Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Orion Energy Systems Inc (OESX, Financial) reported a strong rebound in its maintenance services business, achieving better-than-expected revenue and returning to solid gross margin profitability.
- The company secured a five-year $25 million contract to supply LED lighting fixtures for new store construction projects for a major national retailer, extending their existing relationship.
- Orion Energy Systems Inc (OESX) is experiencing robust quoting activity in its LED lighting project business, with a new multi-year contract expected to exceed $10 million.
- The EV charging station segment saw a 40% revenue growth in Q2, driven by construction contracts for Eversource Energy customers and additional work for Boston public schools.
- The company is well-positioned to capitalize on state-led bans on fluorescent lighting, which is expected to accelerate the conversion to more energy-efficient LED lighting technologies.
Negative Points
- The LED lighting segment was impacted by customer delays, with several projects slipping into the second half of the fiscal year.
- Distribution channels, including energy service companies and electrical contractors, faced timing delays and softness in new construction markets.
- Year-over-year revenue comparisons were negatively influenced by the completion of a large European retrofit project in the previous year.
- Orion Energy Systems Inc (OESX) revised its fiscal 2025 revenue growth outlook to approximately 10%, down from the prior outlook of 10 to 15% growth, due to project delays.
- The company incurred $300,000 in restructuring and severance costs in Q2, reflecting actions to rightsize the maintenance business following the roll-off of unprofitable legacy accounts.
Q & A Highlights
Q: Can you discuss the 10% year-over-year revenue growth expectation and how it will play out across various segments?
A: We expect our LED lighting business to recover and accelerate, especially in Q4. Our EV business should maintain or slightly exceed its current pace, and the maintenance business, post-restructuring, will be slightly under the expected decline but more profitable.
Q: Should we expect results to be more skewed towards Q4 versus Q3?
A: Yes, we anticipate a stronger Q4.
Q: How are you addressing the frequent issue of customer-directed project pushouts?
A: It's challenging to anticipate customer pushouts as they relate to other projects. Our focus is on building a robust pipeline to have enough projects to offset any delays.
Q: With the election results, is there any impact from potential tariff changes?
A: If further tariffs are implemented, it could be favorable for Orion as a domestic manufacturer, despite some components being sourced from abroad.
Q: Can you provide more details on the restructuring efforts?
A: We scaled back our self-perform technician force and supporting personnel within the maintenance division, and exited a leased facility, incurring $300,000 in restructuring costs.
Q: Does the expectation of a larger weighting of LED in the second half imply challenges for EV charging?
A: No, we expect LED lighting to grow significantly in the second half, while EV charging will continue to grow at a strong pace.
Q: Why were the delayed lighting projects not forecasted?
A: Delays are often due to internal workings of customer companies, which are difficult to forecast. We aim to be conservative yet realistic in our projections.
Q: Are project delays a broader market trend or sector-specific, and how will they affect revenue cadence?
A: Delays occurred for various reasons, some macro-related. We expect some projects to activate in Q3, others in Q4, and some to carry into fiscal '26.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
