Orion Energy Systems, Inc.

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 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.

Thanks, Michelle, and good morning, everyone, and thank you for joining this call today. Mike Jenkins, Orion CEO, and Per Brodine, Orion CFO, will review the company's Q4 and 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.com. As a reminder, 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. Such risks include, among other matters, matters that Orion has described in its press release issued this morning, as well as 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-GAAP financial metrics to the closest GAAP measures are also provided in today's press release. Now I will turn the call over to Mike Jenkins. Mike?

Thanks, Phil. Good morning and thank you all for joining 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 four, and year end. Orion finished at $90.6 million overall, which is within our latest guidance and is approximately 17% above prior year. Quarter four was a strong 22% over prior year. 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. Our EV business recorded a record quarter four of approximately $5 million, up 42% over prior year, and finished over $12 million for the year, which was about a 96% increase. Let me now provide some commentary on our businesses. Starting off with the LED lighting solutions, we saw steady progress throughout fiscal 24 in our ESCO and turnkey customer groupings. Our number one customer grew significantly in the quarter and in fiscal 24 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. Both of these areas will be multi-year projects that enable them to upgrade their energy efficiency and lighting performance. 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 ESCO who is acting as prime contractor on the base and hired Orion to manage the lighting for them on a turnkey basis. The super ESCO is one who we frequently work with 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. 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 long-standing 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 technology, retail, and federal sectors that have been in the planning stages for more than a year. 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 name Triton Pro and Harris Exterior. 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 pipeline that is now approaching $10 million all without significant capitalization of our higher end product sales. We expect to build on the success of these products in the coming year. 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, most of which go into effect in 2025, and we expect other states to follow with similar regulations in the future. We have started to see signs of customers accelerating planned LED retrofits into our fiscal 25 as a result. Given Orion's strength in engineering and design, in 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 BABA, which was part of the $550 billion Infrastructure and Jobs Act. The BABA Act requires states, municipalities, and schools to use BABA compliant products when available to receive federal funding. 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 produced in our manufacturing facility here in Wisconsin. We are still in the early days of BABA, but 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, their capabilities and geographic reach to meet the needs of larger national customers. Voltrek closed fiscal 2024 with record quarterly revenue of nearly $5 million, leading to an annual record revenue level of over $12 million. In Q1 of fiscal 25, we announced over $11 million of 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 Voltrek's outlook is supported by its positive momentum demonstrated in fiscal 24, 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. 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. 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 customers 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 businesses. Also during fiscal 24, we made tough decisions regarding unprofitable contracts from our stay light acquisition. Many of these multi-year fixed price contracts had become unprofitable due to a variety of inflationary impacts over the past few years. We recognized that we either had to reprice the contracts to 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 the segment to 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 period. We expect this to be partially offset and gloat from other accounts. and new business in the maintenance segment. Overall, this loss will be a net positive for 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 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 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. This outlook is based on expected revenue from large national LED lighting projects for automotive, 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 existing products. We expect our EV charging solutions business to be driven by current contracts, as well as our growing pipeline of opportunities, and achieve 50% plus growth this year. Maintenance services revenue is expected to contract by approximately $5 million in fiscal 25, though we expect a much better bottom line performance. The revenue decrease is primarily due to the loss of three legacy customers that were unprofitable. The revenue impact from the losses is partially offset by growth in other accounts and expected to net to $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. 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, Peb Brodine, to discuss our financials and outlook in more detail.