wondering effects.
Speaker Change #105: Just the contraction or is that the number for your your consolidated revenue outlook.
Michael H. Jenkins: It's a contraction within that segment, but only, and that's the net impact. In my comments, I referenced the value of the contract loss was about $6.8 million, but we're offsetting that with new business, both with our three-year preventative agreement, which has been previously announced, as well as potentially some additional business, and we expect that to net to a contraction of $5 million.
Speaker Change #106: It's a contraction within that segment.
Speaker Change #107: And that's the net impact.
Speaker Change #108: In my comments I referenced the value of the contracts loss was about $6 8 million, but we're offsetting that with new business.
Speaker Change #109: Both with our three year preventative agreement, which has been.
Speaker Change #109: Previously announced as well as potentially some additional business and we expect that to net to a contraction of $5 million.
Michael H. Jenkins: and their overall growth. So yeah, and our overall growth guidance for the year is met on those five, and others. It includes that. Thank you.
Speaker Change #109: And our overall growth.
Speaker Change #109: And our overall growth guidance for the year is net of that $500 million.
Speaker Change #110: Yes, it includes that kind of action.
B.J. Cook: Perfect. Thanks for the clarification. I appreciate it, guys.
Speaker Change #111: Okay perfect. Thank.
Speaker Change #112: Thanks for clarification I appreciate it guys.
Speaker Change #113: Yes. Thank you.
Operator: Thank you. And one moment as we move on to our next question. And our next question comes from the line of Bill Dezellem with Titan Capital Management. Your line is open. Please go ahead. Thank you.
Speaker Change #114: Thank you and one moment as we move on to our next question.
William J. Dezellem: Thank you. I'd actually like to just follow up on that last point.
Speaker Change #115: And our next question comes from the line of Bill Dave.
Speaker Change #116: Gentlemen, with Titan Capital Management. Your line is open. Please go ahead.
Bill Jones: Alright, Thank you I'd actually like to just follow up on that last point and just kind of doing these numbers in my head, but if you didn't have that $5 million headwind than your 10% to 15% revenue guidance would be closer to 15% to 20% revenue guidance is that correct.
William J. Dezellem: And I'm kind of doing these numbers in my head. But if you didn't have that $5 million headwind, then your 10 to 15% revenue guidance would be closer to 15 to 20% revenue guidance. Is that correct? That's correct, Bill. And so, longer term, do you view that 15 to 20% revenue growth as the more sustained revenue growth that you would be targeting for the business?
Speaker Change #117: That's correct Bill.
Speaker Change #120: And so do you view longer term.
Speaker Change #117: That 15% to 20% Rev.
Speaker Change #118: Our revenue growth.
Bill: The more sustained revenue growth that you would be targeting for the business.
Michael H. Jenkins: Yeah, I think somewhere around 15% per annum is definitely a target which we're shooting for and think is attainable.
Bill: I think somewhere around 15% per annum is definitely a target, which we're shooting for and think is attainable.
William J. Dezellem: Okay, that's helpful. And then one other point of clarification before I jump to a couple other questions. The $35 million in cross-selling pipeline, is that LED and EV charging business, or is it just the EV only that that $35 represents?
Speaker Change #121: Okay. That's that's helpful.
Speaker Change #122: And then one other point of clarification before I jump into a couple of other questions the $35 million of cross selling pipeline.
Speaker Change #123: Is that LCD and EV charging business or is that EV only.
Speaker Change #123: That 35 represents.
Michael H. Jenkins: 35 is full. So, part of the synergy, which we've always believed in, is that we can cross sell lighting programs to some EV customers and vice versa. Obviously, our base of lighting customers is larger than EV customers, and so we thought that that would be a bigger growth driver, but we are starting to see some significant opportunities coming the other way as well. So that's a total between the two.
Paul: The 35% as Paul So we part of the <unk>.
Speaker Change #125: We have a synergy which we've always.
Speaker Change #125: Believed in is that we can cross sell lighting programs to some <unk> customers and vice versa, obviously, our base of lighting customers is larger than EV.
Speaker Change #125: And so we thought that that would be a bigger growth driver, but we are starting to see some significant opportunities coming the other way as well. So that's a total between the two.
