Orion Energy Systems, Inc.

This is Fiscal 2024 Second Quarter Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Bill Jones, Investor Relations, please go ahead.

Thank you, and good morning, everyone. Thank you for joining today's call. Mike Jenkins, Orion's CEO, will begin with an overview of Orion's business, strategy, and outlook, followed by Per Brodine, Orion's CFO, who will discuss second quarter and year-to-date results, the company's financial position, and its financial guidance. We will then 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. 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 than currently expected. These risks include, among others, matters that the company has described in its press release issued this morning, as well in its filings with the Securities and Exchange Commission. 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. I will now hand the call to Mike Jenkins.

Thanks, Bill. Good morning, everyone, and thank you for joining our call today. As anticipated in our last call, Orion's business progressed in the second quarter with both sequential and year-over-year revenue growth of 17%, reflecting the revenue momentum we anticipated building as we progressed through fiscal 24. September was our strongest month of the year. and within our top three months since the start of fiscal 23 for both our lighting business and our overall total. Per will discuss our Q2 performance and financial guidance a bit later in the call. Now I'd like to start by providing an overview of our strategy and performance across the business segments. Within our lighting business, the $9.6 million Department of Defense European LED retrofit project began in earnest in Q2. with revenues of approximately $1.2 million, and we expect to complete the bulk of this project in the fiscal year. This project experienced some unexpected startup issues working its way through the EU regulatory bodies, but is now in full swing, and we expect to catch up in the second semester of fiscal 24. We anticipate several other larger retrofit projects to contribute to the balance of this fiscal year. including a project for a global technology customer, as well as continued growth from a long-term global warehouse logistics sector customer. We also expect meaningful revenue to come from an outdoor lighting project for Orion's largest customer. We feel good about our growing pipeline of lighting business. We also anticipate solid full-year growth in LED lighting revenue from our ESCO and electrical contractor distribution channels. In fact, the technology customer retrofit project I just mentioned was sourced through a relatively new ESCO partner. By their nature, ESCOs are focused on delivering energy savings and environmental benefits to their customers. LED lighting retrofits are right in the sweet spot of their value proposition as they provide significant quantifiable long-term energy savings and generally a full return on investment within two to five years. Our ESCO business was up 43% in quarter two and 38% for the first six months, which includes our expanded relationship with our large warehousing logistics customer, but excludes the DOD project, which was sourced through an international ESCO. We are continuing to build our base of productive agent and distribution channel relationships, focusing on partners who recognize the value of our high product quality leadership and energy-efficient performance, and our commitment to the highest levels of customer service. To extend our penetration in our distribution channels, we recently launched a new line of more value-oriented products that incorporate the industry-leading design, quality, and energy efficiency for which Orion is known within the trade. These new products include Triton Pro LED Retrofit High Bay and other interior fixtures, as well as an expanded line of Harris-branded exterior LED lighting products. They were developed in response to requests for more competitively priced LED contractor-grade fixtures that incorporate Orion's strong design and product quality. Feedback has been very positive, and we've recorded over $1 million in revenue from these new products in Quarter 2, their first quarter of availability. Our quoting activity has been strong, and we look to accelerate sales of these products in the second half of fiscal 24. Importantly, these products also provide a solid margin contribution. Also on the product front, we recently debuted several new products that are compliant with the Build America, Buy America, or BAA Act, and we expect that they will be well received by those customers who prefer U.S. manufactured products. BABA is a certification which requires 55% or greater of material content in products to come from U.S. sources. The BABA standard was created as part of the federal IRA bill, and it stipulates state, municipal, and schools to use BABA-compliant products when possible in order to receive federal funds. Orion is uniquely positioned to provide this product due to our U.S., based manufacturing facility and capabilities. As you may know, over the past 24 months, we have diversified our business into two new complementary areas, which include electrical maintenance services, as well as providing turnkey electric vehicle or EV charging station solutions. These new areas are well aligned with our core mission of helping customers achieve their business and sustainability goals while providing Orion with exciting cross-selling opportunities. Many of our customers had previously asked us about our ability to help them in these areas, which was a key factor in our decision-making to enter these spaces. We entered the commercial industrial EV charging solutions market in our third quarter of last year with the acquisition of Voltrek. We had a large bus project in quarter four of last year and then saw Revenue dipped sequentially in Q1 this year as we managed through Voltrek's integration and the build-out of its sales and project management teams to support expanding revenues in a broader geographic reach. Our EV segment rebounded strongly in Q2, delivering $3.4 million of revenue versus no contribution in the year prior. We anticipate continued growth at Voltrek in the coming periods, as the business capitalizes on its long-term track record of success, growing market interest in EVs throughout the U.S., and our ability to cross-sell these solutions with our strong base of customers and partners. Projections are that 50% of the new vehicle fleet will be EVs by 2030 and 80% by 2040. Businesses everywhere are now considering their electrification and EV charging strategy to support their employees, customers, and their own fleet needs. Orion is well positioned to help our customers and partners through this exciting and rapidly evolving journey. Our maintenance services business also delivered both sequential and year-over-year revenue growth. We acquired Salite Lighting in quarter one of last year, and with the acquisition came a number of multi-year contracts, some of which are now no longer profitable given a range of cost increases including higher subcontractor costs that have occurred over the past several years. To address these inflationary pressures, we have updated our pricing for new and existing customers to better reflect our current cost structure. We've been working to renegotiate contracts as they came up for renewal, and we are making progress. We have renegotiated three out of four of our most significant legacy contracts and believe this effort will return maintenance to solid profitability as these new price levels continue to impact our results in the second half of fiscal 24. We recognize our pricing effort could result in the loss of some business and could therefore provide a modest near-term revenue headwind for the segment. Nonetheless, there are plenty of growth opportunities in this space, and we believe that we can restore profitability while delivering high standards of service and great value to our customers. We recently finalized a three-year preventative maintenance agreement with our historically largest customer. Orion will provide LED lighting and light electrical preventative maintenance services to our customers' approximately 2,000 retail stores nationwide. The agreement formalizes and builds upon services we initiated in February and scaled through July. Overall, I am pleased with the progress we are making, though we still have work to do in terms of integrating our lines of business and pursuing expanded revenue opportunities. We are excited about our expanded array of solutions to offer customers and partners and are encouraged by their interest. We have already secured product sales and new projects through our cross-selling initiatives between all three of our segments. This remains an area of focus for the business that we believe we can deliver growth synergies as we move forward. In summary, we believe we are building a strong and diverse business for long-term success. We expect to see our total revenue accelerate across the business in the second half of fiscal 24, and as such, have reiterated our $100 million revenue guidance for fiscal 24. Now I'll pass the call to Pierre Bourdin to discuss our financials and fiscal year outlook in more detail.