William J. Dezellem: And so those opportunities that are coming the other way, we're talking about EV charging, businesses that are then deciding that they would like some of your outdoor lighting solutions to either light up the EV location or the entire parking area where the EV would also be located. Is that the right way to think about that? Or are you actually finding EV customers saying, hey, we'd like you to put LEDs inside a building that is next door?
Speaker Change #125: And so those opportunities that are coming the other way we'd be talking about EV charging.
Speaker Change #125: Yes.
Speaker Change #126: Business does that then.
Speaker Change #127: Is deciding that they would like some of your outdoor lighting solutions to either light up the EV location or the entire parking area, where the EV would also be located is that the right way to think about that or are you actually finding EV customers, saying, hey, we'd like you to put.
Speaker Change #128: Inside a building that is next door.
Michael H. Jenkins: Yeah, it's really all of the above. It's really about the customer more than the specific application. So we're getting exposure to some new customers, new partners, etc., through the two businesses working together, which is creating synergy and additional opportunities for another segment.
Yes, it's really all of the above it's really about the customer more than the specific application. So we're getting exposure to some new customers new partners et cetera through the two businesses working together that is creating synergy and additional opportunities for another segment.
William J. Dezellem: Okay, that's actually well clarified. Thank you, Mike. I appreciate that. And then a couple of additional questions here. So you mentioned that the Orion execution with the ESCO and the military base was really good. Let me start by asking, has this ESCO done other military bases, or was this their first one that they had done outside the US?
Speaker Change #129: Okay, that's actually well clarify thank you Mike I appreciate that and then.
Speaker Change #129: Couple of additional questions here, So you mentioned that the.
Speaker Change #130: That the Orion.
Speaker Change #130: Execution.
Speaker Change #131: With the ESCO in the military base was really good.
Let me start by asking has this ESCO done other military bases or was this their first one that they had done outside the U S.
Michael H. Jenkins: So they have, they do quite a few bases. And when I say quite a few, it's a couple per, you know, either per year or every couple of years. So these are very large projects, but they do a fair amount in this space. And we've worked with them historically on those as well.
Speaker Change #132: So they have they do quite a few basis and when I say quite a few it's a couple per.
Speaker Change #132: Per year or per every couple of years. So these are very large projects.
Speaker Change #132: Projects, but they do a fair amount of the space that we've worked with them historically on those as well.
William J. Dezellem: Okay, so where I'm going with this is, was your execution strong enough and better than other suppliers in the past that you anticipate that you will receive other business from this ESCO? And I am making the presumption that if they've been doing bases, that they've done well enough that the military will continue to will continue to use them in other other bases.
Speaker Change #133: Okay. So.
Speaker Change #134: Where I'm going with this is what is your execution strong enough and better than other suppliers in the past that you anticipate that you will you will receive other business from this ESCO and I am making the presumption is they've been doing basis that they've done.
Speaker Change #133: Hey.
Well enough that the military will continue to.
Speaker Change #135: We'll continue to use them, an ad or other basis.
Michael H. Jenkins: They are a long-standing partner of ours where we've done a number of different sites. I think the execution on the projects in Europe this year was outstanding by our team. I think they would echo that, and so I think we're well-positioned to work with them on future projects.
Speaker Change #136: Yes, they are.
Speaker Change #137: Our long standing partner of ours, where we've done a number of different sites I think the execution on the projects in Europe. This year was outstanding by our team I think they would echo that and so I think we're well positioned to work with them on future projects.
William J. Dezellem: And do you see the DOD opportunities outside of the US with this ESCO to be larger or smaller than the opportunities to work with this ESCO on the types of business that you had done historically prior to this European base?
Speaker Change #138: And do you see the.
Speaker Change #139: The Dod opportunities outside of the U S with this ESCO to be larger or smaller than the opportunities to work with this ESCO on the types of business that you had done historically prior to this European base.
Michael H. Jenkins: It's difficult to say exactly, though I think there are going to be a lot of opportunities moving forward. You know, one of the things that's interesting right now is that the federal government does have an ambition of electrifying essentially all of their assets by 2035. This is what we've been told anyway.
Speaker Change #139: It's difficult to say exactly.
Speaker Change #139: There's going to be a lot of opportunities moving forward one of the things. That's interesting right now is that the federal government does have an ambition of electrifying essentially all of their assets by 2035. This is what we've been told anyway and that includes military basis, and so that has a fairly profound.
Speaker Change #139: Impact not only for energy efficiency in led lighting, but potentially for EV charging and other avenues as well. So I think moving forward, we would anticipate that there could be more opportunities along these lines, both domestically or abroad.
Michael H. Jenkins: And that includes military bases. And so that has a fairly profound impact not only on energy efficiency and LED lighting but potentially for EV charging and other avenues as well. So I think moving forward, we would anticipate that there could be more opportunities along these lines, both domestically or abroad.
William J. Dezellem: And so this could be a federal building in any given city from small to large in the US, or a military base in the Middle East, just anything and everything in between between now and 2035.
Speaker Change #139: And so this could be a federal building in any given city from small to large in the U S to military base in the Middle East just anything and everything in between between now and 2035.
William J. Dezellem: That's our understanding. Okay.
Michael H. Jenkins: Okay, that is helpful. And then one additional question, if I may. The EV charging you said was approximately 5 million revenues this quarter. Do you have a backlog to maintain that pace of business or even increase it to 20 million or more annual run rate?
Speaker Change #139: That's our understanding.
Speaker Change #140: Okay that is helpful. And then one additional question if I may.
Speaker Change #140: The EV charging you said was approximately $5 million of revenues. This quarter do you have a backlog can maintain that pace of business or or even increase it.
Speaker Change #140: To the $20 million or more annual run rate.
Michael H. Jenkins: Yeah, we, you know, as I referenced, our expectation for this year is a 50% plus growth. So obviously, on a base of 12, that is north of 18. We have $11 million with one customer that we referenced already, and a 45 to $50 million pipeline. So we feel really good about our competence and our ability to grow this business and achieve the $18 million plus.
Speaker Change #140: Yes.
Speaker Change #141: As referenced our.
Speaker Change #142: Expectation for this year is 50% plus growth. So obviously on a base of 12 that is north of 18.
Speaker Change #142: We have $11 million with one customer that we referenced already.
Speaker Change #142: And $45 million to $50 million pipeline. So we feel really good about our.
Speaker Change #142: Our confidence in our ability to grow this business and achieved the $18 million plus.
William J. Dezellem: Okay, I wasn't doing that math. So since I'm failing on the math front, I'll end my questions there.
Speaker Change #143: Okay, I wasn't doing that math, so since I'm failing on the mat rental I'll end my questions there and thank you for the thank you for all the low Gram.
Michael H. Jenkins: And thank you for the thank you for all the time. No problem, Bill. Yeah.
Operator: Thanks, Bill. Thanks. Thank you. And again, if you would like to ask a question,
Operator: Thank you. And again, if you would like to ask a question at this time, please press star 11 on your phone line. One moment for our next question. And our next question is going to come from the line of Andrew Shapiro with Lawndale Capital Management. Your line is open. Please go ahead.
Bill: Thanks Bill.
Speaker Change #144: Thank you and again, if you would like to ask a question at this time. Please press star one on your phone line one moment our next question.
Speaker Change #145: And our next question is going to come.
Andrew Evan Shapiro: From the line of Andrew Shapiro with.
Speaker Change #147: Ron Gill capital Management. Your line is open. Please go ahead.
Andrew Evan Shapiro: Hi, thanks. I have questions regarding the kind of all three lines of business as an immediate follow up to your discussions here. Do you internally look at and kind of define your sales funnel? Is it kind of like a book to bill activity? This is in Voltrek. Do you have somewhat of a book to bill activity and metrics lens that you're applying to this? And can you provide us investors some clarity on how to think about it and how your sales funnel is configured right now for Voltrek?
Andrew Evan Shapiro: Hi, Thanks.
Andrew Evan Shapiro: Questions regarding kind of all three lines of businesses immediate follow up to your discussions here.
Speaker Change #148: Do you how do you internally look at and kind of define your sales funnel is there kind of like a book to bill activity. This isn't full truck.
Speaker Change #148: Do you have somewhat of a book to bill activity and metrics lens that you are applying to this can you provide us investors some clarity on how to how to think about it and how your sales funnel is configured right now for volt trick.
Michael H. Jenkins: Well, I would say that we look at a number of different ways. But when we talk about pipeline, typically, what we're talking about is, I mean, almost always, we're talking about high-confidence pipeline, which means there are active projects. We have a level of detail around those where we believe it's a good fit, and we are quoting. And so that's when I speak of pipeline. That's what I'm talking about. Beyond that, we really don't know. We use various metrics internally, with the management teams, etc. But we really don't get into that from an
Speaker Change #149: Well, Andrew I would say that we looked at a number of different ways, but when we talk about pipeline typically what we're talking about it I mean, almost always we're talking about high confidence pipeline, which means there is active projects we have a leg.
Speaker Change #149: Will detail around those where we believe it's a good fit.
Speaker Change #149: And we were quoting and so that's that's what I speak of pipeline Thats, what im talking about.
Speaker Change #150: And that we really don't.
Speaker Change #151: We use various metrics internally with the management teams et cetera, but we really don't get into that from an external standpoint.
Andrew Evan Shapiro: Okay, and then when you book the project, you're not really billing the project. Generally, what's the timing like?
Speaker Change #152: Okay, and then when you book the project.
Speaker Change #153: You are not really building the project generally what's the timing like what's the cycle like once you.
Michael H. Jenkins: What's the cycle like once you, you know, you've now quoted it, now they sign, what is a typical project? Yeah, it really Again, not to cop out, Andrew, but it really depends. It depends on whether or not we're doing a turnkey installation; we could be doing materials only, you know, this could be just installing a unit on a ready pedestal, or it could be doing make ready work, which is all the infrastructure to get the power to the site, where, ultimately, we're going to put the station.
Speaker Change #154: You have now quoted it now they sign the deal.
Speaker Change #155: What is the typical.
Project.
Michael H. Jenkins: So it varies wildly. Some of these projects may be, The scope varies. Some of them, we may be able to recognize revenue, you know, in a very short order. And some of them, it may be more of a turnkey where we get progress payments, you know, over time. Okay, got it. Question here on Voltric.
Speaker Change #156: It really.
Speaker Change #156: Again, that's a cop out here, Andrew but it really depends it depends on whether or not we're doing a turnkey installation, we could be doing materials only.
Speaker Change #156: These could be.
Speaker Change #156: Just.
Andrew: Installing a unit on a on a ready pedestal or it could be doing make ready work, which is all the infrastructure to get the power to the site, where ultimately we're going to put the station.
Andrew: No.
Andrew: It varies wildly.
Andrew: Okay.
Andrew: The scope varies some of them, we may be able to recognize revenue.
Andrew: And a very quick order and some of them it may be more.
Andrew: <unk> turnkey, where we get progress payments over time.
Andrew: Okay got it.
Andrew Evan Shapiro: Am I correct in calculating that Q4 benefited from a reversal on Voltrek, an annual earn out accrual that had accrued up through Q3, right? And I think you said this was 3 million and that was a, that was a singular quarterly benefit for Q4, is that correct?
Speaker Change #158: Next question.
Speaker Change #159: <unk> am I correct in calculating.
Speaker Change #158: Here.
Speaker Change #160: 10% is that Q4 benefited from a reversal on volte tracks.
Speaker Change #161: Annual earn out accrual that had accrued up through.
Speaker Change #162: Q3, right and I think you said this was $3 million and that was a.
Speaker Change #163: That is a singular quarter.
Speaker Change #164: Benefit for Q4 is that correct.
Per Brodin: That is correct. So for Q4, we had a net reversal of $3 million. For the year, we had a net expense for the earn out of $300,000. Unknown Speaker, the place that's most visible is the NRA, adjusted EBITDA reconciliation at the end of the press release. And so, more importantly.
Speaker Change #165: That is correct. So for Q4, we had a net.
Speaker Change #166: Reversal of $3 million for the year, we had net expense for the earn out of 300000.
Speaker Change #167: Okay intermodal the place that's what's visible.
Speaker Change #168: Adjusted EBITDA reconciliation at the end of the press release.
Per Brodin: So more importantly, why or how? As of Q3, did the accrual get to that excess for such a reversal? Is it that you had a bunch of business expected to close and bill in Q4 that has been bumped into Q1 and beyond?
Speaker Change #169: So more importantly, why or how.
Speaker Change #170: As of Q3 did the accrual get to that excess for.
For such a reversal is it that you had a bunch of business expected.
Speaker Change #171: To close and Bill in Q4 that has been bumped into Q1 and beyond.
Per Brodin: I would say it's, I'll start with up until the end of Q3, Fiscal 24, we were accruing at the maximum potential liability. And then as we got to, you know, and then just a reminder for Fiscal 23, the maximum earn out was achieved. So we continued to accrue at the potential maximum until we got to the end of the year and could view the actual result. Unknown Speaker, we adjusted our, I thought about what would be achieved because for the fiscal year ended March of 2024, the amount achieved for the discrete fiscal year 24 was $875,000 versus a target of $3.5 million.
Speaker Change #172: I would say it's.
Speaker Change #173: I'll start with up until.
Speaker Change #173: Through the end of Q3 fiscal 'twenty four we were accruing at the maximum potential liability and then as we got to and then just a reminder for fiscal 'twenty three.
The maximum earn out was achieved so we continued to accrue at the potential maximum.
Speaker Change #174: When we got to the end of the year and could view the actual results we adjusted our.
Speaker Change #173: Alright.
Speaker Change #173: And what would be achieved because for the fiscal year ended March.
Speaker Change #173: 24, the amount achieved for the discrete fiscal year 'twenty floor was 875000 versus a target of $3 $5 million. So that was a big piece of the reversal.
Per Brodin: So that was a big piece of the reversal. Then we also brought down the amount accrued for the, what we call the kicker, the cumulative earn out, to an amount that was less than, you know, 100% of the max, based on our outlook doesn't impact our view of the expected success of that operation. Right, I guess.
Speaker Change #173: Also brought down.
Speaker Change #173: <unk>.
Speaker Change #173: Amount accrued for the what we call the kicker of accumulative earn out too.
Speaker Change #173: The amount that was less than 100% of the Max.
Speaker Change #173: This is based on our outlook doesn't impact our view on the expected success of that operation.
Andrew Evan Shapiro: Right. I guess it just added to a lot of the volatility in our reported earnings, which unfortunately added to the volatility in the stock that we all encountered over the last year. Going on to the maintenance, the overall side. The gross margins you had were a really nice increase. What's the gross margin percentage you're trying to get back to, and how long do you think it takes to get there?
Speaker Change #173: Right I guess, it just added to a lot of the volatility.
Speaker Change #173: Ported earnings, which unfortunately added to the volatility in the stock that we all encountered over the last year.
Speaker Change #173: Going on to the maintenance.
Speaker Change #173: Overall side so.
Speaker Change #175: The gross margins you had really nice increase what what's.
Speaker Change #176: What's the gross margin.
Speaker Change #177: <unk>, you're trying to get back to and how long do you think it takes to get there.
Per Brodin: That's with respect to maintenance.
First with respect to maintenance.
Andrew Evan Shapiro: Well, yes, but it was also with respect to the overall, I guess the overall business. But let's drill down into maintenance because that is the main drag. What was the maintenance gross profit margin in Q4? What recovery and margin percentage remains to get this line of business gross margin back up to your company goals?
Speaker Change #177: Well, yes, but it was also with respect to the overall I guess the overall business.
Speaker Change #178: Drill down in the maintenance.
Speaker Change #178: That is the main drag.
Speaker Change #178: The maintenance gross profit margin in Q4.
Speaker Change #178: <unk>.
Speaker Change #178: Covering.
Speaker Change #178: Margin percentage remains to get this line of business gross margin backup to your company goals.
Per Brodin: And we don't typically disclose the actual margin of the segments, but from a directional standpoint, maintenance, you know, increase to [inaudible] gross margins, mid-teens, and we expect to see some improvement on that for the remainder of fiscal 25 after we work through Q1 and the drag that these last three contracts will have on that business. And then, as I said in my other remarks overall, we expect to see some incremental improvement to what we achieved in Q4, but it will still be that drag in Q1, and at this point, we don't expect it to be significant, but we still are expecting some improvement.
Speaker Change #178: And we don't typically disclose the actual margin the segments, but from a directional standpoint.
Speaker Change #178: Maintenance.
Speaker Change #178: Increase too.
Speaker Change #179: Mid <unk>.
Speaker Change #179: Gross margins mid teens, and we expect to see some improvement on that.
Speaker Change #180: For the remainder of fiscal 'twenty five after we work through.
Speaker Change #180: Q1, and the drag that these last three contracts will have on that business and then as I said in my other remarks overall, we expect to see some.
Speaker Change #180: Incremental improvement to what we achieved in Q4, but there will still be that drag in Q1 and at this point, we don't expect it to be significant but we still are expecting some improvement.
Andrew Evan Shapiro: And is Q1 the timing of the expected write-down in the maintenance area for the coming year that you kind of put in your little forecast, or is that throughout the year?
Speaker Change #181: And is Q1, the timing of the expected write down in the maintenance area in the coming year that you're kind of putting your little forecast or is that throughout the year.
Per Brodin: Now that will be Q1, we expect. You know, the final contract that lapsed lapsed at the end of April. So we expect, by May and June, to work through those remaining work orders. Similarly, the other two previously lapsed, so that should all be cleaned up as well, including the movement for the most part, and I'd be happy to.
Speaker Change #182: Now that will be Q1, we expect.
Speaker Change #182: Yes.
Speaker Change #182: Final contract that lapsed last at the end of April So we expect.
Speaker Change #182: By May and June to work through those remaining work orders.
Speaker Change #182: Similarly, the other two previously lapse. So there should that should all be cleaned up as well.
Speaker Change #182: Including the <unk> for the most part in IV end of June.
Andrew Evan Shapiro: Including the equipment write-off you mentioned. Correct. Okay, and lastly, and this is on the LED side, are the new lower priced products, I think you call them Triton Pro and Harris, are they generative of similar gross margins as the more broadly greater-featured higher price product line, or are they lower margin?
Speaker Change #183: Including the equipment write off you mentioned.
Speaker Change #182: Correct.
Speaker Change #184: Okay and lastly.
Speaker Change #185: And this is on the led side or the new lower priced.
Speaker Change #185: Products, I think you've called them Triton Pro and Harris are.
Speaker Change #185: Are they generative of similar gross margins.
Speaker Change #185: More broadly greater future.
Speaker Change #186: Higher price product line or are they.
Speaker Change #187: Lower margin.
Michael H. Jenkins: Yeah, on a percentage basis, I would say that overall, they're similar to the rest of our portfolio.
Speaker Change #188: Yes on a percentage basis I would say overall there is similar to the rest of our portfolio.
Andrew Evan Shapiro: So as the sales mix shifts in some way, as these are new products that would start to kind of get a percentage of share, they won't be any kind of drag on the overall gross margin then.
Speaker Change #189: Okay great.
Speaker Change #189: As our sales mix shifts in some way.
Speaker Change #189: These are new products that would start to kind of get.
Speaker Change #190: Get a percentage of share it wont be any kind of.
Speaker Change #190: Drag on the overall gross margin.
Michael H. Jenkins: That, no, not on a percentage basis. Great. All right.
Speaker Change #191: No no no on a percentage basis, though.
Andrew Evan Shapiro: Great. All right. Thanks, guys.
Speaker Change #192: Great Alright, thanks, guys.
Michael H. Jenkins: Thank you, and this concludes the question and answer session, and I will now turn the conference back to Mr. Jenkins for his concluding remarks.
Thank you.
Speaker Change #193: Thank you and this concludes our question and answer session and I will now turn the conference back to Mr. Jenkins for concluding remarks.
Michael H. Jenkins: Great. Again, thank you all for joining us today. We look forward to updating you when we report our Q1 results and as we progress through our fiscal 25. We also hope to speak with you at upcoming investor events, including the Noble Capital Markets Virtual Equity Conference on June 26, a virtual event with one-on-one meeting opportunities. You can contact a Noble Conference representative or our IR team to request a meeting at this event. You may also contact our investor relations team with any questions concerning today's call or to schedule a call with management. Their contact information is in today's press release.
Michael H. Jenkins: Again, thank you all for joining US today, we look forward to updating you when we report our Q1 results and as we progressed through our fiscal 'twenty five.
Speaker Change #194: We are also we also hope to speak with you at upcoming Investor events, including the noble capital markets Virtual equity conference on June 26, a virtual event with one on one meeting opportunities you can contact a noble conference representative or.
Speaker Change #195: Our team to request a meeting at this event.
Speaker Change #195: You May also contact our Investor relations team with any questions concerning today's call or to schedule a call with management there.
Speaker Change #195: Their contact information is in today's press release, Thanks again.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change #196: This concludes today's conference call. Thank you for participating you may now disconnect.
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